Vancouver and London came first and second on the 2016 list of cities most at risk of real estate bubbles. Bubble risk was also evident in Stockholm, Sydney, Munich and Hong Kong: house prices in these six cities have increased by nearly 50% on average since 2011. The average price rise in other financial centers has been less than 15%.
Who is to blame for this latest global bubble? Why your friendly, local central banker of course.
As the WSJ summarizes, loose monetary policy at global central banks is a key driver behind rising prices, the report claims. Low interest rates have pushed investors to hunt for returns in tangible assets, “so it is hardly any wonder that housing markets are again overheating,” according to report authors Claudio Saputelli and Matthias Holzhey. …
Meanwhile, Vancouver house prices have been significantly overvalued since 2007, according to UBS. The culprit there is not so much the BOC as the PBOC: until recently Vancouver served as the primary offshore target for Chinese money launderers, which neither the financial crisis nor weakening commodity prices managed to dent. However, this bubble now appears to have finally burst after the provincial government of British Columbia introduced a 15% transfer tax on foreign home buyers in August, leading to a crash in the most expensive local housing segments.
– from Zerohedge, 27 Sep 2016
Vancouver RE, ‘Overvalued since 2007’. Care of weak monetary policy, and strong local narrative. – vreaa
“We need to recognize that living in a great place may just be more expensive than some people want it to be.” [6:30]
For this and lots of similar material, watch the Video from BNN 12 Sept 2016
The headline reminds us of Stevie Smith’s ‘Not Waving but Drowning‘. -vreaa
“A Vancouver accountant told The Globe that she and her colleagues see questionable real-estate transactions all the time, which they believe have contributed to skyrocketing prices. “This has become a huge mess. You have no idea how angry I am,” says Corina Ciortan. “A generation of people has been screwed. It’s so obvious. Everyone I work with is so angry because there is a select group of people who have profited from this.”
One of the Vancouver homes Mr. Gu flipped sat vacant for three years, in a city where many people can’t find a place to live.
Ottawa says it is studying the issue, and B.C. has brought in a tax on foreigners who buy residential real estate in Vancouver. But those who see firsthand how real estate is traded like stocks and bonds say this isn’t nearly enough. “We have governments that are not doing their job,” argues Mr. Lazos, who acquired his inside knowledge while working for Jun Gang Gu, also known as Kenny Gu, a former civil servant originally from Nanjing, near Shanghai.
Mr. Gu came to Canada in 2009 under Ottawa’s now-defunct immigrant-investor program, which gave permanent residency to applicants who agreed to lend a significant amount of money to the federal government. He started out here as a developer, but the documents show that his business evolved to buying homes – using other people’s money– and then flipping them. His deals are financed with investor money from China and mortgages issued to those investors by Canadian banks.
In addition to holes in the tax system, speculators like Mr. Gu also rely heavily on Canadian financial institutions to give their clients multimillion-dollar loans. “They are using this money temporarily – to make more money – instead of using their own money,” Mr. Lazos says. “Then prices go up. We are making the bank richer and the Canadians poorer.”
Mr. Lazos says that his whistle-blowing will be worth it only if it jolts Ottawa and B.C. into action. And his reasons, at least in part, lie close to home: “I hate the fact that for my daughter and my grandchildren, there is no way they can own a house in this city.”
– from ‘Out of the Shadows’, Kathy Tomlinson, G&M, 10 Sep 2016
“As was largely expected, the first official data since the bursting of the Vancouver housing bubble following the 15% luxury real estate tax, was ugly: on one hand, the number of Vancouver home sales fell 26% from a year earlier, and tumbled by 23% comparted to July, to
2,489 transactions. Detached properties were hit hardest as sales dropped 45% from a year earlier. Transactions of attached homes such as town-houses dipped 25% and apartment sales were down 10%. On the other, prices likewise slumped, with the average price of detached Vancouver properties crashing 17% in just one month, and already down 0.6% on the year, to C$1.47 million in August, the lowest price since September 2015.
What is worse, is that what was until now a mostly regional housing bubble, is starting to spread in the form of a hit to Canadian consumer confidence. As Bloomberg reports, “a shifting real estate market in Vancouver led Canada’s consumer confidence index lower for a second week.” According to the BBG Nanos telephone poll shows, the share of respondents who see local real estate prices falling has almost doubled in the last two weeks, rising to 22.5% in the latest survey, up from previous readings of 20.5% and 12%. Conversely, the share of those who see higher prices fell to below 40 percent for the first time since April.”
– from ‘Vancouver Housing Bubble Burst Sends Local Consumer Sentiment Crashing Most In Three Years’, Zerohedge, 6 Sept 2016