Low Interest Rates, Foreign Capital, Local Speculation

“Here, in a nutshell, is what Saretsky has learned. The reason most Vancouverites can’t afford a home is because of three related trends. The first thing you need to know is that low interest rates make it easier than ever to borrow money and invest in real estate. The second is that buyers from China and elsewhere are investing in the market at record levels. The third is that as real estate prices across the city skyrocket, a surge of domestic speculators — including first-time buyers worried they’ll miss their chance to buy a home — is causing prices to go even higher.
Or in Saretsky’s words: “I would boil it down to low interest rates creating an easy credit environment, slash foreign capital coming in and distorting the market, and ultimately, as prices went up, it fuelled a fear-of-missing-out speculation.”

– from ‘A Realtor’s Revolt – Why Steve Saretsky is exposing the truth about Vancouver’s real estate industry’, Geoff Dembicki, The Tyee, 12 Jun 2017

Gee, this guy sounds like us.
Note how he correctly classifies first-time buyers as domestic speculators.
All buyers here are speculators, have been for many years. – vreaa

32 responses to “Low Interest Rates, Foreign Capital, Local Speculation

  1. Saretsky is “woke”, as this kids say.

    “I have been cautioned by many realtors and people in the industry that I could be the one to cause panic…”

    Notice the hypocrisy: it’s fine and dandy for all manner of inflationary rhetoric to spread among the populace, but any talk of downside is to be muted. Reminds me of some of the commenters on this blog…

    What does that tell us about the strength of their ideas? That they are weak. If they weren’t, they would welcome a “battle of ideas”.

    What does that tell us about their current mindset? That they are scared. They know it’s a game of musical chairs (or at least part of them knows — a few “critical thinking” neurons in a brain otherwise lost to groupthink), and they are desperate for the music not to stop.

  2. That’s so much comfort for people who stayed out since 2006 and counting…I’m NOT a speculator! YAH! I’m so smart! I only spend $200K+ in rent, missed out on the greatest RE price run-up in Canada ever, and still have to move every year or so! That place I didn’t buy because it’s too expensive? Sure it’s 3x more expensive now, but hey, it’s nothing compared to the satisfaction and value I get knowing I’m NOT a speculator.

    • Space-case uses infantile sarcasm to mock the truth about Vancouver’s distorted RE market. Easy to swim naked when the tide is in. When it goes out — and it WILL go out — he’ll be clutching his crotch and running for cover.

  3. “The first thing you need to is low interest rates make it easier than ever to borrow money and invest in real estate.” Credit has not been tightened for a very long time in Canada. Many people, like the highly intelligent and accomplished Garth Turner, former National Revenue Minister like to try to predict when the government will raise interest rates. It is a waste of time, according to superstar investor and businessman Warren Buffett who does not even try to predict GDP, or interest rates or any macroeconomic event – because no one can.

    From the torontorealtyblog, I saw an interesting summary of federal intervention into the real estate market over the last decade. I was surprised to see it laid out all at once, there have been several attempts to cool the market, over and above what the B.C. Liberals have done in the past year.

    “So what has to happen for our market to correct?

    Maybe that’s the toughest question of all to answer.

    Our government has taken many steps over the last few years in attempts to “cool” the market.

    They might not come out and say they want to cool the market. They might suggest that it’s an effort to stop Canadians from taking on debt, or that it’s ensuring financial responsibility among both lenders and borrowers – especially in the wake of the 2008 financial crisis in the United States, but make no mistake, these changes had the expectation or intent of slowing or cooling the real estate market.

    A quick refresher:

    1) The maximum amortization was changed from 40 years, to 30 years, to 25 years.

    2) The minimum down payment required was upped from 0% (or in some cases a negative percentage) to 5%.

    3) The minimum down payment required over $1,000,000 was increased to 20%.

    4) The minimum down payment for second properties was increased from 5% to 20%.

    5) CMHC insurance premiums were increased.

