Spot The Speculators #100 – Couple In 20’s Desire Light Workload, Early Retirement And Free Money From Their RE ‘Investments’; Current RE:Networth 10:1

“In B.C. a couple we’ll call Max and Portia, 28 and 27, are trying to plan their financial future. They bring home a total of $6,880 a month from their high-tech jobs, but Portia wants to take sabbaticals to travel more and Max wants to try out a new career. They also want substantial investment income — $1,000 a month by their mid-30s. All that, plus early retirement well before 65.
What is standing in their way is not just the problem of earning enough money to do all that, but more than half a million dollars of debt
They have already made big career switches, Max from running a theatrical company for four years, Portia from several years in pharmacy management. Their jobs, their incomes and their present high rate of savings can build a solid retirement, though not necessarily an early one.

So far, Max and Portia have made a big bet on real estate. A $265,000 rental condo is their largest investment. It has a $228,775 mortgage with 26 years left on its amortization. Without capital repayment on the 25-year mortgage, interest alone is $410 a month. Condo fees and taxes add $277 for total carrying costs of $687. It generates $1,050 rent, so their total return is $363 a month or $4,356 a year. That’s a 12% return on their equity — not bad, but vulnerable to rising interest rates. If they have to roll over their 3.0% mortgage at 4.0%, which is still historically cheap, they will lose their margin of profit. No one doubts that interest rates will rise and a 1% jump is easily in the cards…
Rather than take all the risks that go with being landlords — such as vacancy, tenant damage, and the inevitable rise in interest rates — they could sell, harvest their about $23,000 of equity after 5% selling costs, and use the cash to pay off most of a $27,000 student loan outstanding at 4.5%. If they choose not to use the cash to pay off the loan, then, at $500 a month, it will be repaid in five years. Their home mortgage would still have 24½ years to run. …
If they choose jobs for fun … their ability to have a secure retirement will be at risk
Their reality at present is that debts are almost 90% of their assets. To support a $1,000 monthly investment income, they would have to have $400,000 capital generating a 3% return after inflation. They can’t do that in seven years with their present incomes and the need to pay down debt. Moreover, if Max changes jobs or Portia takes lots of time off for travel, sacrificing income and perhaps career advancement, their financial outlook would dim.
“It is not possible in any reasonable scenario, especially if they impair their incomes with sabbaticals or risky job switches,” Derek Moran [a financial advisor from Kelowna] says.

Summary of finances:

$6.9K per month

Assets: $606.7K Total
Home condo $298K
Rental condo: $265K
RRSPs: $23.7K
TFSA: $8.9K
Stock options: $4.5K
Cash: $6.6K

Liabilities: $544.4K Total
Home condo mortgage: $284.6K
Rental condo mortgage: $228.8K
Loans: $31K

– from ‘Is this couple’s financial vision an impossible dream?’, Andrew Allentuck, Financial Post, 8 Mar 2013 [hat-tip MC]

Networth: $62.3K
Percentage of Networth in RE: 973%
[For those readers who have semantic objections to their position being expressed in that fashion, think of the ‘973%’ as an elegant way of saying that their net-worth is leveraged to RE prices by 9.73 to 1.]
So, if their RE holdings drop in market value by a touch over 10%, they lose their entire net-worth. In fact, we can say with close to certainty that, given current market conditions, their actual current net-worth is very likely less than zero, as they’d be unlikely to clear 90% of the quoted amounts on their properties if they tried to sell.
This couple represents self-delusion run amok.
They clearly see RE as a path to a light work-load and early retirement. Free money, in effect.
How many Vancouverites have built positions in RE based on similar fantasies?
Note how the sensible financial advisor (from Kelowna, and thus, we’d assume, no stranger to collapsing RE markets) advises them to sell their RE ‘investment’.
What will the effect on our markets be when all those speculators in a similar position try to get out of money losing RE, over the same few years?

This couple’s position is also particularly noteworthy in that it represents the local speculative activity that has been the major engine of our perverse bubble. Most would still argue that their actions are innocent; that they are simply trying to get ahead in current challenging economic circumstances. We’d argue that they are being greedy; and ask what the hell they were thinking buying a second, poor-cash-flow property with a household balance sheet like that. It is purchases such as these, people over-stretching to buy primary residences and/or ‘investment’ properties in the hope of future abnormally large price gains, that have relentlessly pushed up prices and formed the bedrock of the problems now facing Vancouver RE: A bubble based on cheap borrowing and over-leverage.

Speculative manias represent ephemeral fantasies, and they all, ultimately, have to be reconciled with reality.

– vreaa

127 responses to “Spot The Speculators #100 – Couple In 20’s Desire Light Workload, Early Retirement And Free Money From Their RE ‘Investments’; Current RE:Networth 10:1

  1. Current RE:Networth 10:1

    Best of luck to them. Hope nothing will trip them up along their way to wealth.

    They probably paid 0% down.

    • What could possibly go wrong? Every one of these gamblers has been assured by others that the worst case scenario is flat prices for a few years. You know….and then the big price increases will kick in again and everything will be OK…….. This is just a soft patch……. Nuthin to fret over. Hell, they can even travel worry free because houses hold their value……Because we all know that inflation guarantees salaries will rise and house prices will rise too eventually…..someday…..

      What could possibly go wrong?

  2. Ralph Cramdown

    I can’t get the numbers to add. It looks like maybe they’ve got a variable mortgage at prime – 0.9%? I wish I knew how much longer they had to renewal. Maybe only one year, if they started with a 5 year term and a 30 year amortization.

    Note that the planner is recommending paying $13,000 in fees (1/3 of their equity) to switch from an investment yielding 12% to a risk-free one yielding 4.5%. And the one they’re selling is one they couldn’t buy again, due to changes in CMHC rules and interest rate spreads.

  3. Titanics hitting iceburgs everywhere… Front page news today, last page in a year….

  4. Real Estate Tsunami

    Happy 100th Anniversary, Spot The Speculator! 🙂

  5. Real Estate Tsunami

    I’m sure that they are not sleeping well, right now.
    Lack of sleep leads to poor decisions which causes more sleepless nights and so on, and so on.
    Also, who trusts a guy named Derek Moran!

    • We’d judge Mr Moran on his words, not his name… in the current case he makes lots of sense.
      Agree re the owners’ likely sleepless nights. (Although, in many cases, complete denial is the name of the game).

