Vancouver RE – ‘Heaven’ At A ‘Perfect Price’

vanc-realestate10rb1-WEB

“Qiqi Hong walks past her sleek, blue-tiled hot tub and an infinity pool that seems to disappear like a waterfall into the chilly air above West Vancouver. She leans on the patio railing and breathes in the majestic ocean view that takes in the towering Douglas firs of Stanley Park, the skyscrapers of Vancouver, the Asia-bound freighters anchored in English Bay and – way off in the misty distance – the faint, rugged outline of Gabriola Island.

“We’re in heaven,” says Ms. Hong. “I can’t find any house that can compare to my house.”

The serene West Coast lifestyle did not come cheaply: Ms. Hong’s home cost $6-million. But it is an investment she can easily afford. The irrepressible businesswoman founded a successful lighting-design business in Beijing that thrived in China’s building boom. It now has more than 100 employees. But tired of Beijing’s hectic pace and foul air, she decided to come to Vancouver – after looking in Switzerland, Germany and the United States – on the Canadian government’s immigrant investor program in 2011. She now also owns three other houses on Vancouver’s west side, each valued in excess of $1.3-million, as well as a downtown condo she uses on weekends and lends to visiting friends.

“Some now say Vancouver is a bedroom community for the world.”…

“In my opinion, I think it’s good for the economy,” Ms. Hong says, noting that the number of Chinese residents on her street has soared in recent years and that the local businessman she bought her house from made a cool $1.5-million more than he originally paid. “In Vancouver,” Ms. Hong says, “the house prices are perfect.”

Dan Scarrow, who recently opened an office in Shanghai for Vancouver-based Macdonald Realty Ltd., one of the largest real estate firms in British Columbia, makes no apologies for courting prospective home buyers in China. He says 178 of the firm’s 531 sales of single-family detached homes within Vancouver’s city limits last year – or 33.5 per cent – went to buyers with ties to China. …

“Vancouver has become a global resort city. The prices have decoupled from local wages,” says Mr. Scarrow, whose mother, Lynn Hsu, moved from Taiwan to Vancouver in 1979 and is now president and majority owner of Macdonald Realty.

As he pursues investors in Shanghai, he intends to steer buyers toward commercial properties if they have no interest in settling down in Vancouver. Some foreign buyers have purchased Vancouver real estate purely as an investment, without occupying the properties or renting them out, but that has triggered some resentment because it’s sometimes seen as detracting from the vitality of a neighbourhood.

But in general, Mr. Scarrow believes the positives of offshore money far outweigh negatives. Baby boomers can cash out at a profit and downsize with enough money left to help out their children. Selling houses also increases sales of appliances, furniture and home renovations. Vancouver’s housing market has become an important ecosystem unto itself, which explains why developers are anxious to keep foreign money flowing.

– From The Globe and Mail, 10 Oct 2014

Unwise to get into bidding wars with multi-millionaires who think they are buying ‘heaven’.
Perhaps the ‘Monaco’ scenario (kinda akin to “bedroom community for the world” scenario) will come to pass, and Vancouver RE will forever be disconnected from local fundamentals. Or perhaps not.
-ed.

145 responses to “Vancouver RE – ‘Heaven’ At A ‘Perfect Price’

  1. In the 90s the economy had supposedly ‘decoupled’ from its pre-internet past. The old rules no longer applied. How did that end?

    Fast forward to RE today, where prices aren’t driven by boring old economic fundamentals, but instead by grander “global” forces.

    P.S. vreaa, should we add “bedroom community”, “global resort city”, and “ecosystem” to our list of bubble jargon, if they’re not on it already?

  2. nice swimming pool….I wonder how often does she use that? I guess she will need to put a lot of antifreeze in the winter. Typical of Vancouver, it is all about appearance with no substance.

  3. Are they paying taxes here?!

    The cost to run Vancouver region, BC & Canada is more than the price of municipal taxes.

    For example – I pay about $15,000/year in income taxes plus ~$5000 in GST&PST&CarbonTax&HiddenTaxes …in addition to the $3500 in municipal taxes.

    With offshore tax shelters, I seriously doubt these foreign buyers are paying the full tax burden to live in their Vancouver shangri la. And their portion of the cost is being carried by the rest of us who established and created this “resort”.

    Then there is: 1) “family break down” as our kids have to move away because they can’t afford to be here. 2) “community breakdown” as we can rarely communicate with these new arrivals in english.

    They are coming to Vancouver way too cheaply. We are selling the farm for pennies on the dollar.

  4. …”We’re in Heaven”… Hmmm… what an odd coincidence – for that is precisely the tune that so enthralled our civic, provincial and federal politicos as they danced away the night at the recent VancouverDevelopersGala…

    • What’s that you say, IllustriousEd?… You weren’t invited either!?! Scandalous. Simply scandalous.

      Never mind.

      It’s not as though ‘OurBetters’ have completely forgotten the destitute Hoi Polloi … For example, just look at the enormous effort they’ve invested in assuring our improved access to the BetterThingsInLife… You know, like ScratchCards & FortifiedWine.

      [TheTyee] – BC’s Sinister Drive to Recruit More Gamblers

      http://www.thetyee.ca/Opinion/2014/10/11/BC_Government_Sinister_Drive_To_Recruit_More_Gamblers/

      [CBC] – B.C. liquor laws to allow alcohol in grocery stores Spring 2015

      http://www.cbc.ca/news/canada/british-columbia/b-c-liquor-laws-to-allow-alcohol-in-grocery-stores-spring-2015-1.2795281

      • Oh yes, I almost forgot…

        File this one under: A Tale Of Two Cities or Why did Vice President Nguema Obiang say, “I really wish that I’d moved to Vancouver, instead.”?

        [LAT] – Foreign official gives up Malibu home in federal ‘kleptocracy’ probe

        …”Overall, the anti-corruption initiative, promoted by Atty. Gen. Eric H. Holder Jr. and involving dedicated teams from the FBI and Justice Department, has seized nearly $600 million in assets from officials of Nigeria, Taiwan, South Korea, Afghanistan, Brazil, Kazakhstan and Ukraine, Justice Department officials said Friday.

        The largest seizure, $480 million, came in August against the estate of former Nigerian dictator Sani Abacha, who died 16 years ago.”…

        http://www.latimes.com/local/crime/la-me-malibu-kleptocrat-20141011-story.html

      • #BonusTao

        [SCMP/IanYoung] – Rich Chinese immigrants’ deception costs British Columbia billions: Province misses out on its promised loans as rich Chinese claim they are settling elsewhere

        …”Most of the 30,000 rich Chinese who have recently moved to British Columbia told authorities they would settle elsewhere in Canada, with the deception costing the province access to billions of dollars in loans.

        An investigation by the South China Morning Post revealed the widespread illicit practice, which is demonstrated in a huge discrepancy between approval and arrival numbers of Chinese in BC under the Immigrant Investor Programme (IIP). The Post’s revelations come as Ottawa prepares to unveil a wealth migration scheme to replace the federal IIP, which was axed in June.”…

        http://www.scmp.com/news/world/article/1612403/rich-chinese-immigrants-deception-costs-british-columbia-billions

  5. #Alas,Sooner… #OrLater… #AllPartiesMustComeToAnEnd… #TheGala’sInevitableDenouement:

  6. Barbara Streisand’s house is much nicer….and i heard Malibu has better weather than West Vancouver …….vancouver a heaven LOOOOOOOOL

    constant cold rain, no attractions no celebrities, no big companies, NO entertainment scene………..but there is lots of cold weather and skiing and snow shoeing…not much of that in Cali

  7. I think we can all agree that’s a nice looking property

  8. today in Los Angeles……im sure everybody wants to be in vancouver though

  9. It’s official: Now it’s Heaven.
    Best Place on Earth is no longer good enough.
    Well, if a Chinese billionaire says so, then it must be true.

    • I had proposed BPIU (Best Place In Universe), but “Heaven” takes the cake.

    • Just between the two of us, RET… the Arcadians might take exception to Ms. Hong’s fervent VanBoosterism…

      [BloomBergBizWeek] – Cash Pads: Why Are Chinese Millionaires Buying Mansions in This L.A. Suburb?

      …“Thank God for them coming over here,” says Peggy Fong Chen, a broker in Arcadia for many years. “They saved our recession.” The new residents are from China’s rising millionaire class—entrepreneurs who’ve made fortunes building railroads in Tibet, converting bioenergy in Beijing, and developing real estate in Chongqing. One co-owner of a $6.5 million house is a 19-year-old college student, the daughter of the chief executive of a company the state controls.

