Monthly Archives: April 2017

‘Poor’ Parenting – B.C. Liberal Housing Minister Rich Coleman – “My advice to my teens, start saving for the down payment.”

Under the B.C. Liberals, who are actually quite conservative, the gap between the super-rich and the rest of us has become a yawning chasm. For most, it has become harder to make ends meet. This demands fundamental change, not a softer tone. …

… B.C. Liberal Housing Minister Rich Coleman is laissez-faire about it: “My advice to my teens, start saving for the down payment. That is your future if you can build up that equity.”
With million-dollar homes, stagnant or declining wages and big student loans – good luck, kids.

Last week, Premier Christy Clark built on this train of thought at the leaders’ debate. “You know what you need to be able to afford a house? You need a job,” she said. Yet, unemployment is up everywhere but the Lower Mainland and Vancouver Island.

– from ‘Anger Brewing in unaffordable BC’, Garth Mullins, 24 hrs Vancouver, 23 April 2017 (with quote augmented based on Frances Bula tweet)

Meanwhile, who would benefit from the fruits of all that hard work?….

From Jan 2016:

Surging real estate values added $2.3 million to B.C. cabinet ministers’ personal wealth this year alone, as the government says coming measures to ease housing affordability won’t include any that lower prices.

One minister saw her four properties jump $765,000, more than five times a minister’s salary. Another saw gains on a portfolio of eight homes. On average, ministers made $103,000 – more than an MLA’s salary, according to a review of public records by CTV News.

It’s natural for those ministers to welcome their own wealth boost, but they have to realize how their eye-popping gains translate into tremendous hardship for young people trying to get into the notorious Vancouver property market, said UBC professor Paul Kershaw.

“We can’t start with the presumption that housing price increases are a good thing. Housing prices that have outpaced incomes is remarkably bad news. It’s turned Vancouver into a generational ghost town,” Kershaw said, referring to how hard it is for young people to buy in neighbourhoods where they grew up.

– from ‘Surging real estate makes $2.3M for B.C. cabinet as affordability worsens’, Jon Woodward, CTV Vancouver, 25 Jan 2016

Goya’s ‘Saturn Devouring His Son’ (1819-1823):

The Value Of The Dirt? – “In condo crazy Vancouver, downtown’s last gas station for sale”

“If you look at the value of the dirt, there’s just no possible way that just having a stand-alone gas station makes any kind of sense financially,” Tsur Somerville, director of the University of British Columbia’s Centre for Urban Economics and Real Estate, told CTV Vancouver.

Downtown Vancouver’s second last gas station was recently sold to a development company for a staggering $72 million. That sale prompted the owners of Downtown Vancouver’s last gas station, an Esso located at the intersection of Burrard and Davie Street, to put their property on the market too.

And while that may be good news for condominium developers, Stephen Regan, executive director of the West End Business Improvement Association, says that selling the station will come with consequences.

“Losing a gas station, and possible the last gas station in downtown, is going to have some significant impacts, I think, for locals and for visitors,” he said.

– from ‘In condo crazy Vancouver, downtown’s last gas station for sale’, CTV, 14 April 2017

The fact of the last fuel station in downtown Vancouver, here for the record.
BTW: If we were to make all decisions about what’s important in Vancouver based on the “value of the dirt”, where would that lead?
If we were to make all decisions about what we do with our lives based on maximizing income per time unit, where would that lead?
In a related sense, how does one measure success?
– vreaa

Spot The Speculator – “I can’t imagine a bubble bursting where over six months you see a decrease of 30 or 40 percent”

“Living in cramped spaces is everyday life for many families. Because of the high cost of housing, many have to make do with whatever they can afford.
In Vancouver, city staff estimated that more than 8,000 families with at least one parent and a child were living in a studio or a one-bedroom apartment in 2011.

