Vancouver Sun: ‘Tinkering with housing market could be dangerous to economy’

Posted on 26 July 2015 | 33 Comments

Tinkering with housing market could be dangerous to economy.

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33 responses to “Vancouver Sun: ‘Tinkering with housing market could be dangerous to economy’”

  1. El Ninja | 26 July 2015 at 8:24 am | Reply

    Ha! Ya gotta love the hypocrisy. As if the government hasn’t “tinkered” with the market already:

    – A kaleidoscope of homeowner grants, credits, RRSP rollovers, tax exemptions, and other market-distorting policies
    – A lack of regulatory oversight and transparency in the RE industry
    – Immigrant investor schemes, friendly international tax rules, and other facilities for, in some cases, the laundering of foreign capital
    – Taxpayer-funded marketing campaigns a la “Best Place on Earth”
    – Widespread financial illiteracy following a lack of basic public education on the subject
    – And, most crucially: sustained, artificially low, “emergency-level” interest rates

    The impact of this last point cannot be overstated, not only in actually lowering borrowing costs to effectively negative levels, but also in entrenching the fantasy that rates will never rise. “Not in at least 30 years”, as one Investors Group executive posited to me, as I tried to keep a serious look, following a presentation I gave the other day.

    All of this has led to the massive financial and psychological distortions we see today, destined to rebalance under the pull of economic gravity, with utterly devastating (though ultimately healthy and necessary) consequences for Vancouver, Toronto, and Canada more broadly.

    So, yeah, a bit late to worry about tinkering now…

  2. 3rdRock | 26 July 2015 at 1:00 pm | Reply

    Outflow: 2.8 trillion RMB (2011)
    Infow: 0.4 trillion RMB (2012)
    >i>1000000000000 Chinese Yuan equals
    161103260000.00 US Dollar

    The money that wealthy Chinese invest abroad far exceeds the wealth that they bring back. So what are they investing in, exactly?

    Chinese Investors Are Mad for Overseas Real Estate
    http://www.businessinsider.com/chinas-wealthy-fleeing-the-country-2015-4

    • 3rdRock | 31 July 2015 at 10:20 pm | Reply

      China’s middle class flocking to Japan to buy property
      http://tinyurl.com/pvllaun

      “In the first three months of 2015, the sale of Japan’s residential property to Chinese buyers rose 70% to around US$908 million, according to statistics from Taiwan-based Sinyi Real Estate. “

      “The high expectations for Japan are also based on the Olympics being held there in 2020. History has shown that cities that have held Olympics often see their property prices jump afterwards. “

  3. 3rdRock | 27 July 2015 at 5:33 pm | Reply

    holy $$$hit
    China Anti-graft Drive has removed another piece of cheese from the princelings’ larder.

    “The water was produced by Tibet 5100 Water Resource Holdings Limited, which is registered in the Cayman Islands and listed on the Hong Kong stock market. The company is run with foreign capital as its major investors are registered in Samoa.”
    http://tinyurl.com/nqqj9vr

    Boss of Tibet 5100 Water Resource, Yu Yiping Walace is reported to have emigrated to Vancouver with his family, to possess Canadian and Hong Kong passports as well as retaining his China residency status.

    Other than a foreseeable future luxury tax on his westside property(ies), our taxmen can’t touch him.

  4. YVR Housing Analyst (@YVRHousing) | 27 July 2015 at 11:31 pm | Reply

    Well it cannot be easily refuted the majority would not find it convenient to see falling prices. Shame on politicians not showing leadership by not instigating policies that could do just that

    • BlaMmO | 28 July 2015 at 9:25 am | Reply

      It’s truly baffling that the politicians continue to work for their constituents.

    • 3rdRock | 28 July 2015 at 3:23 pm | Reply

      David Cameron: UK property no safe haven for ‘dirty money’
      British prime minister vowed to expose the use of “anonymous shell companies” to buy luxury UK properties – often in London.
      “London is not a place to stash your dodgy cash”.
      Corruption, he added, was “a cancer which is at the heart of so many of the world’s problems” and must be tackled.
      http://tinyurl.com/owmzgyg

      David Cameron will commit to unmask the shady web of overseas companies used by dubious characters to mask their identities when concluding multi-million pound property deals in Britain.

      The announcement comes just a week after it emerged the ownership of 221b Baker Street – home to the fictional super-sleuth Sherlock Holmes – is linked to a brutal former secret police chief accused of murder and money-laundering.

      Mr Cameron will also commit to publishing Land Registry data so that the public can see which foreign companies own land and property titles in England and Wales.
      .~ ~ ~ ~ ~
      Chido Dunn of Global Witness: “Our recent investigations have revealed corrupt officials use London houses as safe havens for their stolen loot. What’s more, they often hide their identities behind layers of offshore companies.

