Category Archives: 15. Misallocation of Resources

Booms direct efforts in ways that don’t benefit the society in the long-run.

“No problemo. 69 per cent of the condo tower is pretty stable.”

Downtown Vancouver

“Only 31 per cent of sales have been to first-time buyers, or new immigrants from offshore, so 69 per cent of the market is pretty stable.”
- Bob Rennie, local condo salesman, as quoted in ‘Vancouver real estate moguls unfazed by axed immigration program for millionaires’, Kate Webb, Metro, 12 Feb 2014

[A post from beyond the grave. This is a one-off post-death 'rattle'. Keep well all. - ed.]

“Nothing Wrong Here!”

Maple ridge, lougheed highway and 223rd aldus huxtable
Maple Ridge: Lougheed Highway and 223rd [image and post title care of Aldus Huxtable]

“It’s kinda funny that 3 unrelated Irish blokes all said that this mess in Vancouver/Canada RE is unfolding EXACTLY like the mess did in Ireland, one headline at a time.”

“Been chatting with some Irish blokes who are here working post Irish Bubble. It’s kinda funny that 3 unrelated guys all said that this mess in Vancouver/Canada is unfolding EXACTLY like the mess in Ireland, one headline at a time. Good luck Canada!”
- TBWCB at VREAA 29 Jun 2013

All bubbles are alike in essential nature, even though there may be variations in the minor details.
- vreaa

Trump on Vancouver – “Your people, they go to New York, they go all over the world, and they speak so highly.”

“I love Vancouver. I have had so much experience with Vancouver and with people who live here. You don’t even realize how important it is in terms of a destination and also your people they go to New York, they go all over the world and they speak so highly.”
- Donald Trump, as quoted in ‘Trumps announce exclusive tower deal in Vancouver’, CBC.ca, 19 Jun 2013 [hat-tip jesse/YVR]

Did he try to say that people in New York speak highly of Vancouver, but just couldn’t?
- vreaa

‘Canadians obsessed with real estate, poll suggests’ – “Just as many people reported talking about real estate on a regular basis as they did about hockey.”

hi-realtor
Besotted.

“Most Canadians think about real estate on a regular basis, and a good number of them are obsessed with it, an online survey suggests.

That’s the takeaway of a recent poll by online home selling firm Zoocasa, where the real estate company commissioned Abacus Data to poll 1,000 Canadians online between June 3 and 6, 2013.

The poll found that 84 per cent of respondents across the country think about real estate on a regular basis, and 85 per cent have gone as far as shopping online for a new home in the past year.

“In ever increasing ways, Canadians seem almost obsessed with real estate. And it’s understandable,” Zoocasa president Carolyn Beatty said in a release. “For the vast majority of Canadians, their home is the largest purchase they will make in their lifetime.”

Nationally, more than a third — 34 per cent — described either themselves or a loved one as obsessed with real estate. In the Greater Toronto Area, which has the second-highest average home price in the country after Vancouver, the percentage of people who identify themselves as being obsessed jumps to 47 per cent, the highest in the country.

Zoocasa notes that the survey took place during the Stanley Cup Playoffs, and just as many people reported talking about real estate on a regular basis as they did about hockey.

Some 28 per cent of respondents say they have gone to an open house at some point in the past 12 months.”

- from ‘Canadians obsessed with real estate, poll suggests’, CBC, 20 Jun 2013 [hat-tip elchavo]

Not me!
I can quit whenever I want!
- vreaa

Don’t Worry, I’m Sure Somebody Will Sort This All Out – “Policymakers now know better and will be a lot more proactive in preventing a collapse.”

“Risks are undeniably elevated in the Canadian housing market with prices so high relative to household incomes. Many housing bears assume this overvaluation entails a hard landing but I’m not convinced it’s inevitable at the national level. One reason – which seems mostly overlooked in the debate – is that Canadian policymakers will be doing their utmost to avert such an outcome.

In a sense, Canada is fortunate to be facing the spectre of a housing bust after other countries have had theirs. Before 2008, it was generally believed house prices could never fall by much. Policymakers now know better and will be a lot more proactive in preventing a collapse.

Canadian policymakers do have the levers to affect outcomes. One is the regulatory framework for housing, which can be amended in various ways to reconfigure housing demand and supply to the extent required. Indeed, Finance Minister Jim Flaherty has tightened mortgage lending several times over the past two years to slow down price increases and give household incomes time to catch up.

Other regulatory changes include tagging Canadian banks with “too big to fail” provisions that require them to put aside more capital. Then there are the “bail-in” provisions that specify when a troubled bank will recapitalize by converting its senior unsecured debt and other liabilities into equity.

In addition to these pre-emptive steps, Canadian policymakers have no doubt given some thought to dealing with the risk that the soft landing could go off the rails. It’s hard to imagine they would allow the housing sector to destabilize the economy and financial system like it did in the U.S. and other countries.

Responses could range from cutting the Bank of Canada rate to relaxing regulatory restrictions on housing demand. Housing bears might complain about such measures but they would allow Canada to reposition back to a soft landing. That would be more preferable than inflicting the trauma that befell the countries hit with housing meltdowns.”

- from ‘Canada’s lucky to come late to the housing-crash party’, Larry MacDonald [a "retired economist"], G&M, 13 Jun 2013

A soft landing will not be engineered in the Vancouver RE market;
it is in the nature of spec bubbles that they burst, ending with a “bang and not a whimper”. Let’s hope that those in charge of Canada’s monetary policy and mortgage rates don’t do even more damage to sensible citizens by trying to avert the inevitable.
While we’re on the topic of “late to the party”, it is interesting to see the Globe and Mail’s Larry MacDonald, who up to now has gone to great lengths to reassure himself and everybody else that the RE market is not at risk [see, for instance, 'Housing bears need to relax and take the long view', G&M 1 April 2013], now stating that “risks are undeniably elevated in the Canadian housing market with prices so high relative to household incomes.” After all, prices have been outrageously high relative to incomes for many years now.
- vreaa

‘Vancouver City Hall: Housing Report Card 2012′; Plus Revised Version

The following ‘Vancouver City Hall: Housing Report Card 2012′ appears at VanCityBuzz 8 April 2013.
The cheekily truthpacked revised version below that is from a source that is as yet unknown to us (but was passed on via e-mail by ‘B’, 9 Apr 2013).

wqkv8cG

DOl5sJa

“My folks find themselves at 65 still owing half the value of their home and recreation property to the bank. After almost 30 years of ownership in the BPOE and a number of boom markets, they have very little to show for it.”

“My folks have owned in South Surrey since the mid-70′s, mostly in just two locations, but in their empty nest years yo-yoed between downsizing and re-upsizing to various condos, townhouses, duplexes, etc. trying to ‘find the right fit’, and all of a sudden they find themselves at 65 still owing half the value of their home + recreation property to the bank. After almost 30 years of ownership in the BPOE and a number of boom markets, they have very little to show for it and dad will keep working until the debt is paid before considering retirement. Now they are talking of selling and renting, which I have encouraged them to do, but they would feel ashamed in their peer group to ‘stoop’ to that.”
- Dazza at VREAA 6 April 2013 11:05 am

“Rent for $2,200 a month or buy and have a mortgage of $4,310 per month. Why would anyone buy?”

2_carousel
7541 Kerr Street, East Vancouver (Fraserview)
2518 sqft SFH on 45×110 lot

“We considered renting this SFH a few months ago. It stayed on the market for a few months, looks like the landlord never got any tenants (rent went from $2500 to $2200) and today when I walked by – - it’s for sale for $999,999! Gee… tough choice, rent for $2200 a month or… buy and have a mortgage of $4,310 per month (based on 3.09%, 25 year, 100k down). Why would anyone buy?
Thanks, I think we will remain renters until prices come back down to earth. Or never buy in Vancouver.”