      Arcadia is a concentrated version of what’s happening across the U.S. The Hurun Report, a magazine in Shanghai about China’s wealthy elite, estimates that almost two-thirds of the country’s millionaires have already emigrated or plan to do so. They’re scooping up homes from Seattle to New York, buying luxury goods on Fifth Avenue, and paying full freight to send their kids to U.S. colleges. Chinese nationals hold roughly $660 billion in personal wealth offshore, according to Boston Consulting Group, and the National Association of Realtors says $22 billion of that was spent in the past year acquiring U.S. homes. Arcadia has become a hotbed of the buying binge in the past several years, and long-standing residents are torn—giddy at the rising property values but worried about how they’re transforming their town. And they’re increasingly nervous about what would happen to the local economy if the deluge of Chinese cash were to end.”…

      http://www.businessweek.com/articles/2014-10-15/chinese-home-buying-binge-transforms-california-suburb-arcadia#r=hp-ls

    • psssst! “Help! “Help!”… RoboEd is back to his OldTricks… there’s a juicy little item stuck in ModerationLimbo, oh IllustriousOne…

  10. Meanwhile in Gastown you can get a condo that will appreciate at 2.5% per year:
    http://ingastown.com/pricing.html
    (never mind the fact that condos in Vancouver have appreciated at less than 1% over the past 7 years).

    And Vancity is even willing to finance your deposit at 2%.

  11. The worst thing is that this kind of articles only feeds on a typical racist attitude of many common Canadians. Do we have a real problem in Vancouver with housing? I would say yes, but it is mainly detached properties that are being heavily overpriced – as said in the G&M article. What the government has to do is to tax everyone according to their incomes. If foreigners move to live to Canada, they should pay taxes here. Thats the only thing I can say about it.

    • I do agree with you. And considering the money coming from overseas is unmatched to the wages of the local residents; it only makes sense out of fairness to our homeland citizens to have the ability to compete. Whether that be from excess tax money being funded for a free post-secondary education system (like they’ve done in Germany, France, Turkey, Cuba, India, Argentina, Greece, Italy and Sweden) -which is a dream for Canadians- or to increase the minimum wage yet again, from 10.75/hr of the large working class here to something to make a living and not barely survive; at $18 – $20. And with that comes problems of inflation etc. It seems like Vancouver is Heaven for the rest of the world; but for locals (in the most polite term I could make for this) it’s truly fucked.

    • When the first family of SIN-land bought a bungalow at British Property, the price-tag couldn’t be $2M . And in those days, a bungalow in Seletar Hills (SIN-land) was around that price range too. Look at its price-range today. (http://tinyurl.com/o3wqu52). Or at that other one doctor who overcharged her patient $22M (http://tinyurl.com/o6kfccy).
      Or the Indonesian tycoon who bought the Plaza of Nations. His sister is known for her voracious appetite in real estate.
      If you had a premonition then, fast forward to a quarter century later it ain’t pretty.
      “Tides and times wait for no men”. Soon yall be shaking greasing hands under the table.

  12. She is the CEO of a branch office at W Georgia, and has a vacancy for a Creative Commercial Designer with min. edu. of an undergrad degree paying $24/hour. Fair start.
    http://www.workbc.ca/JobSeekers/DisplayJobPostingApply.aspx?jobid=169746

    Her company has a partnership with Vancouver-based Russell Brewing Company on a project in China.
    At the time, Cristy said in 2013: “Chinese investors want to see significant returns on the investments, and they want to see them in a timely fashion” .
    VanBoomTown real estate is the gilded pathway to heavenly riches. lol
    http://www.cccica.com/en/?p=197

  13. Some of you may find this interesting if you haven’t found out yet. It costs more to borrow domestically in China than overseas. A privately held public company once operated as one of the subsidiary companies of HSBC Bank Plc, which operates as a national commercial bank that provides financial services.
    http://listofcompanies.co.in/penton-international-ltd/
    It later changed hands and became a ship building company. To cut the story short, the latter was a subsidiary of a real estate holding company nothing to do with the maritime industry and no info on record.
    http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=11791018

  14. Notice the repeated misuse of the word “investment” to describe such property purchases, instead of the more correct “speculative play” or (sometimes) “status symbol.” Such misuse of “Investor,” “invest,” “investment” is typical of MSM coverage of Lower Mainland real estate. How can a house that is left empty (rather than rented out) be considered an “investment”?

  15. Heaven?
    Looking outside, it looks more like purgatory.
    No use for the pool for the next 6 month.

  16. Unexpected landlords

    Bosa properties have built many condominiums in Vancouver and the surrounding area. This is the first time I’ve seen them rent. Does anyone know whether they weren’t able to sell these units so decided to become landlords?

    http://bosa4rent.com

  17. In today’s Sun, Tsur Somerville enlightens us with the lesson: life is about tradeoffs.

    “You can’t always get what you want,” he tells us, in reference to the unaffordability of Vancouver RE.

    But it ain’t so bad, he assures us, because a lot of lower-income jobs are out in the ‘burbs anyway.

    “You may want to have meaningful employment that gives back to society and be able to have the house you want in the neighbourhood you want. The reality is, [if you want to live in the city], you may have to go be a corporate lawyer. So you make that trade-off.”

    Translation: Quit your whining you working-class, common folk. Go to Valley, where you belong, and start contributing to society.

    If there has ever been a more paternalistic, smug justification for the absurdity of Vancouver RE, I have never heard it.

    http://www.vancouversun.com/business/Metro+Vancouver+neighbourhoods+costly+average+family+database/10296788/story.html#ixzz3GVwuoRLg

    • Well as much as we all like to malign Somerville, you might want to pause and consider the guy is advocating for a significant rethink of housing forms that are being built in Vancouver, including what could well include going in wielding a mage-charmed rapier on RS-1, RS-5, and RS-6 zoned neighbourhoods.

      He’s actually quite funny too if you get to listen in on some of his lectures.

      For what it’s worth. Death to the bourgeoisie.

  18. A big article about HAM. Every day, another SFH in Vancouver gets torn down, and turned into a duplex, or land for townhouses. Don’t worry though, it’s all speculation. Nothing to do with less than fifty percent home ownership, offshore money, no land in Vancouver left untapped.

    Yes it’s speculation. Median income in Vancouver is 22nd in Canada at 70k per year, house prices are number one. If the factors from the paragraph above don’t count, there must be special financing rules that create the highest housing price to income ratios on the planet that apply only to Vancouver. The search for the real reason that Vancouver prices are so high goes on … only the shadow knows.

  19. I have been reading this board for a while. First of all, I am beginning to understand the crux of the issue finally. People have a hard time defining what affordability means. Take this for example, is a 40 year old two bedroom lowrise apartment in the west side of Vancouver a good place to live for a family of three or four? I ask this because I could find you a bunch of listings of these properties in Vancouver that cost from 300K to 400K. Now is that so unaffordable for a dual income family? Who says that everyone is entitled to live in a SFH anywhere in Vancouver. People in Asia all live in Apartments, no one has a SFH. Most of the HAM’s had no idea what a SFH is until they got here. This is one issue that we need to resolve first before we can begin to talk about affordability. What is an acceptable level of accomodation.

    Second of all, the truth is that SFH has skyrocketed beyond control. I was just in the middle of a bidding war for a SFH in East Vancouver. Ten offers and the house went for 100K over asking. I did a quick survey of some of the other bidders. All of them can afford this house quite easily. They either have high paying jobs in Vancouver, are offshore buyers, or are investor immigrants, or they have an apartment that can be sold for about 400 to 500K. At that type of downpayment and with East Van houses with two suites sitting at about 1600 dollar monthly income, the affordability becomes a lot more realistic for these places even at these prices.

    But that still is not the most important factor. Statistics show that we allowed about 30000 investor class immigrants into Vancouver from 2005 to 2012. That is 30000 just in that class alone. So this doesn’t take into account other forms of immigration such as skilled, entreprenuerial, etc. And more importantly, this doesn’t account for foreign buyers, because, well, they are not foreign, they actually technically are residents. I did a quick research of the number of SFH in Vancouver, Burnaby, West Van and Richmond, the four most desirable places for investor immigrants to own real estate. There are less than 100,000 SFH’s in total. That is not 100K SFH on the market, that is the total supply of them. Now, to be an investor immigrant, you must have liquidable assets of over 1.6 million dollars. So let me recap this math, we let in 30000 millionaires from the most property crazed nation on Earth. We still have god knows how many non-residents offshore buyers of our SFH. We also have, not as much as a city like Toronto, but still a lot of high paying employees in Vancouver looking for these types of houses. And we can also add in the Indian population in Vancouver who are great at combining their incomes to support a single house. Add these factors together then the great supply and demand equation becomes painfully clear. We do not have enough SFH’s to fit the demand. And if we ever let in more of these immigrants, doesn’t have to be a lot, but another 10000 in 10 years would destroy this market some more.

    • The argument that foreign money will forever propel, or even maintain, Vancouver RE prices would perhaps hold water if Vancouver were the only game in the world. But it’s not. There are many equally desirable, if not superior, places around the globe that foreign cash can and will flow to. There comes a time when even the dumbest money (and, arguably, any money going into Vancouver RE at this point is very, very dumb) will call a spade a spade.