      • Real Estate Tsunami

        He may be giving them good advice now, but who advised them when they made the bad investment decisions in the first place.
        People put far too much trust into professional advisers.
        Also, why is only the rental condo listed as an investment?
        Obviously, this couple views their Home condo as part of their get rich fast strategy, so it should listed as a speculative investment as well.

      • RET -> Agreed re home being part of the get-rich strategy (and for most Vancouver speculators, their sole spec vehicle).
        Also agree re caution regarding ‘trust’ in financial advisors. At the same time, best to judge each piece of advice on its own merit.

  6. I like the creative math used in this example.

    And only $6,880 from two high tech jobs???

    • It is probably pretty accurate for after tax tech wages for their age.

      • They are probably making around about $53k/year each. If they have more than 2 years experience, it’s low. At 27/28, they should have more experience… of course, theatrical company doesn’t count and now they want to take sabbaticals, try new careers and be indebted landlords at the same time. Good luck with that…

      • You never know what types of “high tech” jobs they have. There are plenty of non-technical jobs in high-tech companies. Especially given their non-tech backgrounds

    • Does it actually say anywhere that they are in Vancouver? Possibly, they’re in the interior (where salaries are even lower) or maybe on the island. And in that scenario, I would question how accurate those property values are – people in Kelowna still have their heads in the sand about how much property values have fallen in the past 4 years.

      • “Possibly, they’re in the interior (where salaries are even lower) or maybe on the island.”

        Really? Because that’s not our experience. Just the opposite, actually, for most jobs. Add to that the fact that housing (buy or rent) is a heckuvalot cheaper.

        Note, also, “Kelowna” is not the only place in the interior. Although you are right about the head-in-the-sand thing in that particular locale.

      • Yeah…it is Nanaimo but without a ferry.

      • E.G., From what I’ve seen, high tech jobs in Kelowna do not pay well. 75K would be considered a very good wage for someone with 10 years experience. And I mentioned Kelowna, because that is the only place mentioned in the article (they mention a BC couple and a financial advisor from Kelowna).

      • fatjay: Interesting. Guess it depends on the job and location. Thanks.

    • $6,880 is about $135K per year (assuming they have limited deductions), not $106K as you suggest. It says in the article that they recently changed jobs so that might be as “bad” as it sounds. Obviously they skipped entry level with those salaries!

  7. I am 28.

    These guys remind me of all the people my age I hang out with.

    They want everything, now.

    They go on vacation multiple times a year while running ridiculous amount of debts on credit cards.

    You know, I would make sure to get my financial house in order before the idea of taking a ‘sabbatical’ year to travel crosses my mind….but that’s just me.

    It boggles my brain.

    How can they reconcile the idea of taking a year ‘vacation’ while having half a mil on debt and expect to retire early?

    Completely delusional.

    I tried many times to point out some facts to folks in similar situations (without offering any advice, just simple math to help them realize on their own) and it’s like talking to people stuck in the matrix.

    I kid you not. Waste of time.


  8. There are a lot of ‘ifs’ here. This is assuming their asset does not go up or down in value (they only look at interest costs), which may or may not be true, likely the asset will go down in value and may not recover in their lifetime, and even if it does, there are opportunity costs of investing that money elsewhere. I also don’t believe condo fees and taxes add up to only 277. Most older condos have fees for 400-500 and add on taxes and you’re not looking at much net income per month from your rental. Not to mention the hassle of finding a good tenant, answering their calls, and all the non-monetary headaches you also get as a landlord. They also want to live the good life and travel–well add on more debt and take away income (if you’re self-employed). Unfortunately, the majority of the population think like that here–living beyond your means and making bad investments. This is exactly what caused the US recession and if you think that can’t happen here, you’re even more delusional than I thought.

    • I too suspect that a total carrying cost is underestimated (as usual). If the condo fee is that low it must be an older one with no rec.facilities (no pool etc) and a strata council that keeps the contingency reserve at its allowed minimum – which is good but on the downside it has more prob. to run into the special assessment.

    • Truth is Brian, their thinking has been molded by those that went before them. All those stories they heard these last years about people getting massive LOC’s off inflated homes that allowed a free wheeling lifestyle of good restaurants, trips around the world and a sporty car to boot…..

      Well now they just assume it is their turn to participate. The lies people deep in debt tell are legendary in Vancouver and many of those toys are not paid up to this day. Most will be on the hook for years.

      Kind of sickening too when you think so many exchanged short term debt and tacked it onto a mortgage too. Lucky them they get to pay for the same toys and holidays three times over before its all said and done.

      • “Lucky them they get to pay for the same toys and holidays three times over before its all said and done.”

        Amen to that. I know so many people that have put vacations, vehicles, renos, investment properties, (and incredibly, high end clothing and jewelry) on credit fed by a never-ending series of home equity withdrawals it’s not even funny. Not only do they think it’s “free” money “earned” from their house, they have no idea that those items will end up costing two to three times what they originally laid out for them amortized over a couple of decades.

        Long term thinking just is not a strong suit with most people.

      • And we have hardly begun to see the largest shift of consolidations into mortgage debt, Told-you-so. The housing correction is still just getting underway. If employment numbers weaken there will be an avalanche of such applications as households try to stem the bleeding and take control of their expenses again. They will want to elimate all the high interest cards and monthy payments and shift it into a single low rate payment. This is why the banks are pure genius and the home-buying public are such a bunch of debt slaves (for life of course).

  9. …”they all, ultimately, have to be reconciled with reality.”…

    [#BackLash, #RevoltingPeasants]

    “For all too long now yuppies have been peacefully going about their gourmet dinners, buying up their lucky condos and flaunting their wealth by driving around in expensive cars. We thought it would be great to remind them AGF is still here.” – Anonymous AnarachistBlogPoster

    [CBC] – Pizzeria vandalized by Vancouver anti-gentrification group

    …”A local restaurant owner says he fears for his safety after an anarchist group claimed responsibility for smashing the windows of his pizzeria on Commercial Drive for the third time in the last half year.

    Ryan Chilibeck, owner of the Famoso Neapolitan Pizzeria, said the windows of his pizzeria were smashed in September, October and most recently, last week. He estimates the vandals did $17,000 worth of damage in the most recent attack.

    “To see everything you’ve worked for the last five years just in shambles… It was probably the most disheartening moment I can remember,” Chilibeck said.”…..