      “What the UK needs now is to shine a light on who really owns property in this country.”
      http://tinyurl.com/oy7lbq7

  5. Brian | 28 July 2015 at 10:58 am | Reply

    This isn’t news, we know this has been happening already. As is stated, there is nothing free market about this. But that argument is pointless, as soon as you collect taxes and provide services then you are not free market. Government pick policies that benefit one side over the other as they see fit. Part of our job is to figure out which side the government will pick in the fight. I would love to see higher interest rates as that would completely prove my point once and for all. My research shows that interest rates only seem to affect the attached side of the Vancouver market. That side is completely driven by interest rates. The recent decoupling of the attached and detached market shows that the detached market is driven by something different all together which I won’t bother elaborating as I have made my stance known quite well in my other posts. Again, I ask this question, if the detached side is driven by interest rates, why has its growth far outpaced the attached side given the same interest rate decreases? As I said, if you keep up the status quo and have a normal interest rate you will see that it has little effect on detached prices. Attached houses however, will see a nice drop.

  6. 3rdRock | 28 July 2015 at 3:13 pm | Reply

    Per CTV today, we shall know more after the DNA testing is completed by Aug. 26.
    http://tinyurl.com/p8pwkkv

    Per Vancouver Sun dated 2015 June 12 –
    “she snapped in another message, sent in October. Pregnant with a child she claims Yuan fathered, the woman was angry. She claimed to have uncovered some of his secrets.”

    Was emigrating to Canada through fake marriage one of them? This rumour has been circulating, if one can believe a blabbermouth of an ex.

  7. 3rdRock | 28 July 2015 at 3:19 pm | Reply

    One realtor is so desperate that she left her “sold” sign in Richmond’s Seafair area outside a house that is not for sale. When the house owner phoned the realtor to protest the “sold” sign, the latter persuaded the owner to list the house with her and she could give a free evaluation of the property.

    Tsur Sommerville has never heard of such advertising ploy. He opined that some marketing behaviour may not be necessary breaking the law, but may constitute false publicity. City of Vancouver’s relevant department has not responded.

    [let me know, if anyone needs the link.]

  8. kabloona | 29 July 2015 at 9:46 pm | Reply

    Garth is reporting that CMHC has changed the rules so that 100% of basement suite derived cash will be counted as “income” when people qualify for CMHC mortgages – rather than the previous level of 50%….

    “…This week CMHC made a bombshell announcement which – more than the bank rate cut – is designed to throw Lava Hot Scorpion BBQ Sauce all over the real estate market, especially in YVR. Simply put, CMHC will now count as “income” 100% of the money you received, or might possibly get, from a tenant renting your furnace room or garden shed. Until now only 50% of rental income was added to a mortgage applicant’s total income, which is then used to calculate how much debt can be carried.

    What does this mean? Lots, actually.

    A couple earning $100,000 between them with $50,000 to put down can qualify for a mortgage of about $420,000. But add in $12,000 a year from a basement suite (based on a rental agreement, not actual cash), and – presto – they qualify for a mortgage of $520,000. That’s seventy thousand more than using only half the potential rental income.

    The mortgage guys are eatin’ it up. “The ability to utilize 100% of the rental income to qualify for the mortgage…can certainly make the difference for many homeowners and may move a larger number of homebuyers from condo purchases to a single family home with a mortgage helper,” a broker from Vancouver tells the trade mag Canadian Mortgage Trends – which itself gushes, “CMHC deserves applause for trying to boost the stock of affordable rentals and allowing young homebuyers an alternative to condo living.”

    And so it goes…..

    • Brian Chen | 30 July 2015 at 7:47 am | Reply

      I am not sure how your math worked exactly. Not a mortgage expert, but usually banks give 5 times income as a rule of thumb and twenty percent down. My bank stuck to this rule and would not budge. Most Vancouver single family homes are about a million which means 200k down and 160k annual income. If you have a suite, this will increase the annual income by about say 12 k like you have suggested. That would help but only to the tune of about 60k according to my banks calculations. So half of a suite is about 30k. That’s about a drop in the bucket for a single family home. Don’t see this making much of a difference to be honest. 520 k mortgages don’t help unless you have 500k down.

      • kabloona | 30 July 2015 at 9:17 pm |

        Not my math…complain to Garth. I quoted him….

      • Brian Chen | 30 July 2015 at 10:24 pm |

        Garth Turner? I stopped reading that guy a long time ago. Its hard to take someone seriously when they paint the entire market with the same brush.

