It’s Different Here, Really It Is – “The rich are not the same as most people, otherwise Vancouver’s prices would never have risen so far above average household incomes in the first place.”

“The free-falling Vancouver housing market shows no signs of reversing its slide with the latest figures showing November sales 30.3% below the 10-year average for the month.
The Real Estate Board of Greater Vancouver now says consumers have begun pulling their homes off the market rather than settle for a lower prices in what is still the country’s most expensive market to buy a home.
Since reaching a peak of $625,000, the board’s MLS Home Price Index for all residential properties in the city is off 4.5% to an average of $596,900. Prices are off 1.7% from a year ago.
“Home sellers appear more inclined to remove their properties from the market today rather than lower prices to sell their properties. On the other hand, buyers appear to be expecting prices to moderate,” said Eugen Klein, president of the board.”

– from ‘Vancouver homeowners pulling properties off the market rather than settle for lower prices’, Garry Marr, 4 Dec 2012

“Given that Vancouver’s RBC housing affordability ratio has been about 92% of household income for awhile now, that must tell you that most homes here are bought by people with wealth. They can afford to hang on and wait for better market conditions, so it makes sense that listings are getting pulled. Conventional house price economic responses are more applicable to cities like Calgary and Edmonton that will react to changes in their (oil based) economy than they are to Vancouver. The rich are not the same as most people, otherwise Vancouver’s prices would never have risen so far above average household incomes in the first place.”
– ThinkRight commenting at Financial Post 4 Dec 2012
[hat-tip to JS who adds “I love the logical deduction that because the affordability ratio has been so poor, it obviously means that homes are bought by people with wealth.”]

Agreed, JS, you’ve got to love some of the bizarre justifications for current circumstances.
From the school of handwaving logic. Also, tautological.
“Prices are high for good reason (trust me on that) therefore they will stay high.”
And the bit about “the rich are different from most people”? (gack!!)
Regarding the article, and sellers pulling their wares in disgust.. they still do think it’s different here, but will discover it’s pretty much the same as everywhere else.
Sales are down; Prices will follow.
– vreaa

79 responses to “It’s Different Here, Really It Is – “The rich are not the same as most people, otherwise Vancouver’s prices would never have risen so far above average household incomes in the first place.”

  1. Vancouverites aren’t particularly rich in social capital, innovation, productivity, modesty, or rational thinking. There is a lot of weed and expensive housing though.

  2. pricedoutfornow

    No, it is not true that most places in Vancouver are being bought by the rich. If this were the case (as Ben Rabidoux pointed out), then there would be lower than normal mortgage volumes coming out of Vancouver, and less CMHC debt. We know that this isn’t the case-mortgage brokers in this city have been making a darn good living for the past 10 years. The people buying houses in Vancouver, for the most part are over-leveraged consumers.

    • Agreed, completely.
      Locals with massive debt.
      Only a regular percentage of them ‘rich’ .

      • Aldus Huxtable

        The rich ‘are different’ from most other people in Vancouver. The other people aren’t aware that they are not rich.

      • I am so going to be punished by ‘TheMagicCircle’… but at the considerable risk of revealing DarkArts ‘tradecraft’… there is one measure which serves admirably as a reliable proxy for, among other things, a HouseHolder’s ‘PocketDepth’… The use of shell companies as RE ‘containers’. You’d be surprised how many properties, ostensibly ordinary principal residences, are actually held within these vehicles. For a ‘variety’ of reasons.

        E.G. – guess which ‘burgh’s Mayor uses one for his residence…

        …”One of Gordon Russell’s more interesting roles is as a co-director of Ohana Partners Ltd. Ohana means “family” in Hawaiian, and the company has only one asset: Gregor and Amy Robertson’s house in Vancouver’s Douglas Park neighbourhood. Amy Robertson, who hails from Indiana and donated $15,000 to her husband’s election campaign, is listed as the other director of Ohana Partners Ltd., a BC registered company.