      In any case, all of this has very little to do with outside money, and very much to do with historically-blind, financially-illiterate Canadians who have whipped themselves into a frenzy over cheap money, a cultural obsession with RE, and delusions of endless “foreign” demand.

      • I understand the idea about foreign investment. Hence I tried not to touch on it too much. But investor immigrants are not foreign, they are local. They are no different than any other immigrant to Canada, just that they happen to be very rich. 30000 of them would have a huge and irreversible effect on the SFH market no matter what area of economics that you are looking at.

      • CaptainCalamari

        Vancouver may not be the only game in the world for rich Chinese immigrants, but it seems to be the game many of the want to play. I don’t completely understand the choice personally since this city would not be in my top 20 if I had the $.
        The simple truth is that the demand for Vancouver land is several times higher than the supply. I don’t see this changing in my lifetime

    • “They either have high paying jobs in Vancouver, are offshore buyers, or are investor immigrants, or they have an apartment that can be sold for about 400 to 500K.”

      Some other options for you to consider:
      – parental help
      – they might be immigrants but not “investor” immigrants, and after how long would they have to remain in Canada before they are just “locals”?

      • “they might be immigrants but not “investor” immigrants, and after how long would they have to remain in Canada before they are just “locals”?” This part is the scary part. Like I point out, I can only quote research statistics based on what has been confirmed. So the 30000 number was recently published by the Globe and Mail so I am certain it is correct. However, annecdotal evidence suggest that there are a lot of skilled immigrants in the SFH market. My parents, for example, are one. They were very poor when they came to this country but had skills. They saved and saved and have been buying and upgrading into better SFH’s all this time. Eventually, they moved into the upper middle class of this city. I am lucky, I don’t have to fight this hard because I have a local education. But there are many similar stories and these immigrants could save up to 70 to 80 percent of their after tax income to pay their mortgage. My mother used to tell me never to underestimate the skilled immigrants because they are tougher than me and can endure tougher conditions. I am beginning to understand her point. These saving levels and the standard of lliving associated with them are unthinkable to western minds like ours. But they are there and they are bidding on the same SFH’s that we are bidding on. Once they settle in and make similar salaries to the locally educated people, we cannot compete on the same properties because we just don’t save as much. Then there are the other annecdotal evidence of Indian people in Vancouver who are just as industrious and combine their incomes to buy a house. A whole family of brothers all live in one house, they usually have 3 to 4 incomes plus a couple of rental suites to support the mortgage. But I do not have hard numbers for either of these cases, so I can’t say definitively their effect on our market. But it is definitely there.

      • Brian, there has been Chinese and Indian immigration to Vancouver for many decades now. It doesn’t explain the massive run-up in prices we’ve seen over the last ten years.

      • I used to believe that immigrants work harder and smarter and save more based on their “exposure” to tougher and rougher conditions in the “real world: — and I have no doubt that in certain cases it’s true — but I think if the intent is to work like crazy and throw everything into real estate, that comes across as a strange failure to find the better investments this continent has to offer. Maybe owning nothing but real estate is the right move, but my risk management brain is tingling.

        Also, if you don’t mind the observation, I see a fair number of luxury cars driving around the west side of the city. If I were looking to save my money, buying an asset that has one of the fastest depreciation schedules going, consumer electronics aside, seems like an odd undertaking.

      • @El Ninja, yep, but don’t think we ever let in 30000 millionaires in an eight year span like this before Investor immigrant class is a very very recent thing. Also, this is not china of 20 years ago, the Chinese upper class have money to burn now. Btw, you are right that it is not a Vancouver only phenonmenon. This is happening to all the world class cities but it is not happening to all cities. So London, New York, Vancouver, etc only. And this trend is irreversible of rich people from whatever walks of life decides to horde real estate in desirable cities. However, in particular areas where a certain language is supported, this is happening much more frequently. For example, rich Latinos have driven up property prices in Miami because well, the city speaks Spanish. We happen to be a place where Mandarin is spoken, there aren’t many cities like that in the Western World. I think if you look at percentage of Chinese people in Western World Cities, we are one of the highest along with San Fran.

      • Brian, I grant you that rich immigrants are perhaps one factor. Just not a driving factor. How do you explain a nationwide run-up in prices on the basis of rich immigrants coming to one or two cities? Or the across-the-board meltdown in U.S. real estate, despite strong immigration over many years? Clearly there are other factors at play. I contend that prolonged, low interest rates, coupled with human greed, have spurred a speculative frenzy. There are other reasons, too, like an aversion to “stocks” as investments, a cultural fixation on home ownership, and so on. But these are the main two.

        Immigration is just a convenient sales story for realtors, in my opinion. Much like “retiring baby boomers” was to Phoenix eight years ago. The city’s population was growing at 3-4% and this, we were assured, would drive prices ever-upward. Until they crashed 50%.

      • C’mon! Vancouver in the same league with London and New York?? Vancouver’s peers on the global stage are more like Portland, Oregon. It doesn’t even compare to Seattle, when you consider the two cities’ economies.

      • Joe Mainlander

        @Brian. 30,000 investor class immigrants in 8 years. Okay, there are around 40-45,000 sales per year in Metro Van, both sides of the Fraser. That’s over 300k sales in 8 years, so these investor class buyers would make up less than 10% of the purchases. You think that would cause home prices to inflate by over double in the whole Metro area? Order of magnitude is not there. 90% of sales are for homes less than $1 million. And that is what is driving our market, along with all other markets in Canada. And that market is driven by cheap money and CMHC subsidization of home buying. It’s called asset inflation. What we’ve never had before is over $1 trillion released into the housing market in a decade. That dwarfs what a handful of rich immigrants could influence..

      • @Joe. I don’t disagree that there is certainly loose monetary policy at play. But to blame the whole thing on that would be ludicrous. A SFH in Shaughnessy went from 2 million to 10 million. I don’t care how loose your monetary policy is, the guy who bought it at 10 million still have to have a wad load of cash to get the financing for it somehow. If you look at my argument, I focused specifically on SFH for four areas, Vancouver, Burnaby, Richmond and West Vancouver. There are only 100K of that (source, statscan). You are right there are about 300K transactions on both sides of the fraser river but I would argue that the majority of those are not in price ranges that I would classify as unaffordable. Dual incomes at 100K plus rental suites should be able to support a 500K place. What I am looking at is the issue where people are crying about unaffordability. My contention is that in reality, the majority of Metro Vancouver is quite affordable. Those areas that are not, see my example above of SFH’s in those four areas, are largely driven by the simple reason that we let in 30000 millionaires, most of whom desire an asset that we really only have 100K of. From annecdotal and personal experience, there are two things that they want, 1 land, 2 location. They don’t want to live in Surrey, they barely want to live in Coquitlam, they only want those 4 areas and they want SFH’s. That’s why prices have become unaffordable. If it was purely loose monetary policy then there are still ways that locals can afford as they can get the financing from the same loose policy.

      • “Rich immigrants” is nothing more than a realtor’s sales pitch. Much like “retiring baby boomers” was for Phoenix in 2006. Which subsequently crashed by 50%.

      • @El Ninja, I don’t know, Globe and Mail doesn’t seem like it is ran by real estate agents and they are the ones saying that we let in 30000 millionaires. I am also looking to buy a SFH (I like land) in Burnaby and have come up time and time again bidding against investor immigrants. Needless to say, I haven’t had much luck. When I went through my mortgage pre-approval, the banks were stuck to their guns that I could only borrow 5 times my income (t4 income). So this means that most people who make a decent salary (100k) in this city can only borrow about 500K, which means that to buy a 1 million SFH, you would need to either make a lot in income or have a wad load of cash as downpayment. In many of the cases that outbid me, they person had so much downpayment that the income became irrelevant. I mean, a 1 million dollar house with a 400K downpayment does not scream overleveraged to me. We just don’t have enough SFH’s in good areas to fit demand and condos are not considered as a good substitute. I saw some other links here about people cashing out in 2012 thinking it was the peak. I checked out some of the 2012 prices and they were at least 20% lower than today for SFH’s in a place like Burnaby.

      • So, the same asset costs more today than it did two years ago, and that makes you want to buy it? That is the precise opposite of a smart investment move.