  9. BlaMmO | 30 July 2015 at 12:48 pm | Reply

    What Vancouver needs is more affordable housing – SF innovators to the rescue:

    http://kalw.org/post/how-tiny-shipping-container-community-causing-big-fuss-oakland

    Less talk, more boxes!:

    http://www.boxouse.com/

  10. tedeastside | 30 July 2015 at 1:42 pm | Reply

    Oakland beats Vancouver hands down.
    i’d rather live in Oakland’s worst neighborhood than vancouvers best Neighborhood, no matter how shiny&fancy your house is… you still live in lame-couver

    • Brian | 30 July 2015 at 2:48 pm | Reply

      I go to San Fran on a regular basis for work. This comment takes the cake for the funniest comment of the year. I wouldn’t live in Oakland if you paid me. San Fran is a different story though, great city.

    • 3rdRock | 31 July 2015 at 2:07 pm | Reply

      http://tinyurl.com/ko5hmq4
      Economist’s Intelligence Unit – 2015 Best overall place to live:
      10. Chicago
      9. Sydney
      8. Washington, DC
      7. Zurich
      6. Melbourne
      5. San Francisco
      4. Amsterdam
      3. Stockholm
      2. Montreal
      1. Toronto

      http://tinyurl.com/nsn79u9
      Cost of Living commparison between Montreal and Oakland, CA:
      Indices Difference
      – Consumer Prices in Oakland, CA are 23.78% higher than in Montreal
      – Consumer Prices Including Rent in Oakland, CA are 62.55% higher than in Montreal
      – Rent Prices in Oakland, CA are 173.98% higher than in Montreal
      – Restaurant Prices in Oakland, CA are 29.93% higher than in Montreal
      – Groceries Prices in Oakland, CA are 30.95% higher than in Montreal
      – Local Purchasing Power in Oakland, CA is 26.67% lower than in Montreal

      • 3rdRock | 31 July 2015 at 2:08 pm |

        Montreal’s English-language educational institutions:
        McGill University
        Concordia University
        Marianopolis College (offers 2-year pre-university programs)
        Dawson College (offers 2-year pre-university and 3-year career/technical programs)
        Vanier College (offers 2-year pre-university and 3-year career/technical programs)

        From UBC’s 2014-15 Vancouver Enrollment report (page 10):
        International students comprised 32% (graduate studies) and 19% (undergraduate program) of the total enrollment for the academic year.
        In the next 5 years, UBC will continue increasing international student intake for revenue reasons. The expected number of the provincial grade 12 graduates will decline. The enrollment targets plan to gradually reduce domestic undergraduate admission; the number of domestic students will fall but still higher than the government-funded target.

        From Stanford University’s student profile 2014-2015:
        International students (graduate studies): 19%
        International students (undergraduate program): 8.1%

      • Brian | 31 July 2015 at 3:03 pm |

        I personally think that if culture / economics are involved in any rankings, then Vancouver will fall off dramatically. This is not a good place if you want to make money or if you care about culture / arts / etc. Me personally is doing just fine on 1 and don’t care about 2. But unfortunately for Vancouver, there are plenty of people who are in my boat. Btw, been to Monaco, great place to live, absolutely love the city, but it certainly won’t show up on that list, cost of living is through the roof, but doesn’t mean that it’s not a desirable city to live.

  11. tedeastside | 31 July 2015 at 8:37 pm | Reply

    did you see the 20 smartest cities in the world…..Baltimore made the list

    but missing was the glorious best place on earth …Vancouver was nowhere to be seen , not surprised vancouver is a no ambition dimwit backwater ….you won’t see the local media squawking over this list, i don’t think it made the front page of the vancouver sun

  12. 3rdRock | 1 August 2015 at 8:27 pm | Reply

    ‘Liar loans’ are popping up in Canada’s housing bubble
    http://tinyurl.com/nn9rvzu

    • 3rdRock | 1 August 2015 at 8:54 pm | Reply

      A total of 45 brokers suspended by Home Capital or false mortgage applications.
      Assuming each one of them submitted 10 falsified incomes of borrowers, 45 x 10 = 450 cases are not a big deal. Nothing to see here, move along.

      Unfortunately, it has generated enough bad publicity and tarnish our image on the other side of the Pacific.
      I was rudely woken up by 2 international calls inquiring about it this morning. 🙂

  13. 3rdRock | 2 August 2015 at 5:50 am | Reply

    A fortnight later, it finally surfaced that the “watermelon seller” who purchased Sydney’s third most expensive waterfront mansion at Point Piper, has been summoned to appear before the pertinent Security Office. I thought this might be relevant, given that there are other peasants and fowl farmers with acquired taste for luxury.

    In case anyone wants some background …
    http://tinyurl.com/ppd5fxe
    http://tinyurl.com/ok5vhck

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