        Company directors are not necessarily the owners of a company. We do know that Gregor Robertson is part owner of the corporation that owns his Vancouver home because of his financial disclosure statement posted on the City of Vancouver website. On page three of this document Robertson, presumably in his own hand, describes Ohana Partners as one of his assets. After scratching out “NO” and checking “YES” to whether he or a family trustee owns more than 30% of Ohana, he writes: “land holding, one property only. [Address blanked out], Vancouver BC” “…

        [TheCityCaucusArchives] – Know Your Donor: Gordon Russell

      • Naturally, these vehicles have other uses as well…

        [TheMainlander] – Financial Crisis and Tax Evasion: Unpacking Vancouver’s Rent Bank

        …”The person in charge of Streetohome’s fundraising for the Rent Bank is global mining giant Frank Giustra. Significantly, Giustra did not recruit funds from anyone other than himself, announcing that he will be using his own Radcliffe Foundation for lending to low-income renters. In the mining world it is common-knowledge that Giustra owns the world’s large mining companies through a series of shell corporations. One of the Giustra’s mining shells is the Radcliffe Foundation, a Canadian-based operation that is tax exempt due to its status as a charity. The Radcliffe Foundation is now funding the large majority of the City of Vancouver’s Rent Bank.

        Through Streetohome, Giustra will be lending — not donating — his mining profits while preserving their tax free status. The Radcliffe Foundation has already been caught for tax evasion and fined by the CRA for “excessive corporate holdings” in 2010. The Canadian government allows investors to use charities as a business investment vehicles, but only up to 20 per cent. For example, the law allows Giustra to use Radcliffe for ownership of up to 20 per cent of the shares in Sky Ridge Resources Ltd., a mining company. Giustra illegally owned 50 per cent in that company through his Radcliffe charity, which he said was “no big deal.” Noteworthy is the fact that Guistra is also the man behind Vancouver’s scheme of allowing developers to use temporary urban farms for tax evasion purposes.

        While it may be shocking that the rent bank doubles as a tax evasion scheme for Giustra, these accounting practices — yielding large profits with and rarely-enforced federal penalties — are by no means limited to Giustra and Radcliffe. There are almost 5,000 private foundations in Canada that hold nearly $12-billion in total assets. It is not just due to CRA loopholes, however, that 75% of the world’s largest mining companies are based in Canada. Among Canadian cities, Vancouver in particular is a favorable tax haven for the corporate elite. The Vision tax shift helped bring Vancouver down to the lowest corporate tax rate in the world through 2010-11. According KPMG’s global Focus on Tax study, Vancouver is still on the podium but with a silver medal, dropping down to the second-lowest tax rate in the world.”…

      • And to conclude this morning’s introduction to the DarkArts… some scholarship that will undoubtedly surprise many here…

        [PublicIntelligence] – Thinking of Starting an Anonymous Shell Company? Try the U.S. or Canada

        …”However, the study found that countries traditionally considered to be tax havens or secrecy jurisdictions are actually far more likely to comply with requirements to confirm the identities of their customers and scrutinize suspicious customers potentially linked to terrorism financing. The Cayman Islands, Isle of Man, Seychelles and Bahamas were among the highest-rated countries with zero instances of noncompliance encountered by researchers. The U.S., Canada, Ireland, Australia and U.K. were all among the lowest-rated countries in terms of compliance, sharing a similar ranking to countries like Ghana, Lithuania and Kenya. U.S. incorporation services were found to be among the least compliant globally, particularly those located in Delaware and Nevada.”…

    • Have mortgage brokers made a “darn good living”? I think a few have done quite well, but overall it depends upon how many are sharing in the spoils.

      • Real Estate Tsunami

        Three parents on my son’s hockey team are Mortgage Brokers.
        Last spring you never saw them at practices. Now they always show up, and do lots of volunteering. Sign of the times.

    • Have more mortgages been written in Vancouver comapred to other Canadian cities? HAM doesn’t need a mortgage.