    [NoteToEd: These things typically unwind in an all too predictable fashion… I can practically see them now, the Counter-Revolutionary ParaMilitary YuppiePizzaSquads in SheerSpandexLuLuLemon rolling down Commercial Drive in ArmouredCayennes… StopChecking vagrants and force-feeding them Sushi and AntiPastas… LateNight DriveBy CondoLeafletting of HousingCooperatives… all as the StateSponsoredGendarmerie look the other way… and then, finally, a provincial legislature encircled by BlackClad PlantationOwners and their squires, the CommercialRealtors and MortgageBrokers.]

  10. I’m trying to figure out what the author was trying to tell us when he chose the unusual names Max and Portia for this couple. Perhaps this definition I found helps:

    “The name Portia comes from a Roman clan name, derived from the Latin “porcus” or “porcius,” which means “pig.”

    Did the author intentionally name this couple Maximum Pig or was that a happy accident?

  11. An insightful (and incisive) commentary VREAA. You nailed it. Greed, fantasy, and easy credit have conspired to turn otherwise successful, productive citizens into lazy, indebted hedonists who think ever-rising real estate prices will forever write their ticket to an easy, fun-filled life.

    There is something fishy about the “12% return on equity” line, but I can’t quite put a handle on it. Just eybeballing the numbers, (what they paid, what they pay in interest, taxes, fees), there is no way that condo is returning 12%. It’s returning a mere fraction of that. And that’s without considering opportunity costs (which admittedly are nothing – I doubt these two would have any idea of how else to invest that sum of money).

    • Return on equity is a misleading figure. It is so high because they have no equity (and aren’t building any as they aren’t paying down the mortgage). If they only have $1 of equity and only net $1/year then they’d have 100% return on equity…but that’s not a good thing.

      • Ralph Cramdown

        Nowhere did I read that they aren’t paying down the mortgage. The advisor correctly looked at only the interest portion of the mortgage as their (slowly shrinking) monthly cost, with the difference (most if not all going to principal) being their profit.

    • I think the 12% refers to the cash return on their down payment which is only about 5% of the purchase. So return on asset is tiny, return on equity is high due to leverage and that there is money left over from paying mortgage interest rate, strata fee & property taxes. However with the high leverage, thin margin, and lack of reserves for repairs and special assessments, that 12% can turn into -40% pretty fast!

      • Right. This kind of leverage you otherwise get in options trading where i would buy options only if I hope to get > 100% reward because the leverage risk is too high.
        To go from bubble to bubble as governments want to do, maybe the government will create an institution to guarantee stock prices, backed by the taxpayers. This way we can leverage our assets to huge stock portfolios and kick the can further down the road.

      • We have it already Nufio. It is called the “Bernanke put”.

    • Easy – take your paper equity of $36,300; assume 100% occupancy all the time to get a rental income of $1,050*12 = $12,600; subtract interest+condo fees + taxes $687*12=$8,244; ignore principal repayment, maintenance, price of your time, vacancies, buy/sale transaction costs, price risks, potential assessments, insurance cost, etc. and you will get (12600-8244)/36300 = 12%

      • Ralph Cramdown

        You don’t ignore principal repayment. That’s your profit.

      • My point was that by paying down your principal (all other things equal), your return on equity decreases.
        And it’s not your profit (unless you are being sarcastic).

    • Anyone can get a high return on equity with a lot of leverage. Profit and loss cuts both ways.

  12. If you tell this couple they should leverage 20:1 using a 30 year amortization loan to buy the equivalent amount of XRE, they would think you are nuts and likely report you to regulators if you are a financial advisor. Not to mention telling everyone they know not to use you as a financial advisor. Yet, doing the same thing with a condo, that’s just good investment idea and safe and the right thing to do. Crazy.

    People like to think that buying a condo is just a good investment and safe investment but really compared to XRE or other RE based ETFs, it really is not. Less return, more hassles, and way more risk. They would likely be much more ahead if they just invested in XRE. At least they would be less in debt since they can’t borrow that much to invest in XRE in the first place.

    With regards to the advisor telling them to sell and pay the $13K fee, that’s painful but likely better in the long run as 1 special assessment will cost way more than the $13K break fee.

    This couple can actually do what they want if they had not bought any RE, saved a lot of money, and delay having kids. I know a lot of co-workers who took 9 months to 1 years+ off to travel around the world on about $25K or less. But they did it before kids and buying RE. Actually at their salary, early retirement is also a good possibility after the world travel and kids but they will have to delay switching careers.

    • Ralph Cramdown

      To be fair, XRE’s holdings already have levered balance sheets, so you’re getting leverage even if you pay cash for the shares. Says me, while I wait for someone to cross the spread and sell me some REIT shares…

    • VRE or ZRE are alternatives. Love these Canadian REIT ETF’s.

  13. Froogle Scott

    They’ll learn — probably the hard way. But they’re young, so they’ll have time to recover.

    I did plenty of stupid things when I was younger, but somehow I had the good sense to be stupid on a beer budget.

  14. Nearly anywhere else in North America, particularly in many US cities these two could be well on their way to retirement by now.

    I know this because I have run the same numbers, at the same age, with a similar income. Only difference is that I carry less than half their debt load, and generate the same cash flow from non leveraged equity investments.

    Put it this way, same income level, but their total debt for both condos $200,000. Makes the idea of early retirement a lot more realistic.

    Unfortunately, interest only payments and leverage will certainly get in the way of these two early retirement plans.

  15. Nowhere is RE more ingrained in the local culture than Vancouver and if you’ve never left here to actually live elsewhere, you really don’t know much about the world. Having lived in multiple US and Canadian cities, I can tell you that only in Vancouver are you judged by how much RE you own. In San Francisco, where I lived, RE prices are expensive (more so than Vancouver—but incomes are higher so more affordable), but only about 30% own there. People there talk about rentals and how lucky you are to even get a rental if you’re new to the city–a 2BR in a not so great area of town (Ingleside, for instance, equivalent to probably east side Vancouver) will set you back over 4K a month. A 2 BR in east side Vancouver would never go for that much in rent. And with more and more inventory coming out, and investors trying to rent out their place, Vancouver will be a renter’s dream in a few years when I can see 2BRs going for sub-1000 on the east-side. So if you’re a young couple, I’d much rather rent, and have someone subsidize my lifestyle, and put my would-be downpayment in other investments.

    For the record, I am a reluctant owner, and only bought due to family pressures.

    • One of my favorite “never been out of Vancouver” anecdotes…

      I always get a bit of a laugh telling people that Vancouver is the only place in the world that I’ve ever lived where the powers-that-be think that it’s a good idea to let the populace go wild with fireworks on Hallowe’en night.