      • @El Ninja, Actually that makes perfect sense in terms of investing. One of the biggest myths of investing is that buying stocks at 52 week lows is better than buying at 52 week highs. There have been research that shows that the opposite is true. In fact, one of the fundamental rules of technical investing is to never catch a falling knife (so don’t buy an asset that is on a straight line down, kinda makes sense). So to answer your question, absolutely that is a valid investment. There are countless companies on the major stock indices that have gone up much more than 20% over the last two years and they are still great buys even today. I used to be one of the people who thought that a crash is a certainty and then I can swoop in and buy a SFH at half of what it is at today. But then after I did some investigation by focusing only on the properties that I want, so SFH’s in Burnaby and Vancouver, I realized that the microeconomics of these properties look much better than say apartments or even SFH’s in other areas. I don’t anticipate that they would go down more than even say 15% in a downturn if they go down at all. Mean while, I also realized that in Vancouver, with the construction of laneway homes, the rental generation of these houses are amazing. I have seen houses that can essentially generate about 5K in rental income for the enitre house out of a 33 by 122 lot (900 each suite, 1200 laneway, 2000 upper floor). I use a ratio of 200 rental to price, the house value is about 1 million. In many areas of East Vancouver, you could buy such a place for about 1.2 to 1.3 million. So the ratios aren’t even as out of whack as I originally thought.

      • Brian, you have clearly convinced yourself that buying Vancouver RE at this time is a good move, and no amount of economic, historical, or international perspective will change your mind. You are the quintessential “greater fool” (no offence intended). Hopefully vreaa keeps up this forum, and we can check back in a few years to see how things worked out. Good luck.

      • @El Ninja, absolutely agreed on the “greater fool” part. But people said the same about people who owned stocks 2 years ago and the S&P has had a historic run and the “greater fools” then are looking like geniuses now. I follow this board since a few years ago. And some of the predictions here a few years ago were corrections of 40 to 50%. Well, since then some of the SFH’s that I have followed have appreciated by about 20 to 30 percent. Condos are a different story. Am I certain that the market will keep going up? Of course not. I don’t have a crystal ball in front of me. My only contention is that if people keep on hanging onto macroeconomics principles and not examine the fundamental demographic shift that is actually happening to our city then the mystery of vancouver housing will continue. The other thing that I will leave is that I have realized over the last few years that in order to make money, we have to own assets that the rich wants to own and we have to pay special attention to the supply of assets. Our society is becoming more and more polarized and unequal. There has been a trend over the past few years of rich people from around the world snapping up real estate in desirable cities which is not unique to Vancouver but still restricted to a handful of cities. Now of course, I do not think that all types of real estate in Vancouver are good investments. For example, I think apartments are quite poor as investments as you can’t control the supply. However, as Thomas Picketty points out, assets tend to outpace economy in appreciation. And housing is one of the most leveraged assets out there. So it is hard for me to see how a city with a limited amount of supply of assets desirable to the rich, particularly one in a country that is fastly growing and full of corruption and the need to launder money out,is ever present and ever more urgent will have a crash in this asset class unless its government, which is more or less funded by the same rich that benefits from this exact appreciation, forces this crash.

      • Fair enough, Brian. But let’s be clear: what you are doing is speculating, NOT investing. For the difference between the two, see B. Graham and/or W. Buffett.

      • @El Ninja, sure. But you can say everyone who has bought real estate in Beijing or Shanghai or Taipei for the last ten years is speculating because the rental income from those suites are lucky to hit even 2% of the purchase price (Vancouver’s price to rent ratio is much better than most Asian Cities). But they have all made ridiculous amounts of money and not even the biggest bear today would say that either cities’ real estate would have even a chance of returning to what they were ten years ago. I am speculating that the commodity is of great value and limited supply and therefore is under valued.

      • “Not even the biggest bear today would say that either cities’ real estate would have even a chance of returning to what they were ten years ago.”

        That’s what the Americans said, too.

      • YVR Housing Analyst (@YVRHousing)

        ” Our society is becoming more and more polarized and unequal. There has been a trend over the past few years of rich people from around the world snapping up real estate in desirable cities which is not unique to Vancouver but still restricted to a handful of cities. ”

        Well apparently the trend is your friend then. In most of the region I still see housing, including the “single detached” variety, as affordable to locals. They seem to be able to scrape together the money from all sorts of places despite the supposed influx of offshore money.

        The contrarian in me is thinking the last 50 years of declining wealth equality is bound and slated for reversal, not by any concerted policy but by looming labour shortages. It’s been so long since labour has had the upper hand I think it’s been mostly forgotten what’s possible.

      • “In most of the region I still see housing, including the “single detached” variety, as affordable to locals.”

        How do you define “affordable”? If housing costs take up a majority of your after-tax income, and if you have had to borrow massive sums of money, and you are reliant on current, historically-low interest rates (which are destined to rise), and on top of this you need to have a stranger living in your basement — all of which are basic realities in Vancouver — then that’s not affordable. Not by any reasonable interpretation of the word.

      • YVR Housing Analyst (@YVRHousing)

        “Not by any reasonable interpretation of the word.”

        Sales are not exactly weak despite high prices. However property purchases are being financed — and there are many ways of raising the necessary funds– the terms are not, ostensibly, woefully risky, though perhaps riskier than normal. I’m not seeing insanity but there is concern. My two cents

      • @El Ninja, I quite agree with YVR Housing. I am seeing the exact same thing on the ground these days. We have to first define affordability. See this situation, a couple, making a combined income of 100K, living in SFH in Surrey which costs about 600000 dollars to buy. Let’s say they have a 480K mortgage which incurs at current rates monthly payments of about 2000 dollars amortized over 30 years. Now their two suites in the basement brings in about 1500 bucks a month. So you say that today’s rates are too low. I used TD’s mortgage calculator for 6 year closed at 5.96% which is about double of what the rate is today, then the monthly payment is about 2843 dollars. The total monthly payment minus the two suites’ income is only about 1343. With the way that the US FED seems to care so much about the income inequality right now. By the time the rate hits 5.96%, most likely at least three to five years from now, this couple’s loan amount will be significantly less than 480K which means their monthly payments could also be lower. I think you have an issue with renting out the basement suite. I am sorry, but I don’t see this as an inconvenience at all. My parents have always had renters and they are friendly and pay the bills just fine. I don’t know why we have become so entitled that it is not acceptable to have renters all of a sudden. To me, renting out basement is a no brainer and a great extra revenue stream. People get rich by creating more revenue streams. Now as I have always maintained in every post. I don’t see an affordability issue for Greater Vancouver except if you want to own a SFH in Vancouver, Burnaby, Richmond or West Van. The rest of the SFH’s in Surrey, Coquitlam, Langley, etc are all quite affordable. Apartments in Vancouver have not gone up as much as SFH’s have. So I am still unsure where this issue of unaffordability comes from.

      • YVR Housing Analyst (@YVRHousing)

        ” So I am still unsure where this issue of unaffordability comes from.”

        Rates are low so there is still memory of when rates were a fair tick higher than now. I think the market has priced in lower rates, but that is a one-off jump in prices, and I don’t think there’s much room lower.

        Part of the issue is rents are not cheap by local salary terms for the more desirable areas.

        Addressing “affordability” is a tough nut to crack because everyone wants to apply their own definition to the term, and Vancouver is a scarce resource. Nobody leaves happy, but I find solace in this town’s boundless irony.

      • I think it’s dangerous to shrug off “affordability” as subjective. It can be quantified and standardized, rather easily, in the context on historical trends, and data from across the country and world. For example, if housing represents “x” more of average income in Vancouver than it does in a similar basket of other locales, or to long-term averages, it is less affordable. Like the price-to-earnings ratio for stocks, it is an imperfect guide. But we ignore it at our peril.

      • @El Ninja, I think your definition is why we have a misunderstanding of affordability in the first place. There is a huge subjective influence of affordability based on cultures. Vancouver is 43% asian / asian descendents. I will attempt now to not stereotype but may sacrifice some political correctness for the sake of argument. Indian families for example, have four incomes supporting one house. Vancouver is 10% Indian, how is that accounted for in the price to income ratio? You can’t blindly compare localities without looking at the demographics that are in these localities in the first place. Vancouver has always been very multicultural but I would argue that there have been a large demographic shift of Asian immigrants into this market which has shifted the cultural mix (see richmond 1993 versus today for example). It is because of the subjective nature of the value of real estate in various cultures that we have such differing ideas about affordability. In Chinese culture, it is not just suggested but mandatory that the male own real estate before marriage. So the Chinese idea of affordability is much more looser than he western one because of the huge demand for real estate. So you can’t pull up statistics of Vancouver versus say Winnipeg or Calgary and say we should be the same. We are completely different cities with different peoples who have different ideas. This is what makes Vancouver so unique.

      • YVR Housing Analyst (@YVRHousing)

        “I think it’s dangerous to shrug off “affordability” as subjective”

        The term is subjective because the definitions I see bandied about are attaching normative assumptions to the debate. 30% of income is a great metric for me, but the rub is why should, in a growing region, the city support the tenure of incumbents when others of greater means are wanting to move in. It’s a big region and there are lots of places to live that are more affordable, yet here we are building rentals affordable to incumbents in gentrifying neighbourhoods.