- pricedoutfornow at VCI 5 Apr 2013 7:38pm

Think of this situation like this:
This landlord can’t find anybody who will pay $2,200 per month to actually use the house as a home, but they are hoping to find somebody who is prepared to pay over $4,310 per month to make use of the house as a financial instrument, by using it to bet on increasing prices.
The house’s fundamental value is that which one could calculate based on a yield of less than $2,200 per month. The speculative market has been valuing it at substantially higher than that. As the speculative mania unwinds prices will fall to reflect fundamental values.
- vreaa

Mom and Pop Get It Wrong In All Markets, Time And Again

“Villa and White felt “sucker punched” when stocks collapsed in 2008, he reports. The crash “wiped out half their savings.” They sold out of stocks, put their money in the bank, and “swore off stocks,” presumably forever.
Last month, as the Standard & Poor’s 500 index surged to new highs, they hired a new financial adviser and plunged into the stock market again.
The problem with Villa and White isn’t that they are unusual but that they are absolutely the typical American investor. Both of them are doctors, meaning they are presumably intelligent and educated. And yet they insist on investing like absolute fools.”

“They buy high, sell low, and the ending is predictable.”
“Share prices fall because there are more sellers than buyers. They rise because of the reverse. So mom and pop investors like the Villa-Whites rush to dump their stocks because they see the market plummeting, oblivious to the fact that the only reason it’s falling is because people like them are rushing to dump their stocks.”
- from ‘Mom and pop: The world’s worst investors’, WSJ Marketwatch, 4 Apr 2013

And so it is with all markets.
Regular folks (in the case of RE, the vast, vast majority of market participants) fell in love with Vancouver RE when prices started running up, became more and more adoring as they ran up more, and were most infatuated at the frothy peak (at the very time they should have been most wary). It is this crescendo of infatuation that drives speculative manias to their ridiculous heights.
As prices fall folks will become less enamoured, then discouraged, then disgusted by local RE, and when the most people are the most disgusted, it’ll be a sensible time to buy.
It’s not rocket-science, but it is emotionally very, very difficult to be a contrarian, and to take a position that is the opposite of that of the crowd.
- vreaa

“She said the market was dead in Victoria and that it would remain so for a very long time. I asked how she knew. Her answer was fascinating and should scare the pants off the real estate crowd.”

“Yesterday two old friends, J & M, from Victoria, mid 50′s, both very bright and mid level bureaucrats at separate provincial government departments came to visit us in the Comox Valley. At one point the topic moved to real estate. I began to say that the market was dead here when J interjected that it is the same in Victoria and that it would remain so for a very long time. I was surprised by her response and asked how she knew this because I know that neither of them reads any of the real estate bear blogs. Their answer was fascinating and should scare the pants off the real estate crowd.

First, both live in Townhouses and J is the head of her strata council (46 units). She said that last year about 7 units sold. This year one of the most desireable units was listed and got no inquiries at all. It was pulled. In addition one of the vendors of a unit last year did want to buy back in but could only do so with a 0/40 mortgage, which is of course no longer available. She had no idea what he had done with the equity from the sale.

Second both pointed out that their incomes have remained largely static for years but that housing prices and strata fees (not to mention special assessments) have increased relentlessly to the point where they felt prices are ridiculous relative to income. J was of the opinion that the townhouse unit in which she lives has about $60K of material in it and yet these units were until recently selling for $300k plus. She felt that the spread between material cost and selling price was indefensible. J also pointed out that despite being mortgage free her strata fees and hydro per month were in excess of $500, the better part of a mortgage payment not that long ago.

Third J said that the price of real estate would be down basically forever because our generation had had few children, overall. As a result who was going to buy our houses when we depart for the great hereafter?

Fourth both believe that the potential sales price of their own units have decreased substantially in the past year and will probably continue to decrease but they intend to stay put. They do not see any point, for example, in selling and then renting despite knowing that prices are inflated vis a vis rent.

Fifth both pointed out that they work at very large institutions and that they, of course, interact with many of their fellow employees. One of the constant topics is real estate and these days the virtual impossibility of finding buyers for the units that their fellow employees have for sale. They report that the view of the majority of their fellow employees is similar to their own – real estate is dead.

Finally, and very ironically, at least for most of us at this site, both get most of their news from CBC and CTV. Their overall impression of reports on both channels was that the real estate market is collapsing.”

- Ford Prefect at VREAA 31 Mar 2013 8:46am

Downside Weights On The Vancouver RE Market – “One of the older guys (over 60) mention to the guy beside him that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house.”

“Every Friday I play hockey with a bunch of guys who are over 55. I’m a goalie, so even though I’m not 55, they let me play – I guess it’s hard to find 55 year old guys whose knees are willing to bounce up and down off the ice for an hour and half.”
“Anyways, I overheard a conversation in the dressing room last Friday. One of the older guys (over 60) mention to the guy beside him (over 70) that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house. The over-70 guy nodded in approval. The over-60 guy asked if he had heard of anyone doing this before, as they couldn’t see any other way to continue to fund their retirement.”
“The over-70 guy nodded, and said “Yup, we did it a couple of years ago. We’ve been renting now for two years – we had to do it, because we couldn’t afford the property taxes each year anymore”.

- anecdote from ‘Ross’, relayed by Garth Turner at greaterfool.ca 27 Mar 2013

“Boomer retirement supply” will be just one of the factors weighing on the Canadian RE market in these coming years.
In Vancouver, there will be many other downside weights. We anticipate that the largest will be the loss of speculative buying (all buying based on the idea that prices go up will stop). Another downside weight will be the knock on effects of a shrinking RE sector (loss of jobs; loss of related economic activity; people leaving). Yet another will be the disappearance of the ‘move-upper’ market (as condo prices contract, almost all wannabe move-uppers will be stuck.. they will not provide support for townhome or SFH prices). Another downside weight will be cash flow negative properties coming to market that have only been held because prices have remained strong enough (we’d expect this to include some of the empty condos we recently heard about). Collapsing RE markets in China will have a modest direct downside effect, but also a larger indirect downside effect through the psychological impact on local speculators.
This list is not comprehensive, I’m sure readers can think of other mutually-perpetuating downside mechanisms. When a speculative mania cycle turns from ‘virtuous’ to ‘vicious’, the multiplier effects reverse.
Boomer supply will be just one of the many downside weights. Many who are reliant on paper RE wealth for their retirement fiscal health will come to market; as prices drop, some will do so with urgency.
- vreaa

“Rogers Communications is expanding into RE; aiming to relaunch website; providing critical data that can help potential buyers assess the value of a property from the comfort of their home computer.”

“Rogers Communications is expanding into the real estate business.
The mobile and cable giant has applied to become a licensed real estate brokerage right across Canada and is aiming to relaunch its five-year-old website Zoocasa.com in May as a unique, one-stop-shopping site for homebuyers.
It’s aimed at going far beyond U.S.-based property listing services such as Zillow and Trulia which have revolutionized house hunting south of the border by providing critical data that can help potential buyers assess the value of a property from the comfort of their home computer.
… The rebuilt Zoocasa site will have “the most complete list of property information that can be provided to consumers, including neighbourhood and related information,” said real estate maverick Lawrence Dale who quietly folded his Realtysellers private sales online listings site a few months ago and started working with Rogers as Group Head, Real Estate Business.”

- from ‘Rogers to step into the real estate business’, thestar.com, 25 Mar 2013

We welcome any moves that result in availability of data regarding for-sale properties.
A Zillow-like system in Canada would represent a great improvement.
- vreaa

Spot The Speculators #100 – Couple In 20′s Desire Light Workload, Early Retirement And Free Money From Their RE ‘Investments’; Current RE:Networth 10:1

“In B.C. a couple we’ll call Max and Portia, 28 and 27, are trying to plan their financial future. They bring home a total of $6,880 a month from their high-tech jobs, but Portia wants to take sabbaticals to travel more and Max wants to try out a new career. They also want substantial investment income — $1,000 a month by their mid-30s. All that, plus early retirement well before 65.
What is standing in their way is not just the problem of earning enough money to do all that, but more than half a million dollars of debt
They have already made big career switches, Max from running a theatrical company for four years, Portia from several years in pharmacy management. Their jobs, their incomes and their present high rate of savings can build a solid retirement, though not necessarily an early one.