      I can always tell who the native Vancouverites (read “have never been out of the Shire) by their incredulous reactions.

  16. “Speculative manias represent ephemeral fantasies”

    I’m reminded of the old Steven Martin routine: “How to be a millionaire and never pay taxes”

    “Step 1: get a million dollars”

  17. Important to note that while these people have 67K of assets, to actually “realize” that wealth they would have to sell ~600K worth of condos – and with ~8% transaction costs, they’re pretty much at zero. These people have nothing.

    Love the “we want it all” attitude though – retire young! lots of investment income! – these people have nothing but a mountain of risk.

    Also, good luck selling these condos for what you “think” they’re worth in this market. wouldn’t be surprised if they’re already underwater on the home condo

    • At the speed it’s dropping I would not be surprised either. If most were not so close to the edge to stert with it might not be so dangerous but if you only have 5% skin in the house it is a 99% guarantee you will be losing inside a year. Hell, if you had to sell one month after buying for whatever crazy reason you would be underwater just on realtor commissions, fees etcetera.

      And that is why housing investment is so foolish in an unstable market.

    • The problem is when everyone wants to get rich. If you had invested earlier a la early 2000s, and known when to get out, you would’ve made out nicely. The problem is when you have sheep like this couple, who get herded along, and realize that, instead of making wise business decisions, they are the ones getting played. The little man with herd-like mentality will never get ahead.

  18. Their net worth is already below $0… If they sold their 2 properties the commissions would wipe out 50% of their net worth and their properties being worth 5% less than they think they are worth (which is really, really optimistic) would wipe out the remaining 50%.

    The 12% return line is also a joke – how could any financial advisor use that figure? If I buy a condo with $0 down my return according to this guy would be infinity…

    They should be more worried about avoiding bankruptcy than thinking about travelling, changing careers and retiring early. What a joke!

  19. And then we have this little gem. Seeing as Vancouver thinks it is world class they might just have to step it up a little to be in league with Manhattans tallest condo tower.

    The building is selling all its units for a combined 2.7 billion dollars. The Penthouse, (last unit remaining) goes for gasping 4600 dollars per square foot. The best part is that prices were hiked 16% since last July due to demand. Maybe it is because the damn thing is so tall…..just shy of 1400 feet.

    Seems real estate is hot in America just as ours is sinking.

    • Lovely Farmer. So in my history, for many years I traveled to midtown Manhattan and for a number of them had a team and office there right in the middle of it all. It was and is a wonderful place to visit. NYC is an incredible place for business and something to experience.

      In support of your point though, is another unexpected benefit of these frequent trips. Now when I read and hear these comparisons of Vancouver to NYC there is one gift that I have from the memories. That is when I read the comparison, I realize how little traveled the individuals are who believe this stuff. Really though, isn’t a necessary factor for BPOE disease for residents to have a such limited view of what’s out there in the world. Vancouver is great, but I’ve also had the opportunity to travel a lot and there are lots of great cities each with their own selling points. NYC though is on a scale and level of sophistication on a scale way way beyond these other comparisons, including lovely Vancouver.

    • This is nothing. There was talk of the most expensive property in Manhattan recently going for 100 million. Vancovuer is NOTHING compared to NYC. The only reason why Vancouver is up there on RE is that it is the most UNAFFORDABLE, which says nothing about the MOST EXPENSIVE. Median incomes in Manhattan are something like 250K. In fact, a recent NY Times article says that that is considered “middle class.” People in NYC actually make money. Vancouver can never compare to NYC, no matter what the local media hypes.

      • Local fundamentals are of course important but it can also become a blinder for macro or external forces that play a big part in what is a globalized world.

        For example, Whistler’s local fundamentals do not support its real estate prices. Vancouver sits somewhere between NYC and Whistler. Probably closer to the latter.

  20. Every week we get to hear some Gen Y sob story about how they are ‘different’ from how they are portrayed (oblvious, spoiled, entitled, unrealistic). Then I read this and I see just how utterly clueless they can sound. What planet are they on?

    • Give me a break. How are they oblivious, spoiled or entitled? How are they striving to achieve anything different than their parents? Perhaps they haven’t made the best of investment decisions, but they’re doing something to achieve a standard of life they desire.

      No generation has seen investment returns as high as the boomer reign, its only natural that people today want to afford the same lifestyles.

      Every piece of news and media has been brainwashing the populace into thinking that to achieve those goals you must own a lot of RE. Ergo, you get a lot of stories like this.

      The only reason “Gen Y” may be “unrealistic” is because the realities of our economic situation are such that we cannot afford the same lifestyles our parents were able to enjoy. Not because of entitlement, laziness, but because the same opportunities don’t exist.

      How many jobs are there available in Vancouver to Gen Y’s that will enable them to have a home and build a family on a single income? Probably none. Dual income? Handful, at most.

      I have taken risks. I have worked my ass off. I have made all the “right” decisions, made all the short term sacrifices. I own my business, I employ 2 Vancouverities. I pay an above average wage. I contribute, I am the type of person this city and province need. I don’t have a hope in hell to live the lifestyle my parents gave me, and it took them HALF the effort that I’m giving! They certainly did NOT have it easy, BUT, they did have so much more opportunity and economic growth to rely on. Infinitely cheaper living costs, not only housing related.

      It IS unfair, when today I put in 3 or 4 times the effort, risk, and money to generate a return on lifestyle half as good as my parents were able to provide.

      It has contributors like me questioning my entire purpose here, why sacrifice so much of my life for so little return?

      • This Gen X-er says: “Hey, welcome to reality. Glad that you finally made it!”

      • I was going to say…..welcome to reality. It’s not our fault that your parents or your education did not inform of how the past went.
        I’m 10 years olders than the twits in the article and I live in the reality that you speak of. I don’t have a house either. That sucks. Especially when I make 3 times what those to make together.
        So the boomers had it easy in Vancouver real estate for 10-20 years. That’s about it. When bonds were 8%, inflation was 10. It wasn’t a no brainer to park it in GICs.
        Gen Y has made the exact same mistake with stock markets as every other generation. They’ve been absent the last 4 years and missed a 100% lift in the markets. Too bad most of them sold or took it out for homebuyers in 2009.
        It’s difficult now. It was difficult then. It will be difficult tomorrow.
        There’s a million places to live. If you choose to live here, suck it up.
        If real estate holds up you whiners are just going to inherit it anyway.