        The best definition I see of affordability, from those pushing their views in the msm, is 30% of income without moving to a cheaper location. There is no problem with that but I would prefer the debate be focused around why we want people of lower incomes living in expensive areas

      • Choose any metric — doesn’t matter which. My point is to look at it over time. What we will see is that Vancouver is less affordable now than it has ever been. And that should tell us something.

      • @El Ninja, sure, but how do you account for changes in demographics? Richmond was not 60% Chinese 20 years ago, now it is. So how do you factor in rent to ownership ratios based on cultural factors then? If you are to ask me, if you take the national average of Canada, time it by 0.4 then take the rent to ownership ratios in places like Beijing, Shanghai, HK and Taipei and multiply that by 0.6, you probably get Richmond’s average. Is that not a valid test?

      • YVR Housing Analyst (@YVRHousing)

        Elninja, The premium is telling me people are willing to pay a large premium for perceived insurance, or future cap gains. The insurance premium is likely culturally driven but in my view not appropriate for a first world economy that has solid rule of law.

        There is no shame in overpaying

    • “Who says that everyone is entitled to live in a SFH anywhere in Vancouver. People in Asia all live in Apartments, no one has a SFH. Most of the HAM’s had no idea what a SFH is until they got here. ”
      Peace, but I call that B.S. In Asian city states and countries with no natural resources, bungalows have become hard commodities. This guy deserves respect for telling it as it is, “His family made its money by investing in bungalows…”

  20. Knock, knock, knocking on Heaven’s door.
    I hear you knocking, but you can’t come in.

  21. vancouver is not a world class city.. in the same league as SF, vancouver is barely a city at all

    that prof said people should be Corporate Lawyers to buy a house in vancouver … newsflash vancouver has no opportunities to be a Corporate anything , there are no corporations in vancouver thus no demand for Corporate Lawyers…. the only opportunities for lawyers in vancouver are hustling ICBC ..frivolous lawsuits in small claims court, and immigration lawyers ..

    Spanish is the second language in SF …any other language would be a distant third

  22. The contrarian in me is thinking the last 50 years of declining wealth equality is bound and slated for reversal, not by any concerted policy but by looming labour shortages. It’s been so long since labour has had the upper hand I think it’s been mostly forgotten what’s possible.
    ————————–
    I personally would like this to happen, too.
    However, changing cultural patterns and the spigot of Temporary Foreign workers program will put an end to organized labour, which is probably the intention of our policy makers.
    We’re well on the Road to Serfdom.

  23. stuck in moderation vapour land…

  24. 10 years ago, rents in desirable areas were definitely half of today’s rate. At the time some were using it to support their arguments. It’s worth re-reading Carl Gomez’s 2005 housing market report. He did touch on the potential for demographic density increases and sfh prices to reflect this rising at a much higher rate than incomes.

    So we are going to have a record intake of immigrants in 2015. Being the descendant of immigrants, I have no criticism but only respect for our policy makers. I chanced upon an article last night of a tycoon in a divorce battle with his ex-beauty queen wife over his £400M-£500M. If the divorce proceedings take place in London, his wife will get half of it. Thing is his family migrated to Austral in 1980, before moving to Canada some years later, and in 1998 bought a Rossway home in Hertfordshire, England now worth £30M.

    “One of the most painful things that Francis said her family has endured was how Khoo, chairman of international brand Laura Ashley, allegedly refused to provide financial or medical assistance for her two brothers who suffer from autism and Tourette’s syndrome respectively, forcing one of them to apply for welfare assistance from the state in Canada.”

  25. From El Ninja, further up thread:

    “Brian, you have clearly convinced yourself that buying Vancouver RE at this time is a good move, and no amount of economic, historical, or international perspective will change your mind. You are the quintessential “greater fool” (no offence intended). Hopefully vreaa keeps up this forum, and we can check back in a few years to see how things worked out. Good luck.”

    Good idea. While we wait, perhaps we could revisit some of the other stories from a few years ago of people that “foolishly” bought, and discuss how things have worked out…

    • Yes, let’s. It’s a myth that RE has been a fantastic investment of late. In fact, over the past several years owners have subsidized renters. Renters who have invested the surplus in a balanced portfolio have earned superior returns to those earned in real estate. Owners who have sold and not bought back in at the same elevated prices (precious few of them) have done okay, but would have done better in equities. And remember that investment decisions should be forward, not backward, looking. Just because an asset has, in the past, risen in price relative to underlying fundamentals, does not mean that it will continue to rise in the future. On the contrary, it is more likely to fall.

      • @El Ninja, I think any attempt at this from Macro is a waste of time frankly. I think the reason why we are having so many divergent views is the fact that people should not make an overarching statement that ALL Vancouver real estate is great investment or ALL Vancouver real estate will tank. Personally, I wouldn’t touch 80% of the real estate on the market. But, like I have always done, I have restricted my argument to SFH’s in four locales, Vancouver, Burnaby, Richmond and West Vancouver. Like a stock analyst, we shouldn’t blindly look at the entire market but it is much easier to delve into specific sectors or even sub sectors. This is the same issue with affordability, most areas are affordable except of the ones I mentioned. You are right that given some period of time, namely 2009 to 2014, stocks have greatly outperformed Vancouver real estate, even the four locales that I have mentioned. However, Real Estate is one of the only places whereby you are not only allowed, but encouraged to leverage to invest tax free! I had two university friends who graduated together. One argued that his investments return just as much as Vancouver’s real estate and he is quite right actually. He basically did this for 10 years while the other put his money into SFH’s in first coquitlam and then Richmond and then into Vancouver. Now, the friend who told me that stocks are awesome has been right, his stock returns have actually beaten the average housing rise in Vancouver. However, he could now only afford a townhouse in East Vancouver despite of his awesome returns. My other friend has a nice SFH on the West side and more net worth than the other guy can dream of. Why, because whereas housing is leveraged, stocks are not. It is because of this leverage that it is equally dangerous to be wrong about housing prices going down as it is about it going up. When I first started working in 2005, west side SFH’s, the class of housing that I desire, were about 800K. Now, they are about 3 million. I have been permanently priced out of the housing category despite of a good income. So real estate is about as micro as it gets. I can only look at a particular area and use simple supply and demand to figure out what is driving the market and predict based on the micro economics. It is pointless for me to worry about what SFH prices will do in Langley when I have no desire on any of that type of property. For example, UBC is opening Vantage college, a program that charges International students 50K a year with an annual intake of 1000. Canadians need not apply apparently. This is frankly a slap in the face in my opinion. Will this do anything to condo prices in Surrey, no. But will it likely to affect SFH prices in Vancouver, I would argue much much more likely when you consider that the majority of the 1000 students are from China like UBC stated. I have no concern over the future of Vancouver real estate, Surrey can go up 300% for all I care and I wouldn’t bat an eye, but I have absolutely the vested interest in what will happen to SFH prices in the four locales because that is my desired real estate like many others who anxiously follow them.

      • It looks like Brian has raised many good points… like Brian, I only look at the SFH market (I have owned a house in North Burnaby since 2003), condos have done well but AFAICT mostly depreciate over time.

        To add:

        1. it is a myth that ALL RE has been a great investment of late, but as Brian pointed out, there are pockets of RE that have still done very well in the last few years. Better than the TSX or US markets? No. But if you bought a SFH in Vancouver or Burnaby 3 years ago, you have made a reasonable amount of money in that time. To suggest anything otherwise is simply ridiculous.

        2. Subsidizing renters? Sure, if you bought an apartment and can’t cover the costs by renting, but I think we can all agree that’s a dumb investment, period. But for homeowners that rent some part of their house out, its pretty much a win-win – renters get to live for less than owning, and homeowner probably covers the interest portion of their mortgage (or more), and gets to write off a large chunk of that income against expenses. I don’t rent out my basement, but if you don’t mind other people living in your house, I can see the value proposition.

        3. Ah, the good ol’ bear theory that homeowners can’t possibly have anything left over to invest, while renters are swimming in excess cash and making all the right moves in the stock market…. Gotcha.

        4. The decision to purchase a house quite often goes beyond the simple investment. Very few people (none that I know for sure, but I’m sure there are some out there) purchase SFH’s as a pure investment – mainly because its a pretty shitty way to invest, and from a personal finance point of view, its usually never a good time to buy. Houses cost money to run and maintain, and people know that. People buy houses to raise families, take care of elderly parents, provide themselves some security, park offshore money, move on to “the next chapter in their lives”, whatever. There are people buying houses today, so there is obviously a segment of the population that a) can afford to buy houses and b) think the intangibles of owing a house outweigh the costs and potential drop in value.

      • Brian, I’ve provided my thoughts already on the wisdom of purchasing what it is today one of the most overvalued housing types available in Canada and, indeed, the world. Good luck to you.