  3. …”In 1926 Fitzgerald published one of his finest stories, ”The Rich Boy,” whose narrator begins it with the words ”Let me tell you about the very rich. They are different from you and me.” Ten years later, at lunch with his and Fitzgerald’s editor, Max Perkins, and the critic Mary Colum, Hemingway said, ”I am getting to know the rich.” To this Colum replied, ”The only difference between the rich and other people is that the rich have more money.” (A. Scott Berg reports this in ”Max Perkins, Editor of Genius.”) Hemingway, who knew a good put-down when he heard one and also the fictional uses to which it could be put, promptly recycled Colum’s remark in one of his best stories, with a revealing alteration: he replaced himself with Fitzgerald as the one put down. The central character in ”The Snows of Kilimanjaro” remembers ”poor Scott Fitzgerald and his romantic awe of [ the rich ] and how he had started a story once that began, ‘The very rich are different from you and me.’ And how someone had said to Scott, yes, they have more money.”…

    [NYT] – The Rich Are Different

    [NoteToEd: “I love the smell of Tautology in the morning.”

  4. Hello? Vancouver IS different, people. It’s the Best Place on Earth. Everyone wants to live here. Why? We have the ocean. And mountains. In the same city. There is nowhere else like that on Earth. I mean, you can hike and sail on the same day!! And lots of coffee shops. Combine that with the fact that real estate never goes down, and it’s a total no-brainer.

    – The average Vancouverite

    • You forgot that everyone is eco-friendly, highly socially liberal and progressive, rides their bikes everywhere and always skis, surfs or mountain bikes on the weekends! This is the _only_ bastion of liberal thinking in Canada other than Montreal. Vancouver has no highways and it’s only foreigners and tourists that drive cars here. There’s no racism or ethnic tensions because the city is such a wonderful model of multiculturalism.

      I could go on. But these are pretty much exactly things that native Vancouverites have told me.

      I’ve learned to never openly challenge the “Best Place on Earth” party line despite actually really liking Vancouver, and should the economics of things here go back to the traditional “only premium” pricing of pre-2001 Vancouver, I might even want to try making this a place I’d try raising a family in.

      • Naked Official #9000

        This snark is disharmonious!

        Splittist! Traitor to the motherland!

        Traitor to Muir-Tse Zdong thought!

        You will be reported to comrade Good and dropped from a yellow helicopter into Burrar inlet!

      • Real Estate Tsunami

        Agreed, most “self-absorbed city” in the world.

  5. Ooops… BritishColumbians, “You’re poorer than you think.”…

    “Had government prepared and reported its Summary Financial Statements in full accordance with GAAP, the deficit for the year would have been $520-million higher, at [$2.36-billion]” – John Doyle, BC Auditor General

    [G&M] – BC’s Deficit Underreported by $520M, Auditor Finds

    [NoteToEd: “Half a billion here, half a billion there… pretty soon you’re talkin’ real money.”]

  6. The truly rich ARE different. We don’t take out HELOCs to buy nice cars and take expensive vacations. We save for a rainy day. We don’t over leverage to buy into market hype like the sheep in this city.

    There was a study that showed the richest zip codes in the US don’t have the nicest cars.we don’t flaunt our wealth and are not sheep. That’s all I can say.

    • You just flaunted your wealth.

      P.S. I call B.S.

    • He’s a truly rich who doesn’t take out HELOC to buy nice cars or expensive vacation but got a lot in the bank. So you got to let him brag about his wealth somehow and feel good that he’s better than those who have nice cars but don’t deserve it.

    • Real Estate Tsunami

      The rich Germans In Ditchmond do drive expensive cars and do flaunt their wealth.

    • Brian, flaunting your supposed wealth is rather gauche. Please leave your credentials and account statements at the door. You don’t know who you’re dealing with on this blog.