Ryan Chahl, a 29-year-old entrepreneur, is thinking about settling down. He wants to provide adequate housing for his future family.
“I’m kind of looking for a home that could potentially support a family,” Chahl told the Georgia Straight in a phone interview.
That means a three-bedroom house “with some room to grow”.
“I’m trying to plan for the future and think ahead,” Chahl said.

For now, his plan doesn’t include selling the Port Moody condo he bought four years ago. “It’s an asset that I can grow equity in,” he said about the two-bedroom property where he lives on his own, and which he intends to rent out eventually.
He used to live with his parents before he purchased his apartment with a five-percent down payment.

Chahl’s challenge is how to secure a new mortgage.
Aimal Pamir, who was his mortgage broker for his condo purchase, has advised him that because he is self-employed, it’s not going to be easy.
According to the Real Estate Board of Greater Vancouver, the federal Office of the Superintendent of Financial Institutions requires from individuals working for themselves a minimum down payment of 35 percent of the purchase price to qualify for a loan.

In 2016, Chahl set up his own consulting and project-management firm. Chahl related that his business is doing well, giving him the confidence to approach a major bank for a mortgage.
“It’s kind of been the vehicle for me to start making those heavy savings that are required to be able to buy a home in Vancouver or near Vancouver, at least,” he said.
Getting the bank to approve a mortgage will likely take a bit of time.
Like the more than 400,000 self-employed people in B.C., Chahl has to prove that his business is viable. According to him, banks typically require three years’ proof of income. If he wants to make a purchase in six months to a year, he said that he may have to produce a 50-percent down payment.

Chahl holds a business-administration degree from SFU. For him, the housing market isn’t just a game in which he wants to make a quick buck.
“It’s something that I’m investing in, going in long-term with the kind of goal of seeing those assets appreciate long-term, not kind of flip them in a year or two,” he said.
Chahl expects home prices to gradually decline, which is generally in line with the latest projections by the Canadian Real Estate Association (CREA). According to the CREA forecast issued on March 15, home prices in B.C. will shrink by more than five percent in 2017.

Chahl is not worried that the property market has risen so fast that it can only head for a crash. In September last year, Swiss bank UBS reported that Vancouver is number one on its global list of cities with the highest bubble risk.
“Over the next year, maybe two, you’re going to see a decrease in prices, but I can’t imagine…a bubble bursting where over six months you see a decrease of 30 or 40 percent,” he said.

As in his first purchase, his realtor and older brother, Adam Chahl, is around to help him acquire a second property. “Adam, being who he is, I have absolutely no issues trusting him,” he said.
Chahl said he’s happy with the way things are going for him.
His long-time girlfriend lives in a neighbouring city 10 minutes away from his condo. There are lots of trails nearby where they can hike and walk her three dogs.
Chahl can see the two of them growing a family together in the future: “That’s the plan.”

– image and entire article from ‘Home search: Millennial in the market to buy second property’, Carlito Pablo, Georgia Straight, April 5th, 2017

—-

For 10 years or more, the vast majority of Vancouver RE sales have been at least partly based on the belief that there would be ongoing outsized price gains.
The buyer above is convincing himself that he’s an investor, and that he’s purchasing for his own future sensible use, but actually he’s speculating.
He’s assuming there may be modest price decreases in the short term and then.. off to the races again. Why else buy two properties?
It’s interesting to hear him state the possible risks but then dismiss them.
The family RE professional is another bubble feature.
Buying even vaguely near the top of a bubble can take thirty years or more from which to recover, in real terms.
Perhaps this guy will be lucky and fortuitously-timed price drops will cause him to reconsider.
Timing can be… tricky. Luck helps.

PS: Yeah, we know the standard response: “But, he just needs a place for him and his family to live!” — That’s the argument that has fueled this bubble all this while: Locals overextending themselves into mortgages which in rational times would be seen as preposterously & laughably oversized, pushing prices higher and higher in doing so, completely unsupported by any real economic fundamentals, all the while convincing themselves they are prudent citizens motivated by wholesome values. If and when you take the expected unrealistic price gains out of this equation, there will be fresh air under this market.

– vreaa