        And since when did a 5-year window of the economy make a lifetime. If that was the case everyone should have blow there heads off in the 30’s.

      • Burt -> They have made the cardinal mistake in ‘investing’ of believing that something that worked yesterday will work today and tomorrow.
        They are very-late-to-the-party sheep, and they’ll get fleeced for that reason.
        The best investments are by definition unpopular at the time they are made. (Which is not, of course, to say that absolutely anything that is unpopular is a good investment. But it is to say that any idea that is very popular is likely to be a poor investment.).

      • sick of whiners

        Hey Burt ,quit whining you big baby, who told you that you are entitled to anything.

      • Yes RF, there was a time when some bonds were offering 20% on long issues. It was crazy not to buy them then.. The whole argument that inflation was higher so therefore your money was “dead money” was nonsense. What some people didn’t seem to realize then was that high inflation and high interest rates would be slain by the forces of policy makers long before the bonds matured. That meant you had dead money for a couple years tops but one hell of a good long term bet if you held on.

        @Burt Not that I usually support a position that sounds so bitter but I have to agree with some of your points. Damn yes, that was easy money. Especially on the housing side. Had I known it was going to perform so well we would have gotten in over our heads on five. We were looking at boarding houses in Shaugnessy in the early Eighties that actually had reasonable cap rates. I mean they were investment homes (rentals) that pulled their weight from day one and generated a profit. There is nothing like that available now.

        These days I hear they have been turned back into regular houses and sold off at tremendous profit for new builds. Sweet deal. Mind you there were better bargains in strange places. A gal I know picked up rental homes in an out of the way place where nobody wanted to live anymore. They went up in value something like times.

        Rossland of all damn places. Must be the skihill.

  21. They are broker than they think! When I was 23, I already owned 2 houses all paid for and making money.

    On the surface it looks like they are making 367 buck a month but what is missing is the ball and chain Property Tax which is about 2000 and increasing due to a broke government. (thats about 150 a month)

    2) Opportunity cost on their down payment. The Dow is doing good and some safe Preferred shares are collecting 5% or dividend bearing stocks.
    (50,000 oc –> 2500 per year or 200 / month

    3) Repairs , note they have renters which loves to trash the place. Also the cost of checking, mowing the lawn and keeping them happy. 20/month

    4) taxes on rental, where a TSF would of had sheltered them from taxes of RRSP (so if they make 367/month, and already make 70,000 a year then expect that to be taxed at 40% which mean 200/month.

    so the balance sheet looks like this
    income 367
    after taxes 200

    oc 200
    Repairs misc 20
    property tax 150
    ==> (370)
    Total lost per month 170,
    Don’t forget when you leverage yourself gains could be good, but same with losses. Ask Kim Campbell whos crying the blue after losing her deposit of 367,000 buck and could be on the hook for another 200,000. Her prebuilt condo loss over 500,000 in just several years. In another couple you can buy it for the same cost of this couple.

  22. Q4’12 population growth is out. I don’t usually cross-post but here are the graphs:

    Summary. Not robust.

  23. 1.I think you overlooked that it was said in the OP:
    “Condo fees and taxes add $277 for total carrying costs of $687.” – so it is priced in although $277 looks to low;
    2. The profit from the alternative investment of the down-payment elsewhere is also taxable unless they lock it into RRSP or something.
    3. Agree on #3, it is about 10% that should be priced in as a contingency reserves for the future repairs and appliances deprecation/replacement.
    4. Mostly agree on #4 but taxes on rental income are somehow reduced by the expenses incurred renting it so it is not a straight forward % taxing.

  24. Assuming the couple is from Kelowna and they purchased 4 years ago (26 years left on mortgage), then presumably they are staring at asset losses of about or at least 10 – 15%. It is implied in the story they can “sell” but if the above is true they are actually probably underwater or would incur a debt register a loss if they could sell.

    “interest alone is $410 a month” That number looks low to me. People can also make up their own deluded versions of ROI. Somewhere in the gig however I suspect that if they actually look at the hard numbers (maintenance?) they will find they may not be getting a positive ROI at all.

  25. Why are ” condos ” included in real estate discussions. It has always apppeared to me that they are nothing more than long term debt obligations with an infinite potential cost. Several times we have been enticed to buy a “condo” but fortunately we never did. In our community here in the lower mainland, “dirt” is still being purchased for in-fill housing.However countless “condos” are languishing on the MLS.

    Thoughts, and thank you.

    • You got me there Hmmm. I might be old fashioned. I don’t consider them housing investments either. More like a lifetime burden that just gets ruined by one of your neighbors stupidity in the end.

      And then they tear them down.

      They barely last a lifetime and can cost you a fortune during the time you are stuck with them. Unlike New York, Toronto or so many other places they are mostly wood and clapboard instead of brick.

      Is it any wonder most end up as rentals?

  26. @ E.G and rf

    Welcome to reality?
    What pathetic, defeatist attitudes to spew.

    Its not at all the reality we need to live in, we are in position to shape policy and create a sustainable living environment for all to prosper in – this isn’t a leftist dream, its achievable. Canada and BC have the building blocks for prosperity, we just need proper management.

    “Suck it up or leave” is precisely the stupid, short sighted and ignorant “advice” taken by too many talented Vancouverites that could have made a difference for the positive here. In business, in culture, in arts, young Vancouverites are needed to take chances and create opportunities, otherwise we will continue to suffer from the same brain drain we have for years.

    The ironic part of it is, you 40somethings are too stubborn to realize you need the teens and tweens of today to be successful to support you in retirement. It should be your generation encouraging innovation, change, and growth. You stand to benefit from it as much as those doing the innovating.

    But, of course, its easier to say “welcome to reality, don’t let the door hit you on the way out.”

    • Burt -> “Canada and BC have the building blocks for prosperity, we just need proper management.”

      Over the last decade one of those “building blocks for prosperity”, namely plentiful and reasonably price land/RE (and Canada and BC should have both readily available) came under control of a cult (the spec mania in RE), partly because of poor “management” (freely available cheap debt and loose mortgage rules).
      How do you propose that we go about changing this for the better?

      • Primarily by political means and public education enterprises – think tanks, etc.

        Certain things are completely out of our hands at the provincial level, interest rates, amortization periods etc. But many aren’t, such as first time home buyer subsidies, tax credits, incentives etc. Where are the provincial incentives to create employment? Why not new business tax credits, or subsidies? Why not spend money on keeping consuming, contributing families in Vancouver, rather than spend millions a day on hopeless drug addicts on the east side.

