Category Archives: 05. Where do Buyers get the money?

First hand accounts of where buyers are getting the cash for their downpayments. Financed by Mom & Pop? Grow-ops? Four jobs? Offshore funds? Robbed a bank? Commodity trades? And so forth..

Vancouver Detached – Sales Down, Prices Down

“Sales volumes are incredibly weak with buyers looking for steep discounts and many sellers still unrealistic with their asking prices. However, sellers who need to sell for whatever reason are increasingly having to lower their prices. There is often a rhetoric that “sellers simply won’t sell” if they don’t get their price, and while this may be true the reality is there are still sellers who absolutely need to move on, such as estate sales, divorces or job relocation. These sellers are ultimately setting the benchmark lower.”
charts and quote from Realtor Steve Saretsky

Classic dynamic for a declining market.
Will crucial technical price supports hold?
Will buyers “rush in” to “snap up ‘bargains'” ??
Fundamental supports are f-a-r below. -ed.

Bloomberg Calls Vancouver ‘The City That Had Too Much Money’


Known abroad primarily for its stunning Pacific Coast setting and athletic lifestyle, the city has since become one of the world’s largest sluices for questionable funds moving from Asia into Western economies. One academic terms the process “the Vancouver model”: a seamy mingling of clean and dirty cash in casinos, real estate, and luxury goods made possible by historic ties to China and by Canada’s lax record of fighting financial crime.

It’s a product of one of the largest financial flows of the 21st century: The money being frenetically shuffled by millions of wealthy Chinese into safe assets abroad, in defiance of their country’s capital controls. Since mid-2014, capital flight from China may have totaled as much as $800 billion, according to estimates from the Institute of International Finance.

In Vancouver, the tidal wave has wrought a dramatic economic, demographic, and physical transformation. Alberni Street, a formerly dowdy downtown thoroughfare, has in the past decade welcomed a two-level Prada boutique with a black marble facade, one of the largest Rolex showrooms in North America, and a 62-story tower with a five-star Shangri-La hotel. All have Mandarin-speaking staff. In May, Rolls-Royce chose Vancouver to unveil its first sport utility vehicle, which starts at more than $300,000, hosting a Champagne reception at its sleek new local dealership in an upmarket neighborhood about two miles south of Alberni. Six sold on the first day—bound, perhaps, for the “car condo,” a kind of luxe garage with customizable suites that’s being built in a majority-Asian suburb. The units start at more than C$800,000, and the first batch recently sold out.

Much of the money coming in has been legitimately earned, if sometimes extricated by gray-market means. But officials say that a substantial proportion is the proceeds of corruption or crime, including the illegal sale of opiates such as fentanyl. With public anger rising over astronomical housing prices and an economy distorted by wealthy outsiders, British Columbia’s left-leaning government—elected last year on a platform focused on calming the real estate market—is building a global laboratory for policies meant to restrain the arrival of Chinese money. The province is hiking taxes, toughening transparency rules, and tightening oversight of casinos and financial institutions.

Change will be difficult and fraught. Vancouver has been closely connected to Asia since the late 19th century, when the first Chinese laborers arrived to help build the trans-Canada railway, and the city is proud of its record of integrating immigrants. Also, beyond real estate, Vancouver’s economic base is shallow. It’s not the business capital of western Canada—that’s Calgary—and it has few major corporate headquarters or large-scale manufacturing operations. “Asian capital has kept this economy alive, end of story,” says Ron Shon, a Chinese-Canadian venture capitalist who arrived as a teenager in the late 1960s. “You can see it in every aspect of our lives.”

The money is arriving so fast, and in such volume, though, that standing by is no longer an option. Vancouver was perhaps the first major Western city to experience the full force of Chinese capital. Soon, it could be the first to learn what happens when you try to stop it.