So far, Max and Portia have made a big bet on real estate. A $265,000 rental condo is their largest investment. It has a $228,775 mortgage with 26 years left on its amortization. Without capital repayment on the 25-year mortgage, interest alone is $410 a month. Condo fees and taxes add $277 for total carrying costs of $687. It generates $1,050 rent, so their total return is $363 a month or $4,356 a year. That’s a 12% return on their equity — not bad, but vulnerable to rising interest rates. If they have to roll over their 3.0% mortgage at 4.0%, which is still historically cheap, they will lose their margin of profit. No one doubts that interest rates will rise and a 1% jump is easily in the cards…
Rather than take all the risks that go with being landlords — such as vacancy, tenant damage, and the inevitable rise in interest rates — they could sell, harvest their about $23,000 of equity after 5% selling costs, and use the cash to pay off most of a $27,000 student loan outstanding at 4.5%. If they choose not to use the cash to pay off the loan, then, at $500 a month, it will be repaid in five years. Their home mortgage would still have 24½ years to run. …
If they choose jobs for fun … their ability to have a secure retirement will be at risk
Their reality at present is that debts are almost 90% of their assets. To support a $1,000 monthly investment income, they would have to have $400,000 capital generating a 3% return after inflation. They can’t do that in seven years with their present incomes and the need to pay down debt. Moreover, if Max changes jobs or Portia takes lots of time off for travel, sacrificing income and perhaps career advancement, their financial outlook would dim.
“It is not possible in any reasonable scenario, especially if they impair their incomes with sabbaticals or risky job switches,” Derek Moran [a financial advisor from Kelowna] says.

Summary of finances:

Income:
$6.9K per month

Assets: $606.7K Total
Home condo $298K
Rental condo: $265K
RRSPs: $23.7K
TFSA: $8.9K
Stock options: $4.5K
Cash: $6.6K

Liabilities: $544.4K Total
Home condo mortgage: $284.6K
Rental condo mortgage: $228.8K
Loans: $31K

- from ‘Is this couple’s financial vision an impossible dream?’, Andrew Allentuck, Financial Post, 8 Mar 2013 [hat-tip MC]

Networth: $62.3K
Percentage of Networth in RE: 973%
[For those readers who have semantic objections to their position being expressed in that fashion, think of the '973%' as an elegant way of saying that their net-worth is leveraged to RE prices by 9.73 to 1.]
So, if their RE holdings drop in market value by a touch over 10%, they lose their entire net-worth. In fact, we can say with close to certainty that, given current market conditions, their actual current net-worth is very likely less than zero, as they’d be unlikely to clear 90% of the quoted amounts on their properties if they tried to sell.
This couple represents self-delusion run amok.
They clearly see RE as a path to a light work-load and early retirement. Free money, in effect.
How many Vancouverites have built positions in RE based on similar fantasies?
Note how the sensible financial advisor (from Kelowna, and thus, we’d assume, no stranger to collapsing RE markets) advises them to sell their RE ‘investment’.
What will the effect on our markets be when all those speculators in a similar position try to get out of money losing RE, over the same few years?

This couple’s position is also particularly noteworthy in that it represents the local speculative activity that has been the major engine of our perverse bubble. Most would still argue that their actions are innocent; that they are simply trying to get ahead in current challenging economic circumstances. We’d argue that they are being greedy; and ask what the hell they were thinking buying a second, poor-cash-flow property with a household balance sheet like that. It is purchases such as these, people over-stretching to buy primary residences and/or ‘investment’ properties in the hope of future abnormally large price gains, that have relentlessly pushed up prices and formed the bedrock of the problems now facing Vancouver RE: A bubble based on cheap borrowing and over-leverage.

Speculative manias represent ephemeral fantasies, and they all, ultimately, have to be reconciled with reality.

- vreaa

“We live next door to a large new house that replaced a beautiful one in excellent condition. It has been empty since its construction about 2 years ago. The owners live in another house nearby.”

“We live next door to a large new house that replaced a beautiful one in excellent condition.
This new house, contrary to the bylaw, does not meet the requirement that the bulk and size of new developement is similiar to existing developement. Nor is it as required, compatible with the existing amenity and design of developement. City Planning approved this contrary to the neighborhood objections.
It has been empty since its construction about 2 years ago.
The owners live in another house nearby.
In this block there are now 3 houses that have been empty for several years.”

- B. Mcloughlin, commenting 2:58 PM on March 8, 2013 below the Globe and Mail article Kerrisdale preservationists lament a tide of bulldozers.

Misallocation of resources.
Speculation.
- vreaa

Vancouver RE Crash On Track

Expected weakness continues, sales remain low. Things are playing out as we’d anticipate. Very significant price drops to come (all in all, 50% to 66%, peak to trough). :

SALES ARE WEAK:
“The flicker of optimism that sparked in Canada’s housing market when January sales outpaced December’s has died out, erased by a notable drop in February.
Last month’s declines were significant enough to prompt the Canadian Real Estate Association (CREA) to cut its sales outlook for 2013 on Friday for the third time since last summer. …
“Vancouver remains the clear weak spot, with sales down a seasonally adjusted 9.8 per cent in February and 29.2 per cent in the past year,” Bank of Montreal economist Robert Kavcic wrote in a research note.But some feel that much of Vancouver’s weakness has played out.”
[hahaha -ed.]
- from ‘Clouds gather over Canadian housing market’, Globe and Mail, 15 Mar 2013

SO ARE PRICES:
“The average MLS residential price in BC was $514,134 … down 8.1 per cent from a year ago.”BCREA news release 14 Mar 2013

INVENTORY/LISTINGS ARE HIGH:
“I’m seeing big increases in New West, North Van, Burnaby SFH listings. Historical highs for this time of year. VW has stalled out; VE puttering along. Condos downtown nothing special on the inventory side. I don’t know what all that means except that our little crashlet is *not* a “Van has too many condos; it’s just condos; houses are safe from all this” thing. It is in fact inventory growth and sales declines are mostly a SFH thing, from what I see.” [price declines will effect all sub-sectors of the market. -ed.]
- VHB at VCI 15 Mar 2013 12:22pm

RE Inventory Chart130313
chart care of b5baxter at vancouverpeak.com

HOUSEHOLD DEBT CONTINUES TO GROW:
“The ratio of Canadian household debt to disposable income rose to another record last quarter, calling into question Bank of Canada Governor Mark Carney’s assertion that families are listening to his warnings about the risks of borrowing too much.
Credit-market debt such as mortgages rose to 165.0 percent of disposable income, compared with 164.7 percent in the prior three-month period, Statistics Canada said today in Ottawa.
In his previous two policy statements, Carney weakened language about the need to raise the central bank’s 1 percent policy interest rate, partly on evidence a housing boom was slowing and consumer debt burdens are stabilizing. Finance Minister Jim Flaherty tightened mortgage rules in July on concern some regional housing markets were overheating.
National net worth rose 1 percent to C$6.87 trillion ($6.73 trillion) in the fourth quarter, Statistics Canada said. On a per capita basis the increase was to C$195,900 from C$194,300.”
[Watch the per capita net-worth plunge with RE prices over coming years. -ed]
- from ‘Canadian Household Debt-to-Income Ratio Rises to Record 165%’, Bloomberg, 15 Mar 2013

MEDIA STILL PUMPING:
“Global TV just ran two RE spots (within an hour of each other) on this morning’s news featuring Joannah Connolly, editor of the highly acclaimed BIV and holder of a BA in Eng Lit.
In segment one, she commented on the 0.1% rise in the Cdn new HPI (for Jan) and implied the housing market had “reversed a downtrend”. She also mentioned the Cdn$ and how “it rose five cents” yesterday. How sad. Colorful, animated bar graphs (a la CNBC) were used in the presentation to drive home the point that home prices are still way higher than they were in 2009. The year 2012 was conveniently omitted from graph #1 so as to mislead the public into believing the upward trajectory is still intact. graph #2 was equally laughable with price chg’s in Vanc, Vic, Wpg and Cda average all appearing to be gains with upward pointing bars.
In segment two, she talked about how hot the commercial RE was, that land was in limited supply and that investors were “snapping up anything and everything”.

- from bullwhip29 at VCI 15 Mar 2013 9:55am

..AND MASSAGING:
BTW, they changed the headline of the Tara Perkins article in the Globe from this…
Real estate market outlook cools as home sales plunge
To this…
Clouds gather over Canadian housing market
There….that’s better.”

- from kabloona at VCI 15 Mar 2013 11:01pm

REALTORS STILL PUTTING ON BRAVE FACES:
“BC home sales continued at a modest pace in February,” said Cameron Muir, BCREA Chief Economist. “Despite improved affordability, many potential buyers and sellers remain in a holding pattern. With pent up demand now becoming latent in the market, it’s not a matter of if, but when home sales rise above their current pace.”
- BCREA news release 14 Mar 2013

Sold One In Vancouver; Bought Three In Prince George – “It seems that Vancouverites just can’t get out of the real estate mindset even when they have the best chance to get off the ladder.”