        Why not audit the provincial government to see where all our money is going?

        Why not vote in people that are pro-sustainable density even if it goes against the Vancouver high rise mantra.

        Compared to our souther neighbours the political will, particularly in Vancouver is very weak. With the amount of disenfranchised bears that visit this site alone we should be able to elect an MLA that represents some dissenting views.

        Forget electing, we should be able to start a grassroots movement to get a conversation going in this city on the management of the local economy and the gross misallocations of resources on the least contributing members of society, many of whom are out of province.

        I like what the Liberals have proposed with the LNG Terminal in Kitimat, we need more spending on massive projects like this throughout BC.
        Projects that generate revenue, and have the potential for long term return.

        Lastly we have a lot of brilliant people studying here, both locally and abroad. Figure out incentives for these students to stick around and start business here. We have the talent here, why allow it to leave and create prosperity elsewhere?

      • Burt -> Just a few thoughts regarding your points:

        1. “first time home buyer subsidies”
        During a spec mania, FTB subsidies simply act to push up the cost of FTB homes by the amount of the subsidy. FTB-sheep are simply able to over-extend themselves by that much more. So nobody wins except the sellers, briefly.

        2. “we should be able to elect an MLA that represents some dissenting views”
        Have you followed local politics much?. Last municipal election the one such candidate, Sandy Garassino, for whom we expressed respect, was, when the votes were in, well over ten spots away from securing a seat. Not one candidate came out in favour of any action that may have led to property price drops.

        3. “get a conversation going in this city on the management of the local economy and the gross misallocations of resources on the least contributing members of society, many of whom are out of province.”
        Perhaps you want to start a blog?
        If you seem to be laying some sound and credible groundwork, we’ll feature your work here.
        We’ve ourselves been talking here for years about the massive misallocation of resources that goes with the spec mania in RE, to little avail. It seems the market is going to have to take care of the problem, not our grassroots movement.
        But perhaps you’ll be more effective with your angle on this.

      • [NoteToEptesEtAl: I write {here} for ‘you’. All you need is a GreatSong, a beret and some ‘Cojones’, metaphorically speaking… SenorCaballero knows what I’m talking about – but everybody has to ‘StandUp’, or it doesn’t work. NoteToEd: Yes. HaveCameraWillTravel. MightierThanTheSword. PrivateMail to follow. Q? WayBeyondCool. LiquidNitrogen. AbsoluteZeroKelvin. BailedMeOut in TheBigBigSmoke. Figuratively.]

      • [NoteToDearReaders: That’s the CautionaryTale or ‘B Side’. I highly recommend QJ’s arrangement as the SuperiorChoice. NoteToEd: It’s the QuantumFlow augmented by copious ExNihiloRiesling. VeryBad JuJu, as it were.]

    • “…we are in position to shape policy and create a sustainable living environment for all to prosper in – this isn’t a leftist dream, its achievable.”

      You know, the whole “Gen” thing is a stereotype. But it has some traction.

      In this case, my (Gen X) cohort left high school and/or university into a dismal economy and no jobs anywhere. Most of us had to claw our way to anything in the face of Boomer “why can’t you do it, we did it?” attitudes.

      (We also had to walk uphill both ways to school in armpit-high snow drifts.) 🙂

      After us came another cohort – yours – who walked out into all the jobs in the world. Thanks to the bubble and then the free-money-real-estate bubble. Thanks, basically, to idiotic government policies meant mainly to line the pockets of the Boomers.

      Now all of the bubbles have popped or are popping and the Boomers are taking it on the chin (finally). The current cohort coming out of university, millennials, are experiencing what Gen X did and they are developing the same way. A bit hard headed. A bit cynical. And rapidly losing their idealism.

      Unfortunately that means that you Gen Y folks who were used to Boomer-like treatment are also getting kicked around. How do you survive? Take a look at the way that those ten years younger and ten years older than you are doing it. Emulate them. Don’t expect things to come to you. Don’t expect things to change. Don’t expect to be able to change things. Take care of yourself and your family and your community and others in need… because there is plenty of need out there and it’s just going to grow.

      Bottom up solutions. Top down just screws up every time. That’s the way it goes when reality finally hits… which it has. Reality bites. Bite it back, and leave toothmarks.

      • The thing is EG, there is something to be said for being born at the wrong time (or the right time as it were). There is no question that the Boomers captured the biggest moves in our countries history. Look at their wealth relative to those who came afterwards. I am part of that group and I can tell you beyond a shadow of a doubt that making money was never easier during our times if you simply followed the large trends in real estate and bonds. Vancouver housing was naturally one of them. It was stupid easy money and almost everyone knew it all along.

        Too bad it is over now. I will really miss those days.

  27. Can I play a bit of devil’s advocate here?

    The couple here are without doubt over leveraged and very vulnerable to a downturn or rising rates. A terrible choice to be that leveraged in any market for any asset.

    However, given their whimsical discretionary spending desires, being locked down to effectively service their liabilities may just be what the doctor ordered. A form of forced savings. Not unlike how insurance companies sell investment plans that are a raw deal for policy holders but at least it gets them to build equity.

    A terrible situation but some good might still come out of it….hopefully.

    • A form of forced savings only makes a sense when it is actually a saving. If the market continues in the same manner as now – they eventually get a negative equity or a special assessment or both, then they need to refinance and are not qualified for any good mortgage rate anymore as their apartment worth less than the mortgage – it is going to be a form of a forced loosing…

      • And forced savings into a savings account or into GICs when rates are lower than inflation makes good sense? Sure, safer and measured but not where the smart money is either.

        Having said that, we can agree they are over leveraged and exposed to negative equity which other forms of forced savings tend to be shielded from.


      • For everything there is a season. That expression comes right out of the Old Testament of course and it is generally pretty sage advice. Some just never get it but those who do make money on everything.

        It certainly does apply to investing in housing.

        The stock markets too. As mentioned above there was a time to be in high rate bonds…..and a time to switch and buy Vancouver homes with the proceeeds. After a very long run up in prices it now makes sense to be elsewhere as the potential for future profitability is so low inthe high priced homes on offer.

        So you take your money and rent while you wait for a better entry point that may be a few years in the future.

        Since the Credit Crisis equity markets have doubled on average. Careful investors saw gains far in excess of that though. And now in the US money is slowly shifting back to real estate and out of low rate bonds 7 years after the biggest collapse in housing prices in their history.