    6) Just recently, the minimum down payment for the amount of home price between $500,000 and $999,999 was increased from 5% to 10%.

    Those are the major changes implemented by the CMHC and the Finance Minister, and all of them were aimed at either cooling the housing market, reducing debt, or both.”

    In my research into bubbles, one truism seems to be articulated over and over again – bubbles burst when liquidity tightens. It would seem at this point it will take an increase in interest rates or a considerable change in lending policy by Canadian financial institutions to make that happen. It could happen at the next meeting of the Bank of Canada, or in six months or in six years. According to Buffett, guessing interest rate changes is a mug’s game.

  4. Bears wet dream…will their former favorite boy toy David Madani come through and be right like a broken clock?

    http://www.ctvnews.ca/business/home-prices-could-fall-up-to-40-per-cent-economist-1.3454660

  5. Notice that El Ninja can’t refute any of what I said as being false.

    • From decades of history you cherry-picked the single best few years for Vancouver real estate, and STILL it performed no better than several available alternatives. So, yes, I can refute what you said.

      Also, only an idiot looks at a single historical period and concludes that it is reflective of an asset class’s long-term prospects. You shouldn’t do it for stocks, you shouldn’t do it for gold, and you shouldn’t do it for real estate.

      #FakeCFA
      #SpaceCase

    • Sure, bears speculate the government will give out free stuff – bears only live in point Grey and nowhere else.

  6. Pointing out that one could have made a killing in a speculative mania (or that it’s painful to be on the sidelines during a speculative mania) is a truism; it’s obvious; it’s redundant; unnecessary. Like saying that water is wet.

  7. Bears don’t want free stuff.
    Sane market participants look for decent value.

    Like reasonably affordable space in a country with a population density of 4 per square kilometre.

  8. “No Listings” Saretsky – imbibed r.e. quackery with his mother’s milk – wants to be a paid pontificating pundit. Anything but hustling with the other rodents to snag a listing. Not to worry. He’ll make it big when she croaks and he inherits. And Madani – the dismal economist – let’s hire him to make some predictions; really really really long predictions. At least long enough for the check to clear. Turn that frown upside down.

  9. Saretsky is woke? LOL Right.. didn’t Ninja teach us not to believe what realtors say? He is just like every other realtor looking for attention. Not any different. His clients can’t afford anything in the market so he whines. But I actually think there is some truth in what he is saying. Hence why I don’t touch the stuff that first time home buyers touch, ie. attached condos in the sky.

    Btw, apparently I found out that I am a speculator. #Iamaspeculator But hey, speculation is awesome. I live in a good home, ain’t no one telling me what to do. I kick my tenants out if I don’t like them. My debt levels are low. If this is speculating then sure, I am a speculator. But what’s the big deal? Life seems great.

    But vreaa, you did accuse me of never intending to finish paying my mortgage once upon a time. I still remember that. In about four years when I have it paid, I will make sure to remind you how wrong you are if I am still here. Don’t worry. Just like how I am going to remind Ninja of that bet we had November 2018.

    • “His clients can’t afford anything in the market so he whines.”

      Notice the disdain. Notice the bullying. These are the only sort of comments that you, Arnie, and Space are capable of making. All three of you are stuck on an elementary school playground.

      As for your bets with vreaa and me. Seriously, get a life.

      • “Ninja” takes a break from ogling Buffet in a Speedo.

      • As if to prove my point for me, Arnie engages in more mockery. He could try to learn something instead. But, no, it’s easier to make fun.

        #StuckInChildhood

      • Err… have you ever met the guy? Cause I have quite a while back at one of his showings I think it was. He is not a bad guy and is quite nice actually. But it was plenty clear that his clients were just priced out. I don’t get why you think one set of realtor’s comments are not trustworthy but another set is. They all have agendas. Like you said, they are all sales people, so the messenger that you speak of is a sales guy, why should I give more credence on what he says. He is no different than another realtor who says real estate always goes up. That is not bullying, that is calling out what i see as happening.