Announcer: “In 2011 Prince George’s population grew by 1.4% over a five year period. [sic. ROTFL. -ed.]. Developers have had to keep up with demand, not just from new families, but from investors, like this couple, who moved here from Vancouver 5 years ago.”

the harpers

Shauna Harper: “For the cost of our house in Vancouver, we could buy three rental properties here..”
Mick Harper: “..three houses.”
Shauna Harper: “.. and that’s what we did. We sold our house in Vancouver and we own three properties up here.. and.. they can cash flow.”

Announcer: “Prince George’s population is supposed to get even higher over the next few years.” [Yeah, watch out for that 0.2% per annum parabolic growth. -ed.]

pg house

Announcer: “A more affordable lifestyle is making living here more attractive, especially to those from the lower mainland. Take this house for example: 2200 sqft, 5 bedrooms, 3 baths.”
Realtor: “And we’re looking at $299,900.”
Announcer: “And how much do you think a home like this would cost in the Vancouver area?”
Realtor: “In the Vancouver area it would be over a million dollars, for sure.”

- from ‘Prince George Revival’, Global TV, 14 Mar 2013

Hat-tip to E.G., who comments:
“The report gets into the fact that house prices are quite reasonable in Prince George. Fair enough…
Then the reporter interviews some Vancouver transplants who sold off and moved to Prince George with money in their pockets. Do they buy one house and invest the rest wisely? Nope… they buy several houses and rent out the spares. Seems that Vancouverites can’t get out of the real estate mindset even when they have the best chance to get off the “ladder.”

“He said that he is currently managing about 337 foreclosed/court ordered sale properties in Mission and Maple Ridge.”

“Bought a court ordered sale in Mission…
Property manager for the Banks came by, wondered why we were in the house…
Bank had not told him it sold… two weeks ago.
He removed the lock key holder.. we talked a bit…
He said that he is currently managing about 337 foreclosed/court ordered sale properties in Mission and Maple Ridge right now… that’s right… I asked three times just to make sure he didn’t mean 37… 337 is what he said.
… said he was not able to provide a list of the properties as the banks had forbidden him to disclose the list as part of his contract…, that’s in Maple Ridge and Mission… alone…
Yikes…
That was Three Hundred and Thirty Seven property’s in just the two districts…
WOW…Don’t see that in the news… or the real estate/assessment tax vultures sales lists…”

- Silver at VREAA 14 Mar 2013 10:08am

Border Services raid on migrant workers on Vancouver Eastside construction site; Reality TV camera crew in tow.

“An ordinary day on a condo construction site in east Vancouver took a turn for the dramatic Wednesday when Canada Border Services agents burst in searching for illegal migrant workers — all while being shadowed by a camera crew apparently recording footage for a reality TV show.
The raid, which took place at the Porter development on Victoria Drive near 20th Avenue, was one of about 10 that reportedly occurred throughout the city Wednesday.
A site foreman for the condo developer Cressey said two CBSA officers arrived around noon hunting for two Honduran nationals who were quickly located. A short time later, as many as 17 officers surrounded the building and began sweeping the construction site floor by floor, checking identification.
The site foreman, who did not wish to be named, said he was shocked and had not seen anything like it before. He said the raid began with two people who seemed to know who they were looking for, then there were 15 more, as well as camera crews.
He said about eight people, all of whom worked for a subcontractor, were taken away from the site.
Other witnesses reported seeing between five and eight workers handcuffed and removed by CBSA agents while a film crew circled. Many also heard workers speaking of 10 to 15 other raids occurring the same day.”

- from ‘CBSA raid on migrant workers, complete with TV camera crew, raises concerns in Vancouver’, Jessica Barrett, Vancouver Sun, 14 Mar 2013 [hat-tip Nemesis and proteus]

Allegedly ‘illegal’ migrants working a Vancouver construction site; all wrapped up with reality TV. Archived for the chronological record.
We don’t even want to begin to think of the ethical issues involved with the TV show. Who is directing who?
- vreaa

Comment below the article above:
“I know where there is an entire building that was constructed with American workers. I called CBSA and they didn’t even care. I told them that if you went there, there is an entire crew of Americans working on site right now. The agent basically said it didn’t matter. To top it off, the construction didn’t even have a construction permit. No fire inspection. Nothing. They open for business and didn’t even have a business license. Yeah trust me. This is just one case. There has got to be dozens or maybe even hundreds happening all the time.”Henry Wang, comment at Vancouver Sun

Their Children Have Left Vancouver – “One of the rarely discussed consequences of the huge RE price inflation in Vancouver has been the separation of the extended family.”

cheaper RE this way!
“Cheaper housing, follow me.”

“One of the rarely discussed consequences of the huge RE price inflation in Vancouver has been the separation of the extended family.
My own adult children have left their home city (Vancouver) partly because of better opportunities elsewhere, but mainly because of the ridiculous cost of housing. The dream of raising a family in a single family home in Vancouver is an illusion. Their options are to commute hours a day or live in a box.
Well over half my friends are in the same boat. Their children have left Vancouver. They are raising their own families in other cities and other countries. My neighborhood looks nothing like it did even ten years ago. The neighbors don’t say hi to each other and the traditional cultural events in the community are gone.
I loved my city. It’s still beautiful (when the sun shines). But now, I find it kind of lonely and hollow.”

- Uwinsome at greaterfool.ca 11 Mar 2013 11:23pm [hat-tip Bob G]

Excellent comment.
A city does best when RE is reasonably priced; when the cost of shelter is not an excessive hurdle to young industrious individuals either remaining here or moving here.
The speculative mania has pushed RE to prices that are two to three times reasonable values, and has consequently forced people away from Vancouver; it has been a deeply destructive force.
- vreaa

A related anecdote, previously headlined here:
“I think about my own home that I bought in 2000, it’s worth about four times what I paid for it now. … I have four kids, three in their twenties and one in their thirties, and they’re never going to be able to afford to live in Vancouver because they’re not already in the market.”
- Peter Ladner (former candidate for mayor), Shaw cable TV interview, 25 May 2011

The Unshakeable ‘Running Out Of Land’ Meme – Vancouver Mentioned In Tokyo ‘Coffin Apartment’ Article‏

Tokyo_Coffin-apartment
Young people in Tokyo are living in 50-75 square feet rooms paying between $500-$1000 a month in rent.

“How much do you want to live downtown? It’s an important question. Because young people in the world’s greatest cities are juggling unaffordable rents and sometimes working several jobs just to live in a glorified closet with four other people.
We often get the bulk of our nightmare apartment stories from places like New York City and Vancouver, where “micro suites” are now popping up everywhere, allotting people 350 sq. feet of living space for significantly more money than you’d imagine. If you can get a table a bed and a sofa in there, you’re pretty much a black-belt in efficiency.
But no matter how unpleasant you think our situation sounds, these micro suites are positively palatial compared to the way some people live in Tokyo and Hong Kong.
In Tokyo there is something known as “coffin apartments”. These dwellings are essentially share houses that consist of communal bathrooms and locker-sized sleeping quarters stacked on top of one another. These lockers, which in a disturbing way sort of resemble morgue refrigerators, run anywhere between 50 to 75 square feet.”

- from ‘Tokyo’s ‘coffin apartments’ are more expensive than you’d think’, Jordana Divon, Shine On, a Yahoo Canada blog, 1 Mar 2013 [hat-tip 'terminalcitygirl']

The Vancouver mention in this article occurs for the sole reason that the author is Canadian (a journalist from the Toronto area). Nobody else would dream of unquestioningly comparing apartment size in Japan or NYC with that in a Canadian city.
Japan, Population 127.3 Million, Area 378,000 km2, Density 336 persons/km2
British Columbia, Population 4.4 Million, Area 944,700 km2, Density 4.7 persons/km2
The idea that anybody should have to live in a cramped space in Canada is patently absurd. Unless, perhaps, if they were in jail.
One meme of the RE cult is that we have no land, whereas in actual fact we have even more land than we have rain.
See the Doug Coupland video below.
- vreaa

doug's house
Frame from video

“I grew up here, in a suburb just across from Grouse Mountain, overlooking the city. On one side of the fence there is home; and on the other side wilderness until the North Pole.” – from ‘Douglas Coupland’s Vancouver’, a promotional video for Canadian Tourism, 2012.