        Nuxfan, you’ve put words in my mouth. I didn’t say that all renters are genius stock market investors. I am merely noting that, if you do the math on the cost of renting versus owning, renting is cheaper–including any equity built through ownership. The numbers have been published on this site for all to see. If you have invested the balance intelligently, you have earned superior returns.

        Your point about the intangible value of owning real estate says nothing about the current imbalance in price / value. It’s like saying the weather is mild in Vancouver. The “ownership premium” has always been there. It was there 15 years ago, when prices were vastly lower relative to economic fundamentals…

  26. nuxfan,
    The nux got creamed last night.
    Good comments, though.

  27. Three untrue things I have read in this thread:
    1. “in 2005, west side SFHs . . . were about 800K. Now, they are about 3 million.” Not the same house. The building lot that sold for 800K in 2005 now has a 3M house on it, yes. But you could buy an old house on a building lot that would have sold, in 2005, for 800K for roughly 1.5-1.6M today.
    2. “I have seen houses that can essentially generate about 5K in rental income for the entire house out of a 33 x 122 lot . . . In many areas of East Vancouver, you could buy such a place for about 1.2 to 1.3 million.” A new west-side house on a 33 x 122 lot doesn’t generate 5000K in rental income, and trying to get the rents Brian cites for basement suites and laneway houses be an unhappy experience, with lots of turnover and unoccupied months . I’ve watched neighbors go through this.
    3. “10 years ago, rents in desirable areas were definitely half of today’s rate.” Asking rents in my very nice west-side area are 25-33% higher than what I was paying (after five years of renting) in 1999. On the west side, it’s much easier, in terms of finances and getting what you want quickly, to rent an apartment on the west side than it was 20 years ago. I don’t follow downtown rents as closely, but I have a coworker who rents a new 1BR condo downtown for a little over 1K. When writers on this blog talk about paying $2800 for a 2BR downtown, I can draw conclusions about those writers, but not about the rental market.

    • Disagreed on the first two points being not true as they are annecdotal. My parents neighbour’s current house is rented out for 5K. Look at south vancouver properties. While you may be right on the turnover because I do not have verification of this fact. There are too many tenants for me to track, but the revenue is pretty accurate. If it is not 5K, it is at least 4.5K. Considering that you are renting out a main floor, two two bedroom suites plus a laneway house, I don’t see how you get less than that in Vancouver frankly. The 800K house is also annecdotal and it is not an old house. My friend relocated back to Taiwan in 2004 and his family sold their family home, a 40 by 122 lot 3000 sq ft house that was fairly new at the time (less than 10 years old) for 800K. The area is Mackenzie heights I believe. Now based on the listings I see it should be worth about 3 mil.

      • First, a 40 x 122 lot will not be priced the same as a 33 x 122 lot (which was the size you referred to earlier). Just as a rent of 4500 is not a rent of 5000. Your figures tend to be slippery, which was the point of my post. You seem not always to compare like to like.
        Second, your *anecdote* is that your friend’s family sold their young but pre-2004 house in 2004 for 800K. I believe this. It’s your *estimate* that this house would now sell for 3M. I’m skeptical about that. Houses built in the 1980s and 1990s, before the 2004 Ecodensity zoning changes, have tended to underperform other properties in the Vancouver market since then. They’re too big and sound to tear down, but they’re not as big as the houses that have been built since 2004. Since 2004 new houses have usually been designed with suites in place. It’s now legal to install suites in pre-2004 houses, of course, but there can be challenges to doing this with 1980s-1990s houses; for one thing, some of them were built on a slab, without a basement. MacKenzie Heights is great, and I don’t know the details of the house you’re referring to, but westside houses built on 33 x 122 lots in the 1980s-1990s have tended to be priced much closer to 2M than 3M in recent years.
        Finally — when you refer to a house in “south Vancouver” being rented for 5K, do you mean “south Granville” i.e. Shaughnessy? A big house on a large lot in a quiet area will rent for more than a westside house on a standard lot, but I don’t think that’s a “typical” house; and I have looked at large houses with nice gardens in Shaughnessy and on the UEL that were asking rent of about 3500.

    • @Canis. Yes, agreed on the mistake on my part. I dispute that 40 by 122 houses built in the 1990’s would be less than 3 million though. 33 by 122 houses, granted and probably higher density have sold for around that price. It is true that my 3 million price is an estimate and I will defer to your opinion as I do not recall how big the house actually was. But regardless, even at 2.5 million because it is not a standard lot, this is a 300% return with leverage. But my point of being priced out still holds regardless of if it is 3 mil or 2.5 mil which was what I was trying to say. The south vancouver house I meant in the little india district. So you are looking at 49th to marine, main to knight. The rental total income is not because the house is nice. They are not. But it is because the house has many income sources. Like I said, the main floor, the laneway, the two two bedroom suites are all sources of income that will total to the rent figure I quoted. My neighbour has 4 families living in one house. Is it legal? No. Is it desirable? No. But does it generate revenue? Yes.

      • Leverage works both ways.

      • “My neighbour has 4 families living in one house. Is it legal? No. Is it desirable? No. But does it generate revenue? Yes.”

        wow

      • YVR Housing Analyst (@YVRHousing)

        “wow”

        Given the total square footage of these places there should be no shock. An interesting parallel, poorly named, is the “mansion flat” in London England.

        Let’s conservatively speculate the monthly rents: upstairs $2500, basements $1000/ea, laneway $1200 : $5700.

        Based on what I see detached lots can support way over the median income in the city but I am also seeing valuations even with $5700 gross a bit on the high side.

      • @El Ninja, yep, that’s true in theory. But assets, be it real estate or stocks have outpaced the economy. In reality, what I am trying to say is that in many people’s case, it is equally risky for people to wait and hope for a market drop which may not happen as it is for people to be a greater fool and have the prices drop on them. In many cultures, asian included, one of the prerequisites for marriage is for the male to have a property. So that means I have to buy one at some point regardless of the price (usually this means the male’s parents help if the male cannot afford it). This is one of the major reasons why in China families will scrape at any cost to get their son a place. So if the housing prices skyrocket and I am betting on the wrong side, then I could be screwed worse than if I bought and the house went down by say 30%. Like I mentioned before, I read somewhere that Vancouver’s demographics is 43% asian descedents which means that it is hard to simply use western standards to judge cultural issues.

  28. “10 years ago, rents in desirable areas were definitely half of today’s rate.
    —————
    This has not been my experience.
    In the early 2000s I rented out my 450 sq ft 1 bed for 1,400.
    Renters did not need parking. So I rented out the parking for 100.
    And by the way, the apartment cost me 125k.
    It was brand new on the 26th floor at the Residences downtown.

  29. Nice to see this blog back in action. My sources, and no I can’t reveal them, say we are in for an interesting 2015-2016. Now there’s a Chinese proverb for you… hint: the year Van RE finally goes indubitably flat/negative…

  30. I perhaps owe a bit more clarification to the last comment; if the last few years have seen declining condo sales offset by still-rising high-value properties, I understand private research from some investment players suggests SFH prices will top next year. Couple that with the declines in condos everyone has been writing about, long, gentle declines in the burbs already documented and… hey presto. If you’re in it to invest, you’ll go somewhere else – like the USA…

  31. Yes, and hopefully the posts will be more regular too. The discussion is great.

    I think we need to avoid blanket statements about RE market here. I think the point about RE is being very micro is very correct and perhaps one of the biggest reasons why bears have been wrong on the housing market. RE isn’t a stock/bond market with many sophisticated participants that can spot pricing error and arbitrage it away. RE market is incredibly inefficient and irrational, and makes it treating it blindly using metrics like stock or bond valuations very dangerous. It is probably why the bulls have been right so far because their arguments go mostly emotionals and demographic, not financial.

    • I actually don’t think that the bulls have been that right. Some friends bought coquitlam condos a long time ago and haven’t made much money or have even lost money. Like you said, generalizations are not good for the real estate market, I completely agree with this statement. I think it is best to look at specific areas / types of housing and look at the micro dynamics and more importantly who are looking to buy into these types of housing. Like I said in another post, I wouldn’t touch most of the listings on the market. But I would for select types and select areas.

  32. Who’s buying in Vancouver? Young working people under 30!

    Starting small, making sacrifices, moving up the property ladder. Some even starting on the way to be property monguls.

    http://www.francesbula.com/uncategorized/whos-buying-property-in-the-lower-mainland-amazingly-people-under-30/

  33. O.k here we go.
    Post # 101 says RE in Greater Vancouver will go up or down,
    depending on what?

  34. Furthermore,
    Posters restrict your Accordian Postings.
    Take far tooo long to load, and are not relevant, anyway.

    • YVR Housing Analyst (@YVRHousing)

      challenge!