        Well when else would be a good time to get back in? When it is cheap and out of favour of course. The Armageddon camp always claims it will fall much further but I am on the side that say the worst is already behind us. The Doomers would have had us believe stocks were going to take a drubbing too but what they failed to understand is how money always shifts from one asset class to another and continues to profit for those who know the seasons.

        For Vancouver on the other hand the timing is different. This is when you exit and take your money elsewhere. Equities are still a good bet as markets are benefitting from a low interest rate environment and business is profitable on average. Sometimes just holding cash makes more sense than doing anything else while you wait.

        If you sold at the top you won’t be hurting in any case.

        The turning points don’t seem obvious to most people for some reason though. Understanding the relationship between interest rates, inflation, bond prices, fear trades like gold and housing almost looks like rocket science (it is not, of course).

        The trend now is for precious metals to fall out of favour too even as housing in Vancouver looks headed for the rut. The world is not ending. We all know that nothing keeps rising forever be it a house on the West Side or a pile of shiny metal.

        The genius is in knowing what to do as an alternative so you don’t get left behind as the season changes once more and the first whiff of new opportunity is again in the air.

      • “So you take your money and rent while you wait for a better entry point that may be a few years in the future.”

        That statement in effect is real estate speculation which nullifies some arguments here that real estate should only be priced as a utility, not as an investment. It’s in essence the same bet that a leveraged buyer takes on the property market except with limited downside.

        Most seem to assume highly leveraged speculators have brought about the high RE prices in Vancouver. In reality, they have only contributed as a market participant. They alone would not be able to bring prices to where they are now.

        So, a good question to ask is ‘why’ Vancouver RE prices are so high in the first place? Some say Asian money, others say low rates or speculators. We won’t know definitively but we can agree these factors all have a role.

        But one way to try and understand why prices have risen so high is to imagine yourself with $4m in the bank right now and nothing to invest in. Your primary residence is owned (which could explain partly why there are vacant west side houses). These high net worth individuals exist and are more common that we might think. Just speak to bank tellers and you’ll be fascinated with stories of locals and immigrants with hundreds of thousands of dollars, if not millions, of valuables stuffed in safety deposit boxes. Some inherited, some earned and some illegally obtained.

        Faced with that scenario, wouldn’t you consider a punt with $500k as a 25% down to flip a $2m west side property? And if you speculate, wouldn’t you choose a desirable areas in the hope that liquidity is higher and demand may stay a bit longer in a downturn (recover more quickly)? The worst case scenario here, for such an individual, is that you rent it out and have some form of cash flow coming in.

        There are those who have been justifying RE investments as a store of value in the midst of QE 1, QE 2, etc. Never mind appreciation. Whether they are right or wrong, only time will tell.

        One thing is for certain, prices are where they are because that is what they are worth at this very moment. Anything else is speculation.

      • Farmer -> Again, your position regarding gold is noted. As we said on that other thread, let’s revisit this in coming months and years.

      • 4SlicesofCheese

        Why does it have to go into a GIC?

      • @4SlicesofCheese What investment instruments would you put your forced savings into?

      • “Farmer -> Again, your position regarding gold is noted”.

        Respectfully, Vreaa, the commentary on your site covers almost every topic under tthe sun. Quite a bit of it is completely unrelated to Vancouver Real Estate and yet it is tolerated without remarks from you.

        I will refer you to contributions from Nemesis as just one example (don’t be offended Nem, I enjoy the quirky posts). There are many other examples too but the point is you are taking a position on one single subject while ignoring the rest.

        Nobody is trying to turn this into a Gold site meanwhile so I might hope that the odd comment won’t be so threatening to your personal views on the subject. They are not intended that way. In this case my remarks are merely noting that I see the fear trades in decline and US Housing on the rise. This is material to the outcome of Vancouver home prices in my opinion.

        It is certainly more applicable to Vancouver housing prospects than are videos of 1960’s advertisements and music on a wide variety of disjointed subjects having nothing to do wtih market dynamics whatsoever.

        I would appreciate if you kept an open mind in that regard before feeling irritated that not everyone shares the view that metals are a great investment (not that it is relevant in any case).

      • Perhaps Nem has an appropriate video follow up!!!

      • 4SlicesofCheese

        Anything but GIC’s, you said forced savings, not guaranteed savings right? Nothing is guaranteed, especially not housing, not at this point in the cycle.

        Heck even boring mutual funds in the bank have done better than GIC’s in the last year.

      • The point is, where do you put your forced savings in now?

        Equities (with the Dow touching record highs)?
        Bonds with zero yield?
        Real estate?

        Mutual funds are just a mixture of these with 1%-5% management fees tacked on.

        Everything’s a bubble!

        Or, wait, maybe inflation has already hit us as a result of the QEs?

        You could put it in a savings account but inflation will gnaw away at it. In any case, people with large idle savings in the bank earning next to nothing are just as nervous as people who aspire to own their own property in this market.

      • [NoteToFarmer: Ask and verily shall ye receive… Psst!… believe it or not, virtually all of these audio-visual teaching aids are actually allegories/parables carefully chosen to emphasize a particular point or to encourage further enquiry… all, admittedly, are designed to force you to think. Even the silliest, and that would include accordians… Some are more obvious than others. If it helps, picture me in a mortar board and chalk stained robes… or, even better, in goat skins emerging from a cave somewhere high in the Pyrenees…]

      • Farmer -> Sure, sorry, I shouldn’t try to curtail any of your range of discussion; it’s almost always very fair, and sensibly & well put.
        I suppose what I’m saying is don’t take my silence to be an endorsement of any of your views on investments; I myself don’t want to start discussing the merits of other investments on a daily basis on this site (I think you’d agree that’d risk changing the focus of the site completely). So I’ll just check in occasionally on these matters.

        And, BTW, to show how tricky this gets, you, in the above very sound comment slip in the phrase “not everyone shares the view that metals are a great investment”, which implies… of course.. that you think that I think that “metals are a great investment”? Thus, the casual reader would be fair to assume that somewhere I have stated “metals are a great investment”… Whereas, I did not state that: I very clearly stated that I didn’t think that that sector was for everybody, that the volatility was murderous, but that the bull is very likely not over, etc, etc.
        So, you see, it’s very easy to get drawn into discussing the minutiae of this with you (which is what I’m doing now, in a way!)