– excerpt and image from ‘The City That Had Too Much Money’, Matthew Campbell & Natalie Obiko Pearson, Bloomberg, 20 Oct 2018

“Our family loves Vancouver, but we’re leaving because the struggle to live here is simply too hard”


Lee Abrahams and her two daughters in the living area of her tiny suite. [image: Vancouver Sun]

“In the Fraser Valley, about an hour and a half or so from Vancouver, my husband and I live in a tiny home. We occupy 400 square feet with two young children and three pets, and pay a low rent to our family for occupying their property. My husband commutes more than two hours to work, each way, five days a week. He is in a company that treats him wonderfully, but his income is low, as is the same for just about everyone trying to get by in Vancouver and its surrounding areas.

I am a writer and cannot work full time out of the home because the cost of daycare far outweighs anything I could earn despite my extensive resume. I hail from New York City and when people ask me how on earth I was able to afford living in Manhattan, it’s hard not to laugh.

“Easier than I can afford living here,” I tell them. That usually elicits quiet shock. It leaves me speechless, too.

I came here five years ago from my loud and proud city to study at Simon Fraser University. At the time, housing had yet to become the full crisis it is today. I didn’t intend to stay long term, but it seemed like a good place to start over as a single mother. I went to school full time, worked two jobs and had a childcare arrangement with a lovely family that I was able to afford.

That time was a blur. I barely saw my daughter, and I assured myself that it was all for a good cause. I made decent money, was working toward my degree, and not too long after I met my now-husband. I stayed because I worked hard to be here and just as we were considering a house, things went wildly out of control.

We were priced out of the market. My husband’s parents were looking for a house, and it was not uncommon for them to be outbid by well over $100,000 of the asking price. Nine exhausting months later, and through word of mouth, they found a seller with enough property for us to share. My husband and I have been stuck in a weird in-between since finding this property with his parents.

We range from having a great savings nest, to having it completely drained once tragedy or car repairs are needed. Or my husband gets sick and loses hundreds of dollars just from getting the flu. Thus begins the tumultuous climb to paying down the credit cards we needed to rely on, paying double bills from the month we fell behind, and then — four months later — finally having savings again. Rinse and repeat.

Despite the market slowing down, prices are still significantly higher than incomes can afford. In Maple Ridge, the cheapest area of Metro Vancouver, incomes still have to be at least $121,780 a year to afford a house. And housing and low incomes aren’t the only challenges we and others face. We are incredibly fortunate to live with a low cost of housing, but it comes at great sacrifice.”

– excerpts and image from ‘Our family loves Vancouver, but we’re leaving because the struggle to live here is simply too hard’, Lee Abrahams, Vancouver Sun, 22 Sep, 2018

Tendency Towards Corruption Is Inevitable – How Do We Minimize Its Existence?


cartoon by Cheney

Hard Earned Home Savings? Hardly.


image care of long-time reader and very occasional contributor ‘westsidefrank’

A tip for home-owners contesting proposed new taxes: Make almost any argument you want, but do not claim that any profits that you have accrued by virtue of owning Vancouver RE are ‘Hard Earned’. This insults people who work hard, and at the same time insults anybody with a modicum of intelligence. Hundreds of thousands, sometimes millions, tax free? As Bing Thom the architect once said “I have done pretty well in my business, but I made more money from sitting on my Vancouver property than I made by working an entire lifetime. That tells you something.”
[BTW, it looks like somebody has graffitied onto that sign, under the “Angry?” question, something along the lines of: “Yeah, because I can’t afford to live in a mansion like you!”]
– vreaa

“You know your real estate is in bad shape when there is a game app that displays Vancouver’s Science World and teaches you how to be a money hungry real estate developer.”