Realtor On Marketing Deceit – “They could have just found a waitress or whatever, somebody who didn’t obviously work for them.”

“Amazing quote here [in this article in 'The Vancouver Observer'], regarding the MAC Marketing scandal, from a Vancouver realtor:
“It’s not just what they did, but that they did it so badly. They could have just found a waitress or whatever, somebody who didn’t obviously work for them.”

- Nick at VREAA 5 March 2013 at 10:00 am [Thanks Nick. -ed.]

[For those readers unfamiliar with the "Mac Marketing scandal", see VREAA 13 Feb 2013.]

Interesting that a realtor would make this kind of comment after such a scandal.
It strongly suggests that he sees deceit in marketing as simply being part of the game.
- vreaa

Fitch Ratings – Canadian RE 20% Overvalued; BC 26% Overvalued

“American-based agency Fitch says house prices are overvalued by approximately 20 per cent in real terms across Canada, with regional variations.
But in releasing its ratings on Monday, it said Alberta’s market is overvalued by 15 per cent.
“Because of the effects of inflation and price momentum, it is not expected that prices would drop by this amount,” said the Fitch report. “If growth halted and prices began to drop, it would be expected to take several years for home prices to revert to their sustainable values, depending on a number of factors such as government support and credit availability. With this time frame, the actual observed decline in prices could be as low as 10 per cent.”
It said rises in prices have continued with small corrections since 1996, and specifically since 2008 have risen when underlying fundamentals suggest that growth is unsupportable.
It said the Ontario market is overvalued by 21 per cent, Alberta by 15 per cent, British Columbia by 26 per cent and Quebec by 26 per cent.”

- from ‘Canadian housing prices overvalued by 20%: Fitch Ratings’, Calgary Herald, 4 Mar 2013 [hat-tip Nemesis]

“There are up to 40,000 illegal suites in the city of Surrey — nearly double the 20,000 previously reported.”

“The appraiser stands at the foot of the empty lot, asked to assess its value — as if the home to be is already built.
He comes armed with floor plans sent to the city for approval.
In his eight years on the job in Surrey, he’s now seen thousands just like this.
The plans show an outlying deck and a basement with rec rooms, kids rooms, sewing rooms — “all these rooms that make no sense,” he tells The Province.
He is then handed another set of floor plans, either by the builder or homeowner.
“The revised floor plan? They show secondary suites going in,” says the appraiser, who estimates there are up to 40,000 illegal suites in the city — nearly double the 20,000 previously reported.
“The day (homeowners) get their final occupancy, the day it’s done — they enclose the rear patio and now you’ve just added another 1,000 square metres to your house.”
Not only are thousands of Surrey’s homeowners collecting undeclared income, he says, they are also saving on taxes when the suites are popped into place after city approval.
The owner of an in-demand design firm in Surrey says he’s aware of the illegal suite issue, but insists his company creates plans in accordance with zoning requirements.
“We discuss with the homeowners/ home builders as to their requirements and then prepare house plans,” he said.
“Our design company plays no role during or in the construction of the homes.”

“Of the nearly 4,000 residences developed in Surrey in 2012, 1,500 were single family units, namely in Newton and South Surrey.
The city issued permits for 427 secondary suites at 67 coach houses in 2012.
Surrey’s manager of bylaw enforcement, Jas Rehal, says his staff and the city’s building department communicate their bylaws and policies to developers.
“Generally, they’re abiding,” he said.
“These suites in Surrey, they’re all over the city,’ said Rehal. “When brought to our attention, we go out there, state the fee … once a suite is identified, we start billing.”
Annual fees for a secondary suite range between $500 and $1,300, which includes infrastructure costs such as garbage pickup and water use.
It can cost a homeowner up to $10,000 to properly outfit a home with separate piping, wiring and a firewall to make a suite legal.”

- from ‘Surrey’s illegal suites look like an epidemic to some’, Mike raptis, The Province, 4 Mar 2013

Jesse (YVRHousing) calls these suites ‘townhouses rotated 90 degrees’, and we think that’s spot on.
They are products of high prices: owners build and manage them to allow themselves to over-reach on price in the hope of further price increases.
This is an inefficient, clumsy and ugly way for a city to increase density.
- vreaa

Overreach For The Stars – “We didn’t just buy a conference, we didn’t just lure a conference to Vancouver”; “This shows we’re breaking through in thought leadership.”

TED-talk
[image G&M]

“When the TED Talks people came knocking at Vancouver’s door last December looking for a new home for their signature event, the city’s tourism officials didn’t just see another small conference on the horizon.
Instead, they viewed the visit as their chance to promote a kind of intellectual Olympic Games for the next two years, where they could sell Vancouver to the world via an international elite of thought leaders.
In return, the organizers of TED – which stands for technology, entertainment and design and brings together innovators of assorted stripes – saw Vancouver as a city whose ethos matched that of the TED Talks: future-focused, green, creative.
“I think the spirit of the city is wonderful for TED. We’ve met so many people who are dreaming big here,” TED “curator” and owner Chris Anderson said Monday from New York, where he announced the signature event would move from Long Beach, Calif., to Vancouver for 2014 and 2015 – and possibly beyond.


“None of us see this as a simple convention coming to town. It’s an opportunity to tell our own story through TED,” said Greg Klassen, a senior vice-president with the Canadian Tourism Commission. “We’ve negotiated the rights to leverage their brand, using the kinds of things we learned from the Olympics.”
So Vancouver will be able to market itself as the TED host city and Canada as the TED host country. And tourism planners are looking at ways to spin off other city events and draw top companies to Vancouver for meetings, using attractions such asextra speeches from some TED presenters.
They hope the strategy will make Vancouver synonymous with creative thinking, the way Austin is now the city of independent music as a result of South by Southwest, and Davos means serious talk about international finance because of its association with the World Economic Forum.
The Monday announcement caused a visible bubble of euphoria among city officials. “This is a game-changer for Vancouver. We’re known as a world-class tourism destination but this shows we’re breaking through in thought leadership,” Mayor Gregor Robertson said. “I’d like to explore how we can best leverage the opportunity to vault Vancouver into the spotlight and endear us to the leading thinkers who come here.”

- from ‘TED Talks choose Vancouver as host’, Frances Bula, The Globe and Mail, 4 Feb 2013

“Watching over and participating in these proceedings at the Long Beach Convention and Entertainment Center is a small vanguard of Canadians preparing to help TED’S once-improbable exodus from a state considered both the bedrock of American technological innovation and the birthplace of TED’S innovative brand for putting ideas in front of the people with the power to make them happen.
There are folks here from the Canadian Tourism Commission, Tourism Vancouver, the Vancouver Convention Centre, Mayor Gregor Robertson’s office, even hoteliers whose ringside five-star hotels will host attendees whose names are synonymous with power, influence and change. Over the next five days these visitors will try to figure out how to capture the magic of an intimate theatre setting TED concocted to make that idea transfer happen.
“Our relationship with TED is a partnership. We didn’t just buy a conference, we didn’t just lure a conference to Vancouver, we developed an alignment of our brand of Vancouver and Canada with the brand called TED,” said Greg Klassen, senior vice-president of marketing for the Canadian Tourism Commission.”