    • Owing to technical difficulties, NetworkManagement sincerely regrets that this afternoon’s pre-recorded, regularly scheduled accordian segment will be broadcast at a later date… In the interim, we are pleased to present the BlackEyedPeas – who will reprise/showcase their ever popular, “Shut-Up” for both our live StudioAudience and select viewers at home…

  35. Interesting how Garth Turner says rent don’t buy and invest in a diversified portfolio with an advisor. Apparently the average investor is failing to do so.

    http://www.businessinsider.com/average-investor-results-1992-2011-2014-1

    Average investor 1992 -2014 2.1 percent per year. The problem is that in that time period, there was the dot com crash of 2000 and the recession of 2008. Small amateur investors are not able to deal with the lumpy performance of financial assets. The familiar story of buy high, and sell low characterizes average investors even when they choose the right financial instruments and work with an advisor.

    The “average” homeowner since 1992 has done much better than the average investor. The average homeowner has a much higher net worth than the average renter. This is what fuels the obsession with real estate. At the end of the day, you can’t eat or live in your financial investments.

    • Well put and I think you’re mostly right.

      As a learned from taking advanced motorcycle lessons (i.e. the stuff you will use on a track day to get the most out of your bike):

      Your machine has more balls than you do. Usually the reason why you dumped the bike is because you panicked not because the bike didn’t have enough traction in a turn or braking power depending on the situation. The same could be said for a well balanced investment portfolio.

    • That too. Apparently now some academicians put on postmortem examination the corporate culture of cheating or an industry that would encourage dishonest behavior? If you’d been listening to scumbag in bearskin and still posting long after Libor farce, you know best ..
      Unfortunately, the said article published in “la revue scientifique Nature” is not available in English.

  36. Keith Cranston,
    Realtor Allert!

  37. Canada Housing in 6 Questions – looks to be much ado about nothing – housing crash very unlikely:
    http://media.rbcgam.com/pdf/economic-compass/rbc-gam-economic-compass-cdn-housing-201411.pdf

  38. Open The Floodgates: Chinese Inquiries On US Real Estate Soar 35% After Easing Of Visa Rules
    11/19/2014 @zerohedge
    “It’s bad enough that American financial oligarchs have leveraged free money polices of the Federal Reserve to purchase tens of billions of dollars in real estate only to rent it back to people who were kicked out of their homes during the 2008 crisis, but the government is now going out of its way to allow Chinese (and other foreign criminals) to launder money via U.S. property.”

    • Crybabies!

    • @SCMP – Ian Young’s blog
      Why was a Vancouver immigration consultant protesting against immigration?

      “Former South African military man Ray Primack also has connections to fake identities used by anti-multiculturalists
      PUBLISHED : Wednesday, 26 November, 2014

      Let me be clear from the outset. The five guys who staged a protest on a flyover outside Vancouver last week, waving a banner blaming immigration for traffic jams, were perfectly entitled to do so.

      And the public has a right to ask who they are and what they stand for.

      The Hongcouver blog’s primary curiosity is this: Why was a registered immigration consultant’s agent among those few men protesting against immigration on that chilly morning in Richmond, the most ethnically Chinese city in North America?

      It could be that Ray Primack, a South African immigrant whose immigration consultancy website is emblazoned with Chinese and Canadian flags, is simply an outrageous hypocrite, protesting against the very system from which he seeks to profit. Or it could be that Primack is an immigration consultant in name only, and that his consultancy services are in part a sham, designed for purposes other than profit. I don’t see much room for middle ground here, considering Primack himself provided no clarity when I spoke to him on Monday.”

  39. @CNN
    Fri November 21, 2014
    “Pfeiffer: White House to launch ‘very aggressive sales job’ on immigration” ~ WoW, perhaps when it gets too hot in TX, CA, FL, AZ or even HI, they’ll consider buying a cottage at 49th parallel north.

  40. Boycott the Canadian Housing Market” petition;

    http://www.ipetitions.com/petition/boycott-the-canadian-housing-market

    “The purpose of this petition is unite potential Canadian homebuyers for the purposes of regaining control over runaway prices in the Canadian Housing market. We want to pay affordable prices for houses. By banding together, we can swiftly reverse the perversity of housing prices in Canada. Alone, we are unable to initiate such changes. However, united we will easily and swiftly topple the market. The market is far, far from proper valuations, and buyers are unwittingly locking themselves into a lifetime of hardship by purchasing for such prices.
    By signing this petition, I agree to:
    a) Not purchase any house in Canada in the next 6 months (till end of May 2015).
    b) After this date, I will only purchase a house that falls within a range 3-4 times my annual income.
    Please sign, pass on the link, and get ready….”

  41. IMF: Canada’s housing market in for ‘soft landing’
    IMF sees overvaluation in some market segments
    CBC News Posted: Nov 26, 2014

    “The international agency says single-family homes have been a major source of price increases, particularly among high-end buyers. ”

    “Rising long-term interest rates and a weaker trade picture because of slumping oil prices should lead to a “soft landing” in the housing market, the agency forecasts. It sees only a gradual increase in rates, rather than a sharp increase.”

  42. @scmp
    PUBLISHED : Wednesday, 03 December, 2014
    Canada’s new millionaire visa scheme ‘will only accept 50 applicants per year.

    “Two sources who said they were consulted by Canada’s immigration ministry in recent months said they were told the new scheme would only accept 50 applicants plus dependents annually.”

    ” ……. But regardless of whether 50 or 120 applicants were approved per year, the new scheme would be dwarfed by the former scale of the IIP.”

    “Quebec’s parallel version of the IIP is still operational. It will accept 1,750 applicants in 2015, including a maximum of 1,200 from any one country – namely, China.”

  43. From greaterfool.ca…

    Writing in the LA Times a few days ago, Michael Kingsley said a house is worth only what someone will pay for it. “That number has two components: one is the value of occupancy — that is, the privilege of living in the house, mowing the lawn, calling the plumber and so on. This should roughly equal what the house would rent for. The other component is the investment value — how much you think the price of the house will go up when you sell it.

    “Any investment value greater than zero (or zero plus inflation) is suspicious because it depends on the greater-fool theory. There is no physical reason why a house should become more valuable at all. It is not growing like a crop. It is not producing anything that you can turn around and sell, like a factory. It just sits there. It becomes more valuable because people believe that it will become more valuable. Worse, since the general assumption that it will become more valuable is already reflected in the price you paid, you need a buyer who believes that it will become more valuable even faster than the general consensus.”

    • How do you value the fact that the place is yours and no one can kick you out of your house? My friend, who rents, was telling me the virtues of renting until he got kicked out as his landlord wants it back. He has bought a place now. There is definitely value in owning that is not equivalent to renting. For example, if I own a place, I can renovate it into anything I want, can’t do that when I am renting. The value of occupancy is only if you want a roof over your head. There are additional values of security and enjoyment. Right to never be kicked out, right to dictate how you want the house to be. Also like I said in my previous posts, there are huge cultural associations with owning. In Asian cultures and some western ones, males should own before they are married. I have no idea how you want to put a value onto these factors. Home ownership is one of the least rational ideas I have ever seen. Frankly, I think some of the stuff that happens in Asia is ridiculous where whole families put their entire life savings into places so that their son can get married. But it happens and happens a lot. Who am I to judge what is rational. Vancouver has a high percentage of Asian descendents, I read somewhere it is 43%, so asian culture must be at play in some of these market runups.

      • Brian: the values you mention (security, cultural, etc.) are KNOWN values, and therefore accounted for already in prices. They do not make a house appreciate. It’s like buying a house that was built with an earthquake-proof structure. It’s going to be reflected in the purchase price. From there, your house won’t appreciate faster than any other.

        This is basic finance. It’s frankly scary that you and others could be (have been?) lent other people’s money to engage in an activity you so poorly understand.

      • I completely disagree that these factors do not make houses appreciate. If you have a group of people who value owning much higher than renting and this class happen to become wealthy, then this WILL have an effect on housing prices. How does it not? This is essentially what is happening in China. Previously no one had the resources for private ownership. Now that people do, it will drive prices up because the Chinese value owning much more than renting. My issue is that people think that historic ratios are somehow correct when in reality we have a demographic shift that is really going on. Like I said before, take the ratios that you have in asia, multiply by the percentage of asians in vancouver and take that into the account and you will have something close to what the actual number is in Vancouver. I have yet to hear an argument that this is somehow invalid.

      • Yours is the greater fool theory, Brian. You’ve dressed it up in cultural mumbo jumbo (as if it’s some deep insight that Asians like to own property). But at the end of the day, it’s just the greater fool theory.

        What’s greater fool theory? The conviction that someone else will be willing to pay more for the same good than you did, not because its inherent worth has risen, but because this person, in turn, thinks an even greater fool will come along and pay more. The problem is, there is not a limitless supply of greater fools (even in China). And when they run out the whole scheme collapses. So, your success hinges entirely on you not being the last fool. You may be, you may not be. There’s just no way to know. You are rolling the dice. And that is why your theory sucks.