        Anyway, I know you debate in good faith, so, keep saying anything that makes sense to you; I’ll only object if the site gets overrun with pro-gold-bug vs anti-gold-bug rhetoric. Regarding the issue of investment sectors alternative to Vancouver RE, I’ll only check in occasionally. And, for a bit of fun, let’s make note of our recent exchange and we can discuss the matter again in a year or two..

      • Well thanks for the kind words, Vreaa (and Nem too for resisting any impulse to feel annoyed that I put his name in my post). I shall carry on as usual but resist drifting off topic even if it is often hard to do. So much of what is happening today in the world of real estate and investing is connected together though. Vancouver I suppose is just not an island anymore unlike times gone past when it was little more than a provincial capital. Maybe that is what we are all missing about the place. It was once a community and now it seems more like a mere object of interest for the storage of money that otherwise has no better home. The fascinating study published today that Nem mentioned below is telling us how fragmented it has become as an outcome of dollars driving away normal families and leaving thousands of otherwise good homes unoccupied. I really don’t think that those who worked hard to bring the Olympics for example had any idea of how that might impact on the city in this respect. The city was internationalized on the public stage at the same time a credit bubble was in progress and the outcome is what we now have to live with. Anyway….with out getting further off track we can leave the G word behind for now.

        PS: Yes I did think you were one of the Gold Bugs.

    • BLM -> “A terrible situation but some good might still come out of it….hopefully.”

      In other words, you hope that the spec mania continues in perpetuity?

      • Speculation is not going to ever go away as long as there are free markets.

        I do truly hope the couple manage to pay off their loans and that some equity gets built. Certainly no sabbaticals in the short term.

      • @BLM who wrote……”The worst case scenario here, for such an individual, is that you rent it out and have some form of cash flow coming in”.

        Seriously man…..that is not the worst case scenario. Not even close.

      • What is the worst case scenario then? We’re talking about someone with no leverage here and with total liquid assets twice the value of the investment home.

      • I think the other contributors have picked the bones of this case pretty well already and come to the concusion that the assets are not so valuable as reported nor that this couple could get out without losses at this point in time. Furthermore, their income is not that high relative to debt and they are currently overleveraged to one big asset class. If they were to carry out their travel plans and suffer reduced income as an outcome while simultaneously suffering equity losses associated with a falling housing market it would not take much for them to go from happy home owners to troubled debtors. Conclude for yourself how this might turn out given the facts we know.

      • BLM -> “What is the worst case scenario then? We’re talking about someone with no leverage here and with total liquid assets twice the value of the investment home.”

        I take it you’re talking about your aforementioned household worth $4M who put $500K down on a $2M property?
        Well, then the worst case scenario is something like a 25% – 33% loss of entire net-worth (with 50-66% price drops).
        Some people will tolerate that fine; others, not.
        You may not have been reading the blog long enough to have seen, but I have often expressed the opinion that the only people who should be buying a residence in Vancouver these last few years are those who have adequate net-worth to be able to tolerate a 50-66% drop in RE prices. My suggestion was that even they shouldn’t be spending more than 25% of net-worth on RE.
        And, even though there may be some people in this category (high net-worth, still renting) they make up a very small percentage of prospective buyers.

      • I definitely read enough of your blog to be aware of your position! Somewhat bizarre in the we hold very similar positions on who qualifies to buy. I perhaps only differ from you and many bears in that I don’t believe property is a poor investment decision for the non-leveraged buyer.

  28. Real Estate Tsunami

    For me the most important things are:
    Capital preservation and a good night’s sleep.
    Therefore, I don’t mind renting right now and the 75 bps on my GIC are just fine by me.
    Let the others worry about volatility, tu felix RET dorme.

  29. renterbychoice

    Even though our net worth is triple what they have, they would be considered much more successful than us because they are owners of two properties and we are ‘just’ renters. I can just hear the cocktail party guests gush their praise for their investing abilities and savvy real estate acquisitions. I think it is going to take a long time for a paradigm shift away from the attitude that one’s home must be owned or it just doesn’t count.

  30. “What kind of community are you living in if there are that many empty? For a city to have that kind of vacancy, it’s like cancer” – Richard Wozny, Vancouver Real Estate Consultant

    [G&M] – Vancouver’s vacancies point to investors, not resident

    …”Nearly a quarter of condos in Vancouver are empty or occupied by non-residents in some dense areas of downtown, a signal that investors play a significant role in the city’s housing market.

    And the city overall has a much higher rate of empty apartments and houses than other Canadian cities, with a rate closer to places like New York and San Francisco at the height of their mortgage crisis in 2010.

    …Downtown, the rate is so high that it’s as though there were 35 towers at 20 storeys apiece – empty.

    …In all, the city of Vancouver appears to have about 7,500 more vacant housing units than what would be expected in most other Canadian cities. For Metro Vancouver, there are around 15,000 to 20,000 more.”….

    [NoteToEd: “I’m shocked! Shocked to find that gambling is going on in here!”… fyi, ‘Nems’ own/original qualitative ‘micro’ research, suggests that the problem is, in fact, much worse than even Mr. Yan has surmised.]

    • Great stuff, thanks.
      And you can be sure that the owners of those vacant condos are, by and large… locals.

      • The comments alone would create enough VREAA fodder for a week!

      • Headlined.

      • 4SlicesofCheese

        “And you can be sure that the owners of those vacant condos are, by and large… locals.”

        Not according to the way CBC are spinning it on their newscast tonight.

      • Agree Cheese. The very suggestion these are mostly “local owned” flies in the face of the obvious evidence to the contrary. This is one area where I am in complete disagreement with Vreaa.

        You have to be blind to not notice foreign investment plays a very significant role in Vancouvers housing scene and all the empty units. The whole “by and large, it is locals” mantra does not get airtime with me at all and the whole city knows that it is not a reasonable conclusion to arrive at.

        When do we we just get down to basics and admit housing is being inflated by foreign infusions of money, if only at the margins (which is the main determinant in any event) and get past the idea it is not politically correct to admit that Vancouver is a city under seige of outsiders who do not really give a care about local values?

        The recent study showing a very high coorelation between the housing bubble in Hong Kong and that in Vancouver should be instructive. It tells us that the time has come to exercise some restraints on hot money inflows and to institute some controls (taxation) on those who abuse our open system for the mere hoarding of housing stock and capital.

        The banks meanwhile have all the evidence necessary to make the case where other data cannot prove these inflows exist. In the meantime anecdotal evidence of hot money damaging the local economy in the form of housing speculation cannot be ignored.

        it is overwhelming as witnessed on this very site.

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