- from ‘Canada gets ready to host global tourism leaders. TED head to Long Beach to find ways of replicating success in Vancouver’, Jeff Lee, Vancouver Sun, 24 Feb 2013

Years ago, we liked much of TED a lot.
Since its size and offerings have ballooned, its content has altered, such that we now like bits of it a lot, and lots of it a bit or not at all.
Regardless, it is not a bad thing for Vancouver to host a conference/convention such as this one (provided the price hasn’t been outrageous.. more about that below).
The attempt to link the announcement with claims that Vancouver is “breaking through in thought leadership” are laughably funny, but at the same time, familiar to those who have noted the hopeful (embarrassing?, desperate?) over-reaching that is characteristic of recent Vancouver rhetoric. (Example: Eco-friendly city? Green Leader? – Despite our bike lane preoccupation, just 1.8% of trips taken in Vancouver last year were by bicycle. Also see: Garbage per capita; Airline flights per capita; etc.)
And, bringing the discussion home, this over-reaching is, of course, manifest in our home prices, and we see a relationship there. “Dreaming big”; Talk vs Walk.
Regarding the TED conference funding: Do any readers have access to details of the exact deal struck between TED and Vancouver/BC/Canadian representatives? How much is this going to cost us?
When the CTC representative says: “We’ve negotiated the rights to leverage their brand”, what were the details of the negotiation?
When they say “We didn’t just buy a conference, we didn’t just lure a conference to Vancouver”.. Okay, fine, but we’re curious as to how much it’ll cost us, anyway.
- vreaa


Thoughts from TED critics:

“According to a Financial Times story last fall, Mr. Wurman [architect and urban designer Richard Saul Wurman started TED in 1984] thinks the TED concept has become too orchestrated and too slick. Other critics have complained that the talks have become intellectually pretentious and almost industrialized in their production. A recent New Yorker article described them as appealing to “college-educated adults who want to close the gap between academic thought and the lives they live now.” But that hasn’t made a dint in their phenomenal popularity, with over 1,200 cities having hosted spinoff TEDx talks.”
- from the same G&M article above.

“Strip away the hype and you’re left with a reasonably good video podcast with delusions of grandeur. For most of the millions of people who watch TED videos at the office, it’s a middlebrow diversion and a source of factoids to use on your friends.” – from ‘Don’t mention income inequality please, we’re entrepreneurs, Why TED Is a Massive, Money-Soaked Orgy of Self-Congratulatory Futurism’, Alex Pareene, Salon, 21 May 2012

tedrect01-460x307
[image Salon]

Housing Makes Up 20% Of Canadian GDP – “This heavy reliance is not healthy. We basically borrowed our way out of this recession. Now, it’s payback time.”

“If the city is any indication of what’s going on in the country, it’s over-reliant on its housing sector.” – Herbert Crockett, a retired World Health Organization executive who lives in France says of Toronto.

“We basically borrowed our way out of this recession. Now, it’s payback time. We will be in for a period of long, slow growth.” – Benjamin Tal, deputy chief economist at the investment-banking unit of Canadian Imperial Bank of Commerce.

“It did seem a little unusual to have every policy maker in Ottawa hectoring Canadians about their excessive debt levels and yet the economic incentive for the average Canadian was completely slanted to taking on debt and not saving. The realist in me would admit it was the only tool the Bank of Canada had. The reality was, they really could not lift interest rates.” – Douglas Porter, chief economist at Bank of Montreal.

“As an economist working for a Canadian bank, I can’t go into a client meeting and have someone not ask me about housing in Canada. For U.S. investors, they are still a little gun-shy about what happened in the U.S., and I think they worry the same fate will happen to Canada.” – Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC, Royal Bank of Canada’s investment-banking unit, in New York.

Meantime, the share of GDP linked to housing, including construction and renovation, soared to more than 20 percent. A similar U.S. measure peaked at 18 percent in 2005. Canada’s share of construction jobs in total employment was 7.3 percent in January, above the 4.3 percent in the U.S.
“This heavy reliance is not healthy,” CIBC’s Tal says. “I expect to see some softening.”

- excerpts from ‘Canada Losing Debt Halo as Bull Market Housing Peaks With Carney’, Bloomberg, 26 Feb 2013 [hat-tip Nemesis]

As we have been saying here for years.
What percentage of Vancouver’s GDP is linked to housing?
- vreaa

‘CMHC seeking to hide foreclosure information from home buyers’ – “CMHC just told us that pricing will stay strong and now they want to keep information about foreclosure secret. Where there is smoke there is fire.”

“Canada Mortgage and Housing Corp. has been asking realtors for months to keep consumers in the dark about whether the properties it sells are part of a foreclosure, according to a document obtained by The Financial Post.
The move, said to be part of CMHC national policy, upset Quebec realtors who refused to play ball, worried about an ethical breach. …
Some real estate industry insiders wonder whether the Crown corporation is simply being prudent, not letting potential buyers know a property is part of a distressed sell so they can put in a low-ball bid.
Others question whether the Crown corporation is just getting things in order in case home prices collapse and they are forced to sell properties that are backed by government insurance. …
“Look at what is going on right now in financial institutions and everybody is ratcheting up their loan-loss provisions,” said Ben Rabidoux, a Canadian analyst for California-based Hanson Advisors, a market research firm whose clients are institutional investors. “Everybody expects loan losses to rise. I can’t imagine CMHC is in the dark on that. My suspicion is they want to limit any loss on that hits their books.”
By limiting the information on whether a property is part of foreclosure, the Crown corporation would potentially avoid a situation in which a buyer knows it has to sell. In the United States, foreclosed properties have sold at huge discounts.
“CMHC is trying to get the better price,” said Don Lawby, chief executive of Century 21 Canada, who had not heard of the new policy. “You know something is repossessed, you low-ball the offer. You know you are not dealing with a homeowner but an investor.”

- from ‘CMHC seeking to hide foreclosure information from home buyers’, Financial Post, 27 Feb 2013
[hat-tip Reader #4]

“If the price of a house is good or someone is putting a low ball price and the seller is ok with that…I call it the market. CMHC just told us that pricing will stay strong and now they want to keep information about foreclosure secret….When you have smoke…fire is not very far…” – ‘luckyluc’, commenting on the above article at the FP site

Is it within the CMHC mandate to take active measures to hide information from the public?
Aside from that, the need for deception is massively telling – the market is at risk from normal price discovery processes, and the CMHC obviously now sees that.
- vreaa

Realtor Tries To Sell Own Home But Can’t – “Buyers are very skeptical, very hesitant because they think prices may go down.”

Hoda Seraji is experiencing Vancouver’s housing slowdown firsthand. A real estate agent, she took her own family’s two- story house in Canada’s third-largest city off the market after failing to get a single bite for the C$2.39 million home overlooking the Pacific. Cutting the price for the five-bedroom, four-bathroom residence didn’t help.
“Buyers are very skeptical, very hesitant because they think prices may go down,” she says.
Seraji blames fading interest from foreign investors, especially in China. Changes to Canada’s mortgage rules designed to cool the market have accelerated the sales drop, she says.

- from ‘Canada Losing Debt Halo as Bull Market Housing Peaks With Carney’, Bloomberg, 26 Feb 2013 [hat-tip Nemesis]

Agreed, “buyers are hesitant because they anticipate prices are going to drop”.
The problem is not with the buyers, but with prices that are still very, very overinflated.
What was that “C$2.39 million home” selling for just ten years ago? Less than $500K, most likely.
Because of the very large speculative component to price in Vancouver, price drops will not draw in demand, but rather beget further drops.
- vreaa

“For almost 20 years, I have had close friends who are realtors. In the past month, I have seen serious changes in behaviour indicative of desperation. Commissions are down 50%, and for those on the fringes, this is pretty much poverty.”

“I’ve been following this market for a long time. Also, for almost 20 years, I have had some close friends who are realtors (and did it in the years when real estate was just something that people needed to live in – – without all the BS hype).
In the past month, I have seen serious changes in behaviour indicative of desperation. There was also a quote that “Everyone in my office has had to take a second job to ensure steady cash flow.”
I don’t think we are here to gloat in the misery of others but with sales numbers like we have now, commissions are down 50% in the past 2 years and for those on the fringes, this is pretty much poverty.
. .
Quick tidbit – – Attached is showing listings declines with some areas even failing to have rising inventory. SFH however is very slow with the high end of the market completely stopped . . . .”
- yvr2zrh at VCI 25 Feb 2013 10:36pm

Vancouver Reddit Boards – ‘Paid Shills In Our Midst?’ – “Does anybody else find there are too many real estate/property development posts on the /r/vancouver sub-reddit?”