      • @El Ninja, explain this to me then. If you have an apartment in the middle of beijing, and the China every year say produces 100K more millionaires than the year before, what do you think will happen to the price of your asset? Is that a greater fool theory or just supply and demand. My bet is simple, that there is only a fixed number of SFH’s in Vancouver and that the number of millionaires in China is not fixed. And it will go up and by a lot. So I like the odds. You can call it whatever you want. But if an asset is desired by a group of people and the number of that group goes up or the income of that group goes up then the asset will go up. Now you should really ask why is Vancouver so desirable to them. But that will take an essay for me to explain. But I believe that the demand will continue until Vancouver stops being a city that you can speak mandarin in and get around easily.

      • Let me explain. The fact that China is producing millionaires is known by other market players. The future demand from by these buyers is widely expected, and hence accounted for in today’s prices.

        Here’s an example. A baker uses all his available ingredients to bake 100 muffins in the morning (the equivalent of Vancouver’s fixed housing supply in your example). He sets their price at $1, in anticipation of 100 buyers walking through the door and buying one muffin each (the equivalent of China’s millionaires in your example). He doesn’t go raising his price over the course of the day as these buyers ACTUALLY COME IN TO BUY his muffins. His $1 price already accounts for their demand.

        Now, let’s suppose it’s a busier-than-expected day and, by 11AM, he’s already had 90 customers. He may then raise his price on the remaining muffins; demand is stronger than he had foreseen. Conversely, if he still has a lot of muffins left by the afternoon, he will lower his price; demand is weaker than he had foreseen.

        The point is, only unanticipated information influences an asset’s real prices. This goes for muffins, Vancouver real estate, and everything else. Stated differently, you can’t make money on an insight that everyone else possesses.

  44. Whether or not it is a culture, the business modus-operandi is obvious.

    WSJ has a story on “Canada Resident Caught Up in China Corruption Probe”. “He is the son of Margaret Jia, who recently left her job as head of the Canadian subsidiary of CNPC amid a shakeup. Ms. Jia is a sister-in-law of Mr. Zhou, according to people familiar with the matter. // Not a lot of sympathy for Zhou Yongkang’s nephew who can’t fly back to his pampered, corruption cash fueled life in Canada. The no fly list a lot better than 灭九族, perhaps he should count himself lucky. Any chance he is leverage to get mom back?”

    The 19yo was working in business devpt for Capital
    Energy Corporation with offices in Vancouver, Calgary and Estevan. From their website, the 2 chairmen are founder & co-founder of ZRG (ZhongRong Group) an investment company primarily focused on the real estate sector in China.

  45. Whipmaster~Kerthwhack

    A landlord dictating to another adult(Tenant) whether he is allowed to have pets or not? A landlord dictating to another adult iwhether he can plant a garden or not? A landlord dictating to another adult how many people can live on the property?…..being a tenant is humiliating!

  46. whipmaster~kerthwhack

    All Tenants must be subservient. Not all LandLords are foreclosed.

    • Is that so? Who is responsible for property taxes, mortgage payments, insurance, maintenance, and repairs? Extremely little freedom to evict, and legally-capped rent increases? Now THAT’S subservience.

  47. whipmaster~kerthwhack

    The LandLord is responsible for all of those things. And he is also able to pass the cost of those things on to the Tenant. What is humiliating is for a grown up adult (the Tenant) to have to ask another person (LandLord) permission to have basic priveleges. And that permission may be arbitrarily withheld.

    • I think there are many pros and cons of renting versus owning. Owning is seen as more stable whereas renting is more transient. A lot of it is also more culturally driven. In cultures that are more about adventure, ie. Western cultures, renting is awesome and seen as normal. But in the eastern culture that preaches stability, families staying together in one place, owning is much more preferred. The ratios will be dictated by demographics of which culture is in one city and the mix that is present in that city.

      • whipmaster~kerthwhack

        We take owning real estate for granted here. In the “old country” you were either rich or poor. There were relatively less rich and multitudes of poor. But here in the Best Place On Earth, we have (had) a middle class and lots of land. Ownership of land has become important since we opened the flood gates of immigration.

    • “And that permission may be arbitrarily withheld.”

      So, just don’t rent that house. As a consumer you can choose from a number of options. There’s something for everyone…

  48. @El Ninja – by your argument stock prices should never rise either since a company’s future prospect are already priced into the current price. But they do, even when company is simply performing as expected.

    Your argument against why housing prices shouldn’t rise simply don’t fly. Jsut because there will be 100K new millionaires next year doesn’t necessarily mean that Beijing central apartment will instanenously jump in price to the max price it should have.

    Remember, if your theory don’t fit with what’s happening then it’s not reality that is wrong. This is a common mistake for both amateur and professional economists.

    • Hi space889. I am not asserting that the price won’t rise. I am asserting that it won’t rise faster than any other asset on a risk-adjusted basis.

    • I will reply to both posts here. I was not aware that we were debating whether vancouver SFH’s will beat the average return of the other assets. I have no idea in this regard. I would actually guess that real estate in general has actually lagged the market rather than stayed in front of it. But that is beyond the point. I am betting that SFH’s in vancouver will go up. Has nothing to do with how the stock market does and otherwise. For a simple reason, I can’t leverage (other than to use options) to play the markets the way that leverage works in real estate. I expect both the stock market and the SFH market in Vancouver to rise. Second, I don’t think your bread demand example works in this case. By your rationale, every asset is currently valued correctly because factors are already priced in. And I disagree that this is the case. For one thing, I contend that the world has no idea how much money will eventually flow out of China. In your bread example, the breadmaker can only price based on current demand because he can’t store bread for 1 year when demand will rise. If I had a SFH on the westside, I could easily store my property and wait for China to have a ton more millionaires before putting it on the market. Frankly, I think we are seeing the tip of the iceberg. So I am simply betting on two things. 1. a lot more money will flow out of china and 2. SFH’s in Vancouver will continue to be a hot commodity that this money will go toward buying because Vancouver is a destination place for the Chinese elite. If you notice, I have been consistently restricting my argument to SFH’s for this reason alone. SFH’s are definitely the properties of choice. In addition, if all factors were properly priced in, then why are we seeing such a divergence between SFH and apartment pricing in Vancouver over the past few years? I don’t think economic factors are ever ALL priced into an asset. There are always things that people miss. Many in the market today don’t even acknowledge the fact that Chinese money has had a huge impact on the house prices even though if you go by the owner’s names it is plain to see, particularly on the west side SFH’s.

      • Brian, you have no idea how much Chinese money will or will not come to Vancouver, no idea whether the market has correctly anticipated this, and no idea the extent to which Chinese money affects, or doesn’t affect, local prices in the first place.

        Not only are you gambling, you want to do it with borrowed money!

        Good luck to you…

      • Thank you for wishing me luck as I will need it. But I’d like to know which investment isn’t a gamble? I am not actually gambling with borrowed money as I own over 50% of equity in my latest purchase. So if shit hits the fan, I will lose my equity rather than the banks. You are right that I do not know, no one knows. No one knew that the stock market would triple off of its lowest point in the 600’s. But it did. I know more than most people who comment on this forum because I know these investor immigrants through association. I have taught many of their kids. I have discussed real estate with many of them, drank with many of them, I have access to the realtor databases and know the last names of many of the agents who deal directly with these people. I understand their reasons and why many more of them will still do their utmost to come and settle here. As long as their ranks are increasing, our SFH’s will be in demand. But this also I know which to me is the most important. There are many others like me in Vancouver where the price of inaction is every bit as high as action. Like I said before, we have to have our own place for marriage, it is a cultural neccessity. So it’s not like the stock market where I can go, oh great, missed the last rally. It is worse for us if the houses went up 20% and we didn’t buy than it is if we bought and it went down 20%. I have many friends who missed the boat and are paying for it dearly right now as they are forced to get in at much higher prices. The difference is bore by their parents who contribute massive amounts of money in the hundreds of thousands. I guess if you want your grandchild this is what you have to do. This is why there are always demand in China no matter how high the real estate prices. We cannot be wrong on this bet either way. This is very different than buying stocks.

  49. Christine Thomas

    Hi, I am Christine Thomas, I would like to share my experience with you guys on how I got a loan to pay the duty tax of my bank draft and to start up a new business. I was at the verge of loosing all my belongings due to the bank draft I took to offset some bills and some personal needs. I became so desperate and began to seek for funds at all means. Luckily for me I heard a colleague of mine talking about this company, I got interested. Although I was scared of being scammed, I was compelled by my situation and then I began to look online and ran into their phone no: +18437769340 /email at: anzjacksonfinancingplc@yahoo.com where I was given a loan within 72hrs without knowing what it feels like to be scammed. So I promised myself that I was going to make this known to as many that are in financial stress to contact them and not fall victim of online scam in the name of getting a loan.

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