    • It’s false modesty. Enjoys going out of his way to point out that he’s unpretentious and frugal, which is fine if that’s the lifestyle you like. But what he really enjoys is the praises he gets for his financial restraint and feeling better than people who have less whether through their fault or not. It’s the same arrogance as those who flaunt their wealth with fancy cars. Just one is more obvious.

  7. It sounds like the right person already bought the place. After all, it’s worth more to him than to anybody else. The free market works.

  8. UBCghettodweller

    Tautological arguments are the norm for people who have run out of any useful data or logic to support their statements. Such behaviour exists in every facet of human interaction, you think the specific case of real estate or economics is any different?

    Reader beware.

  9. The truly rich, such as they are in Vancouver, are probably less likely to sweat a 10% reduction, and will just push ahead and get the place sold if it’s what they need to do at that particular point in their life. So yes, they would be different in that respect, but not in the way ThinkRight believes.

    It’s more likely the not-rich, or the paper-equity rich, who will pull listings, hanging on as the knuckles get ever whiter. As a group, they are probably less financially sophisticated than the truly rich, attaching an inordinate amount of importance to the loss of a few nickles — ensuring much greater losses down the road. It’s understandable if, as a group, they are people who are not used to having much money, and they have this one asset — the goose that for the past decade has been laying the golden egg. Now there’s a very real chance that houses will be laying an egg of a different sort, but many owners don’t see that.

    I had a ring-side seat for an example of this way of thinking back in the early summer. Friends offered 1.25M on a house listed at 1.388M, (Yeah, the 8’s thing.) The house had already been languishing at that point, and would continue languishing for many more months until, I’m fairly certain, expiring or getting pulled. The owners initially rejected the offer outright. I said to my friends, “Just wait. I can almost guarantee their realtor will phone your realtor and try to get talks going again.” Sure enough, two weeks later the owners came back with a counter offer. They were willing to reduce their price by 1% — $13,880 on an asking price of almost a million and a half bucks. But on the understanding they wouldn’t be required to install the new dishwasher in the rental suite. Ludicrous. Cloud cuckoo land.

    In addition to price, there were other reasons this house would not attract a lot of bids. It would suit only a fairly small subset of buyers. I knew, but the owners never found out, that my friends would have been willing to go to 1.3M — 94% of asking price for a house the owners had lived in for years, and quite possibly owned outright. At a point in their lives when they were looking to cash out and downsize. My friends walked away, disgusted, and have since gone in a completely different and much better direction regarding their housing plans. Because of greed and naivety, the owners let what was probably their only serious offer slip through their fingers.

    The dishwasher is the telling detail. My friends couldn’t have cared less about the dishwasher, but the cheeseparing quality it brought to the discussions really soured them. Imagine losing a 1.3M deal over a crappy $400 dishwasher.

    • “Friends offered 1.25M on a house listed at 1.388M, (Yeah, the 8′s thing.) The house had already been languishing at that point, and would continue languishing for many more months until…”

      I’d be interested to know the address or mls listing #

      • froogle,

        is it 889 west 26th ave?

      • Man, that’s one UGLY house for $1.388 M! Do you know how much it eventually sold for?

      • Froogle Scott

        No, it’s not 889 W. 26th.

        The house isn’t currently listed. I want to preserve some anonymity about the identity of the property. I don’t want others making the connection to people I’ve characterized as greedy and naive.

  10. Ah yes, “conventional economic responses” don’t work in Vancouver. Those things only matter in conventional cities. Do these guys ever stop to consider how ridic……??? Um, never mind. The answer is obvious.

  11. If the rich really acted like Vancouverites they wouldn’t be rich for very long.

  12. Any of you actually know somebody rich?

    Thought so.

    • Definition?

      • Your anecdote. You define it.

      • Sorry…offensive sounding response was not intended. It is just my nature to be blunt.

      • Fine, no problem.
        One of the risks of Internet communication (loss of the subtleties of communication that we’d have face to face).