“Does anybody else find there are too many real estate/property development posts on the /r/vancouver sub-reddit?
Moderators, and fellow /r/vancouver-ites: Can we consider banning/pruning the number of real estate submissions as a new rule? It’s rather frequent that I can come to /r/vancouver and see 4-5 posts on the page that certain individuals have posted.”
pfak at reddit.com 16

From the comment exchanges on that thread:

“I’d say the number of posts are in perfect proportion to the frequency Vancouver real estate comes up in conversation and the local media… “- [nutty buddy]

“The price of real estate in Vancouver is too high. This isn’t controversial, I don’t know why you are suggesting it is, everyone I know down here agrees about this, and some of my buddies overseas, the ones who are familiar with real estate/finance, agree completely.” – [MyFavouriteAxe]

“The fact that it’s subjectively “too high” might not be controversial, but this notion (that almost all of OP’s articles are pushing) that the housing market is about to crash any day now is a complete fabrication, and it’s one we’ve been hearing for at least a decade now.” – [Niyeaux]

“Obviously not everyone agrees the prices are too high, there are people buying houses for those prices, and there are others desperate to join them if the prices drop. Supply and demand my friend.” – [idspispopd]

“In a community as small, as easily accessible, and as geographically centralized as this one, it would be pretty surprising if there wasn’t at last a few paid shills in our midst. I’ve always assumed the aforementioned user /u/derpaderpe (formerly /u/proudbedwetter) is one of them.” – [Niyeaux]

“Paid by whom to sell what?” – [Smallpaul]

“Either the shitty “news” outlets who are peddling these crappy real estate articles, or someone with an interest in making people think the price of real estate in Vancouver is too high. I imagine the list of people who fit the latter description is quite lengthy.” – [Niyeaux]

“Oh, really? Like who exactly?
Agents want people to believe their property is valuable, worth it, and selling well. Developers want to charge as much as possible and make everyone think demand is high. Construction people want as much development as possible. Governments want high assessments so they can charge owners as much tax as possible. Banks want to collect as much interest as they can get on long-term mortgages. Owners want reassurance that their property isn’t losing value…
So, I guess you’re referring to mid to low-income renters and young people who don’t work in a field related to real estate. Yeah, they’ve got a lot of clout. Damn propagandists.”
– [FellSwoop]

“Or, y’know, any prospective investor who is waiting for the market to crash so they can pick properties up for cheap.” – [Niyeaux]

Real Estate infiltrates every discussion about Vancouver, so it certainly won’t surprise any of us here that the subject comes up frequently on the Vancouver reddit boards.
We don’t know whether there actually are any “paid shills” on Vancouver sites (other than the recently publicized OlympicVillage/VancouverIsAwesome ‘arrangement’, of course).
The idea that there are “prospective investor[s] who [are] waiting for the market to crash so they can pick properties up for cheap” is relatively new to the Vancouver RE discussion. It’s an interesting idea to ponder. These ‘vultures’ would have to be people who consider Vancouver RE to currently be appropriately priced, and who are hoping for ‘bargains’ at prices lower than this, such that when the properties recovered what they see as fair price levels, they would profit. We don’t ourselves know any prospective buyers of that stripe; we would certainly be interested to hear about any. All the prospective buyers we know (and there aren’t many of them) see prices as currently being far above fundamental values, and simply have a desire to buy themselves a stable shelter arrangement at a vaguely reasonable price.
- vreaa

“Where in the world would you pay $888,000 to live in this beauty?”

v988743_1

242 E 48th Ave, East Vancouver
2619 sqft
[really? -ed] Old-timer SFH, 33×140 lot
For Sale: Ask price $888,000

MLS®: V988743. Blurb: ‘Amazing property including legal basement suite. Some updating to electrical, and plumbing. Over 2600 sq ft of living space. Some hardwood floors, wood burning fireplace, newer deck, garage, 9 bedrooms [surely not! -ed.], 5 baths on 3 levels. ***close to all amenities and all levels of school including Langara College. All these on a great southern exposed, oversized lot. Well Priced,ASSESSED VALUE $865K.GREAT INVESTMENT WITH REVENUE POTENTIAL****NEEDS A LITTLE TLC’

Hat-tip to ‘Pretzels…thirsty’ for popping this example up in a recent thread and who added: “I think there should be an open web survey for this.
“Where in the world would you pay $888,000 to live in this beauty?”

This entire house looks like a bad basement.
One can only imagine the threat to one’s morale if you ended up an occupant of one of those 9 bedrooms.
- vreaa

Large Abandoned Richmond SFH Construction Site For Sale – “Assessed value is $2,300,000. Asking $1,888,888 for quick sale.”

photo-21

“Ad posted in Richmond News Feb 15.
10111 Sidaway Road, Richmond
4 Acre Estate Property, located in area of multi million dollar mansions and is adjacent to Mylora Golf Course.
The property was under construction in 2011 but construction was stopped.
House plans currently include a permit to build a 16,000 square foot house, but buyer can change the plans and build on the Engineer approved foundation that is on site.
Value of foundation is in excess of $300,000 and the assessed value of the property is $2,300,000.
Asking firm price of $1,888,888 for quick sale.
Call 604-abc-defgh.”

- posted by ‘Real Estate Tsunami’ at VREAA 18 Feb 2013 7:41pm

Filed under ‘Misallocation of Resources’; the central tragedy of a speculative mania.
- vreaa

“Canadians shouldn’t count on home prices to be their main source of wealth gains. Real wealth is built through innovation, and hard work. Not through some magical asset inflation.”

“The correction underway in Canadian house prices is likely to persist for another two years, warns Bank of Canada Governor Mark Carney.
“We’ve seen the adjustment in the housing market. We think there’s a bit more to come over the next couple of years,” Mr. Carney told CTV’s Question Period in an interview broadcast Sunday.
Mr. Carney said rapidly rising prices experienced in Canada over the past decade are “certainly not normal” and Canadians shouldn’t count on home prices to be their main source of wealth gains.
“Real wealth is built through innovation, and it’s gained through hard work,” Mr. Carney explained in an interview taped before this weekend’s G20 finance ministers and central bankers meeting in Moscow. “It’s not through some magical asset inflation.” …
Ottawa has tightened mortgage rules several times since 2008 to cool the market. But interest rates still remain at rock-bottom levels, as do borrowing costs.
Mr. Carney said the pace of debt accumulation has slowed to about 3 per cent a year from 10 per cent.”

- from ‘More adjustment to come in home prices: Carney’, G&M, 17 Feb 2013

‘Vancouver Is Awesome’ “Community-Based Social-Venture” Blog Actually A Stealth Paid Promoter Of Olympic Village

vancouver2010olympics
Above from a 12 Feb 2013 post on the ‘Vancouver Is Awesome’ site

“Marketers of the in-receivership Olympic Village are paying the editor of well-known local culture webzine VancouverIsAwesome.com to blog about the joys of life in the village – but it does not say on the website that he is being paid to do so.
Rennie Marketing Systems awarded the deal after receiving a single pitch from VancouverIsAwesome.com editor Bob Kronbauer, who says feels like he won a contest to be paid to flog the Village in False Creek – much like the public contests held by Vancouver International Airport and Tourism Richmond to find paid bloggers to promote them.
“I was visiting the Village a lot as a resident of Mount Pleasant before we moved in and fell in love with it and wanted to share the stories of all the positive things that make it great,” Kronbauer said.
“Beyond the budget and all this stuff I really have no idea about as an average citizen, (I wanted) to sort of expose stories about what it’s like to actually live there.”
Kronbauer lives in a market rental unit at the $1.1 billion complex, marketed by Rennie Marketing Systems, but declined to disclose his rental rate. He began a $2,475 per-month, six-month contract in May 2012 that was renewed in November. The year-long gig is worth a total $29,700.
“Beyond this, beyond my contract to promote the Village, we’ll be staying there in our suite because we love it so much, that was the intention to move there,” Kronbauer said.”

- from ‘Life in the Village pays off for local webzine editor’, Bob Mackin, Business in Vancouver, 14 Feb 2013

Elsewhere in the same BIV edition, Glen Korstrom suggests this is part of a broader trend of media manipulation by the real estate industry:
“Such tactics seem to be part of a trend of real-estate marketers manipulating media perception to sell condos.
Business in Vancouver has learned that VancouverIsAwesome.com editor Bob Kronbauer is being paid by the in-receivership Village on False Creek, formerly the Olympic Village, to promote life in the village – even though nowhere on his website does it make it clear that he is being paid to do so.”

“Vancouver Is Awesome, and we are dedicated to everything that makes it that way.
A community-based social venture sharing positive stories of arts, culture, lifestyle, and everything awesome about Vancouver. No bad news.
If you want to read ugly, bad news about this beautiful city of ours, you’re going to have to look to traditional media and other blogs; V.I.A. promotes everything that makes our city awesome, from old to new and everything inbetween. We’re like the human interest piece on the news… only different.”