“You know your real estate is in bad shape when there is a game app that displays Science World and teaches you how to be a money hungry real estate developer: #vanRe #vanpoli”
– tweet from Brette A. Mullins @BretteMullins 3:27 PM – 18 May 2018

“It’s sinking in that Vancouver is sinking” – “Westside prices have fallen 17% from 2016 & 11% this year; sales volumes down by 80%; 3 years worth of >$3 Million inventory”

First, a Toronto Story: “The home sold for 25 per cent less than what John had paid just five months earlier, a loss of $500,000”
“The house in Toronto was the type of property highly coveted by those in the city: fully detached on a sprawling lot, recently renovated and adorned with granite countertops, hardwood floors and a solarium. John, who asked that his name not be used for reasons that will become obvious, knew he had to make an offer. He figured he could rent it out, and if the payments didn’t cover the mortgage costs, no matter. Back in early 2017, home prices in Toronto were on an unstoppable tear, surging double-digits every month. The house would surely be worth more in no time. The home was on the market for only a few days when John’s offer was accepted. He bid nearly $1.9 million, about $360,000 more than the list price. Then everything fell apart.
John, a real estate agent, thought he had financing lined up. But the bank declined to lend him the money. John had recently formed his own brokerage, and the bank was treating self-employed individuals with far more caution in an overheated market. He consulted two lawyers, who told him that if he walked away from the deal, he could be sued. John decided he had no choice but to take a mortgage from a private lender that carried a hefty 12 per cent interest rate. He knew there was no way he could afford the payments and listed the property as soon as he took ownership.
But there was another problem. During the closing period, the Ontario government introduced the Fair Housing Plan, which included a 15 per cent tax on non-resident buyers. The plan released the air from the housing market, and prices took a nosedive. John’s investment property sat on the market for 27 agonizing days before a buyer could be found. The home sold for 25 per cent less than what John had paid just five months earlier, leading to hundreds of thousands of dollars in losses [ballpark $500,000 -ed.]. “I was so greedy,” he says now. “I will not play the game like that again.” Painful as it was, he looks back at the debacle as a learning experience. He even purchased some books about real estate investment on Amazon to learn how to do it properly.
John’s tale of misfortune isn’t exactly unique. Hundreds of Greater Toronto Area residents were caught when the housing market took an abrupt dive last year after a long run of booming activity. Home sales plummeted 32 per cent from the peak, and prices cratered by 10 to more than 30 per cent in the suburbs, depending on the municipality.”
– image and excerpt from ‘The people who bought at the peak of Toronto’s real estate bubble, and then lost hundreds of thousands within months’, Joe Castaldo, Maclean’s, 4 May 2018 [hat-tip El Ninja]

Second, some Vancouver market facts from Garth Turner: “On the Westside prices have fallen 17% from 2016 and 11% this year while sales volumes have evaporated 80%”
“Detached home sales are crashing hard. What everyone wanted two years ago sits idle and unloved. Transactions are down by a third to the lowest level ever for an April.
In West Van sales are off by half. Incredible. Only 30-odd deals. Another spring record. Sales in Richmond have been sliced almost 60%.
Over six thousand listings materialized across the province in a single day. The meme is spreading. This ship’s going down.
Overall, sales are reduced an astonishing 62% from 2016. The lowest number in 30 years.
The average sale price has declined 6% from last year, 8% from 2017 – and this is just the start.
Two Aprils ago $3.5 billion was spent on housing in Vancouver. This April that fell to $1.35 billion. That’s $2 billion less spent in a single month. If you think there will not be economic implications, you’re wrong.
On the Westside prices have fallen 17% from 2016 and 11% this year while sales volumes have evaporated 80%. There is three years’ worth of inventory for houses valued at $3 million or more – the ones the NDP has targeted for a special punitive tax.
Over 90% of the houses now selling are going for less than asking. Two years ago, almost all were over ask. In April there were as many price reductions on detached houses as there were sales. Yes, it’s sinking in, that Van is sinking.”
– excerpt from ‘The big shed’, Garth Turner, 2 May 2018 [hat-tip El Ninja]

If a serious market correction were to commence, this is pretty much what it would look like. The beginning of a lengthy, drawn out correction process… Watch as wave after wave of ‘Johns’ sell at lower and lower prices. It’ll take years to play out.
Ultimate target: The return of Vancouver RE prices to those determined by the utility of property in our economy.
– vreaa