        As I know you know, ‘rich’ is an arbitrary (and relative) cut-off… Top 1%? 5%? 10%?

    • I’m riiiich biiiiiitch !!!

    • Yes. One. (Not friends w/ him or family, but did dinner w/ them once several years ago.)

      Owns an apartment on W. 10th Ave. Well, technically the grandfather bought it for his son (not sure who owns the title on paper/legally though) over 20 years ago (possibly longer) — sorry for all the fuzzy details, I don’t know much about them.

      Own factories in Indonesia. Is “HAM” for sure, but none of the family live here. The apartment was rented out at one point for about 5 years over 3 years ago (possibly longer).

      But otherwise hasn’t looked at/care about the place. Hasn’t looked to sell it. Doesn’t care that no one’s renting it.

      He goes to Vegas once every year or 2 and puts enough money into gambling that the hotel “takes care” of the family entertainment w/ all expenses paid.

      No idea what his net asset worth is but certainly in the multi 10’s of millions if not more. He is the richest person I have been introduced to. And possibly the only one I consider “rich”.

      Vancouver is such a “great” place, but he’s possibly only been here twice his entire life.

    • Melvin did…

      [NoteToEd: It’s astonishing, the sort of people you encounter in the middle of the desert.]

    • Seeking knowledge...about Van RE, that is

      Rich = my boss (private company). However, he doesn’t know that I work for him – just another cog in the machine.

  13. vamcouverbubbleman

    my ladnlords “HAM” have been trying to sell my rental house….no bids-they are moving into our place now as they are in some trouble cashwise and were kind enough to get one of their friends “also HAM” to rent us their house which has been listed for over a year….no bids. she has never rented a house to anyone before. this is one of the many empty houses in the area. HAM is realizing that they need cash so they are maybe starting to rent out these empty houses. all 4 of them told me.. “the mkt is very very very bad right now” if the HAM is telling me the mkt is very very very bad…exact words- i wld listen to them rather than GVRB, cam good , cam murr or any other pumpers.

    • Doesn’t sound like HAM to me. HAM would’t be so concern about their properties as the paid all in full and the loss is nothing to them. This sound like just a local speculator

  14. A few years ago, people in Phoenix and Miami were saying exactly the same thing. “Millions of Baby Boomers are retiring, and they all want to live on a golf course in the sun. It’s a total no brainer.”
    Famous last words…

    • Here’s a recent listing price history from a friend in Hawaii, another market that was supposed to be recession-proof. What it doesn’t show is the market topped out around $750K in 2007. So what took nine years to quadruple in value only took four years to drop almost 50%

      Pricing and Status History:What is this?
      Date Event Changed From Changed To
      12/5/2012 Change in Status Contingent Sold $398,000
      10/13/2012 Change in Status Expired Contingent
      10/1/2012 Change in Status Active Expired
      6/4/2012 Change in Price $478,000 $448,000
      2/18/2012 Change in Price Status $480,000 Withdrawn $478,000 Active
      1/6/2012 Change in Status Active Withdrawn
      11/2/2011 Change in Price $499,000 $480,000
      8/23/2011 Change in Status Not Listed Active
      Previous Sales History:
      List Date Status MLS Days List Price Sold Price
      2/2/2009 Withdrawn $559,000
      1/27/1998 Sold $169,000


    Could it be that Omni is just using this as an excuse to bow out of the crumbling real estate market without crucially damaging the “healthy” soft landing appearance of the real estate market. I remember when the space in front of GM Place that now hosts Firenze condos/townhomes complex was a dug out pit pond for the ducks for a long time. When developers are no longer interested in building because of reduced profit, it’s a sign. Vancouver is going to explode in inventory when all projects finish with reduced demand and falling prices thrown in the mix.

  16. “ps i call bs” – efficient … effective … effrontorious!
    “ludicrous cloud cuckoo land” – lovely … luculent … legitimo loco!
    “ridic” – urous!