        I also find it funny for you of all people to tell me to get a life. You spend every morning, evening, waking hour on this blog being the first one on every post. I think you need to look in the mirror buddy. I got you down to a bet to simplify all the mumble jumble so that we actually have something concrete to measure. It’s result that counts.

      • Whatever you need to tell yourself.

      • (stuck in moderation…)

      • Whatever man, piece of advice. This blog isn’t the end of the world, there is a great world out there. I am sure your wife is more interesting than I am, you should find out.

      • Go fuck yourself, Brian.

      • Testy testy my friend. It’s fun bugging ya cause you get bugged easily.
        #objectiveachieved

      • Brian fantasizes about other men’s wives, feels proud.

      • Right….. sure.. buddy.. whatever you think… but seriously, you really need to spend more time with her than this blog. It helps.

  10. If you can’t draw a distinction between Saretsky and his colleagues you are blind. He is utterly alone in his opinions. He is making arguments that run against his self-interest. So, no, I don’t take his as “just another opinion”. It’s a remarkable opinion to have in his profession. He may be wrong, but it’s interesting to hear a contrarian view.

    As for getting a life. I find Vancouver RE a fascinating study in human behavior, and it happens to be where I was born and where I grew up. Financially I’m not attached to the place, but it holds my intellectual and personal interest. And I like reading vreaa’s posts — he/she is an astute observer. I also try to call out bulls*t wherever it presents itself, and there happens to be a lot of it in this blog’s comment section. Say what you will about me, I don’t care.

    What doesn’t occupy my mind is our “bet”. I don’t think about it at all. I don’t remind you of it. I don’t cross off the days in my calendar in a countdown to the supposed “deadline”, as apparently you do.

    • Steve Saretsky is making arguments against his own self interest? What planet are you on? If he was one of the biggest agents out there and he made the comments I get it. But he couldn’t get a listing to save his life so he decides the only way to become famous is to become a contrarian. Sorry, that isn’t against his self interest. Again, if this came from someone who was pulling half a million a year in agent fees then I can agree. But when this person doesn’t even have a listing to save his life (note that if he was really that interested in helping his clients he should convince all of them to sell ASAP) then I would believe you.

      As for vreaa, who is the brownnoser buddy? You have been up his/her ass so far that your face is full of you know what. Look at the open admiration. It kind of speaks volumes of your judgement that you are following someone who called for a 50% crash back in 2008. I don’t even know how small the chances are now that we would ever reach those levels he/she called for. Even if this market crashes, the original valuations that it must crash to to get to where he/she is correct is almost impossible to reach just based on rent levels right now. This blog has been here for almost a decade, are we going to wait another decade before we say that the premise with which it was created was incorrect? Yet you openly say that the person who made such predictions to be astute. Right, very intelligent stuff, no bullshit there.

      One last thing about the you don’t care part. But you do. If you didn’t, you wouldn’t have bothered posting. You wouldn’t post late at night, early in the morning. You are obssessed, admit it. I also enjoy the discussions here, but I wouldn’t put it above family time cause it ain’t worth it buddy.

      • Butt-hurt Brian doesn’t tolerate dissenting views, mocks those who hold them instead of putting forth sound counterarguments. Says I post too much, while trolling every single one of my comments.

        #Hypocrite
        #Sad

      • I love how you constantly say bulls don’t make sound arguments when you still haven’t made one sound argument on how saretsky is acting against his self interest when Arnie has clearly shown that he doesn’t have any real positions in this market. But do explain to me something though, if he is so bearish in reality, why doesn’t he list all his friends and families homes for sale?
        #lookabitdeeperthantheskin
        #sureonlybullshaveagendas

        As for the trolling part, you seem to reply to every one of my posts too. Don’t believe me, look at the history of this blog.
        #whoisthehypocritenow

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