    “requiem for richesse” (a maxim in 2 parts)
    gain enough to win one’s freedom
    try for more begins to give it back
    … also available in “songs of poverty” format along with other favorites like “buddhism is my back-up plan”

  17. It seems to me that a lot of potential sellers received their assessment last year and thought “Hey,let’s cash in”. Just as they did so, the market tanked. However, since many weren’t under any real pressure to sell, they are simply taking the properties off the market, hence prices are not tumbling. It remains to be seen if the pressure on those who truly do need to sell will be enough to have a substantial downward effect on prices.

  18. Anonymous Guy (currently) working for the machine that keeps this insanity moving

    Just Substitute San Francisco for Vancouver and there you have it.

  19. Anonymous Guy (currently) working for the machine that keeps this insanity moving

    I mean Vancouver for San Francisco.
    Sorry, Long Day.

  20. I’ll bet you didn’t know that cigars are a marvelous appetite suppressant, Ms. Malled. Works for me.

    By the way, does this blog make my bottom look bigger?

  21. Real Estate Tsunami

    Someone please enlighten me.
    Are Germans HAMs?

  22. “Demand rules the roost in the short run.” ie. a buyers strike always results in falling prices particularly when the buying/selling of the product is a significant part of the overall local economy. The next phase of the Vancouver RE market will be the HAM only phase since they will be largely unaffected by the declining local economy. Eventually prices will drop if, contrary to popular opinion, the Chinese economy doesn’t implode from bad debts and declining exports. On the other hand, a significant slowdown in China is likely to result in a tidal wave of capital flight out of the country with Vancouver RE likely seeing a huge increase in demand and quickly rising prices. This is what many sellers are holding out for whether they fully acknowledge it or not.

    • Naked Official #9000

      Disloyal, cadre!

      Rouse this rabble no further!

    • Airedales: Interesting. However, is there a precedent for capital flight out of countries when their economies decelerate? Did U.S. capital flee the country in 2008, propping up asset prices elsewhere? Has Irish, Spanish, and Greek capital fled those countries?

      Could not the opposite occur (repatriate capital to cover debts, etc.)?

      • They are withdrawing cash. It does not follow that capital is leaving the country.

      • Yes, throughout history hot money moves to wherever there’s a perceived safe harbour market. Consider the mass exodus of money out of the southern European periphery to London real estate as the Euro debt crisis intensifies. Vancouver is analagous to a Swiss bank account for the Chinese especially because its easy to move money out of China through the multitude of Vancouver-based Chinese companies and into their favourite hard asset – RE. Hot money is not debt/credit, it’s cash – ie. no margin or collateral calls and this its what drives the Vancouver RE market. Always has – but it’s a much bigger factor now then it was 10 years ago.

        If this is hard to believe, just look at the run up in Vancouver RE before HK was repatriated back to China and the crash afterward when there was no crisis. One of my extended family bought a new home in Point Grey for 50% of what HAM built it for just three years earlier – complete with wok kitchen, 6 full bathrooms (4 ensuite), and tacky gold-plated fixtures! Of course, she sold it back to HAM after a 4-bagger recognizing that Vancouver was done for them financially and then buying a hotel in the US with the proceeds. Basically, they made their entire wealth off the HAM cycle as did most of their siblings. Those that didn’t figure this out early enough are either still struggling in Vancouver poverty or were forced to return to their home country just to make a living. Truth.

      • Naked Official #9000

        Disloyal cadre Airedales, you would be wise to beware late night knocking at the door!


      • Naked Official #9000

        Did i say city, i meant treaty port.

      • I’d love to see evidence that Chinese money “drives” the market. No doubt it’s a factor, but I’d bet that local demand is more influential by far.

      • Local speculation has driven the market; biggest factor by far.
        But now, that factor seems to be “taking pause”.

    • Real Estate Tsunami

      Aires, agree.
      The China card looms large.
      But unlike in 08, it will not be an Ace, but more like a “Chocker”.

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