- vancouverisawesome.com

We’ve previously tried reading the V.I.A. blog, but each time we break out in a terrible rash and can’t continue.
Advertising is irritating enough when it’s clearly advertising; when it’s in a stealth ‘product-placement’ form, far more so. And the ‘trend’ of media manipulation by the Vancouver RE industry is something that has been going on for years, it’s only coming to light now because the current state of the market makes people ‘ripe’ for the realization.
For the record, we ourselves aren’t paid anything, by anybody, for anything we archive, post, or say on this blog; it’s a labour of love and morbid fascination. We actually pay a small fee to wordpress each year to keep ads off the blog.
When news is “bad”, we call it “bad”; when something is “ugly”, we call it “ugly”; and that’s precisely how the RE market here looks to us right now – ugly.
A grand spectacle is playing out in our town, and we’re keeping notes.
- vreaa

If you are interested in developing your own ideas about the truth of the Vancouver RE market, and whether it is ugly or otherwise, read as broadly as you can about the market. If you don’t already do so, make sure you also consider the opinions expressed in posts and discussion on the following sites:
Vancouver Condo Info
Whispers From The Village On The Edge Of The Rain Forest
Vancouver Price Drop
Vancouver RE And Then Some
Housing Analysis
The Economic Analyst
and, of course,
Vancouver Real Estate Anecdote Archive

“My friends who are westside realtors are cutting spending budgets and dipping into savings now to keep things going.”

“My conversations with friends who are westside realtors over the past few months (I know a few – hey everyone wanted to be a RE agent for a while, it seems) [reveal that things] are not good (for them). Telling me they are cutting spending budgets and dipping into savings now to keep things going.”
- Girlbear at VCI 11 Feb 2013 2:51pm

Update – Westside Old Favourite Sells For Same Price As In Feb 2011

Here’s an update on a Westside SFH we’ve featured here before:

4411 W 11th; 4,696 sqft SFH; 63×121 lot (7,623 sqft; 0.175 acres)
(Old Timer; Backs onto alleyway behind 10th Avenue stores.)
Listed 9 Oct 2010 $2,980,000
Price change 6 Dec 2010 $2,890,000
Sold 15 Feb 2011 $2,830,000

Listed August 2012 with $3,180,000 ask price
Remained on market for rest of 2012, unsold

Relisted 24 Jan 2013 with $2,998,00 ask price
Sold 24 Jan 2013 $2,850,000

Anybody care to calculate carrying and transaction costs over the last 2 years?
We can’t verify this, but we are told that nobody has lived there over this period.
Will this property now be utilized as a residence, knocked down for a new build, or is it being purchased to sell again later at a hoped-for higher price?
- vreaa


This house was first featured at VREAA 6 Dec 2010 when we noted that, at an “Ask Price of $2,890,000″, “10% downpayment ($289K); 4% rate; 25yr amortization” would result in “Monthly mortgage payments: $13,681.79″
In a later post, 5 Jan 2010, we cited it as the kind of house that would sell for less than $1M in the coming trough.
This house was also featured representing our fair city in ‘Unashamed House Porn: Seattle Vs Vancouver’, VREAA, 11 Aug 2011.

No Bad Hair Jokes, Please – “A high-rise hotel and condo project on Vancouver’s West Georgia Street is being rebranded as the city’s first Trump tower.”

trump tower vancouver +
Sorry; impossible to resist…

“A high-rise hotel and condo project on Vancouver’s West Georgia Street is being rebranded as the city’s first Trump tower, CBC News has learned.
Developer Holborn Group is relaunching its Arthur Erickson inspired twisting tower under the Trump brand with condos priced around $1,600 a square foot.
When the project was originally launched before the global economic meltdown, the 60-storey tower, which will twist 45 degrees as it rises, was to feature a high-end Ritz-Carlton hotel on the lower floors.
Another 123 luxury condos were planned for the upper floors, priced between $2.5 million and $10 million, with the penthouse priced at $28 million.
But when the recession hit in 2008 the luxury market collapsed. The project was halted and early buyers were refunded their money.
The project was restarted in April 2012, with 290 condo units aimed at a lower price point, at the location on the 1100-block of West Georgia.”

- from ‘Trump Tower brand coming to Vancouver project’, CBC News, 15 Feb 2013 [hat-tip Nemesis]

trump tower in vancouverTop rated comments on the CBC site:

“When overdevelopment has hit the point where the likes of Trump are drawn to town to bless us with their “brand”, you know we’re heading into the trash bin. It used to be such a classy city.” – JimBev [547 thumbs up; 27 thumbs down]

“How embarrassing.” – Michael.Wolf [492 thumbs up; 18 thumbs down]

“So according to this article, we are told that the Toronto development was a smashing success (sub-heading “Toronto success moving west”, article says “Trump International Hotel and Tower has put its stamp on that city”) and there is no reason why it won’t be just as successful here in Vancouver.
Yet, in the December 26, 2012 issue of the Financial Post, an article appeared titled “Trump Tower woes signal Toronto’s condo market ‘on thin ice’.”
One investor feels he’s been ripped off and sold something that was misrepresented. “We bought into the Trump name and what we were being told was a hot real estate market in Toronto for this kind of project,” [the man] said in an interview. “It turns out that the hotel had nothing to do with him and that it isn’t a good investment after all.”
Things are clearly not what they seem and the CBC should correct THIS article immediately. A little Googling would have gone a long way, instead you chose to be lazy and, clearly, parrot what the developer is telling you. Shame.”
– Fox in a Hole [368 thumbs up; 8 thumbs down]

We’ll add the Trump Branding as another candidate for the Vancouver RE market’s ‘Jump The Shark’ moment. – vreaa

CTV TV News Featured ‘Condo Buyers’ Actually Marketers Of Very Same Condos!

Village Whisperer, over at ‘Whispers from the Village on the Edge of the Rainforest’ has unearthed a remarkable story of RE-marketing shenanigans.

Lee sisters
Sisters Amanda (left) and Chris Lee (right) are scouting for condos before their parents visit from China to help them buy one. (CTV photo)

“The CTV-TV story [CTV 9 Feb 2013] featured two sisters who were looking to buy a condo at the Maddox condo development in downtown Vancouver: Chris and Amanda Lee.
Curiously MAC Marketing Solutions has an Administrative Assistant named Amanda Lee who not only works for MAC Marketing Solutions – but her current background says she’s attached to the Maddox Downtown condo development profiled in the CTV-TV story. ..
It wasn’t just CTV-BC that ran coverage of the MAC photo op. So did CBC-TV.”

- Whisperer, 13 Feb 2013

MAC Marketing Solutions, once caught out in this subterfuge, on Wednesday [13 Feb 2013] published an apology for the ‘misunderstanding’, in the form of a facebook page comment:

MAC semi-admission
- facebook screencapture, posted by Whisperer, 13 Feb 2013

Whisperer has followed up with a review of the entire incident:
‘MAC Marketing admits they mislead CBC-TV, BC-CTV and all their viewers/customers’
Whispers from the Village on the Edge of the Rainforest, 14 Feb 2013

Clearly this represents far more than a ‘misunderstanding’, but the exposure of this deceit will barely cause a ripple. We have, sadly, come to expect ridiculously poor standards from local media regarding the coverage of the local RE market.
Well done, ‘Whisperer’, many thanks for the uncovering.
The episode is very reminiscent of similar deceit that we ourselves spotted in April 2012, where a ‘sales representative’ selling condos for Cam Good’s ‘The Key’ was presented by Global TV news as a ‘White Rock Investor’ and apparently interested buyer.
- vreaa

UPDATE 14 Feb 2013:

“MAC president Cam McNeill later confirmed that both women filmed in the segment are in fact MAC employees – and aren’t even sisters.
“I don’t have a full explanation of how things went down, I deeply regret for the fact that it didn’t make it more clear to you that the two women in the story were MAC employees,” McNeill told CTV News.”

- CTV News, 14 Feb 2013

Of course, as the two women in the story are MAC employees, and aren’t even sisters, the story itself doesn’t even exist!
- vreaa

UPDATE 15 Feb 2013:

The story of the deceit has now been covered by various ‘media outlets’:

‘Vancouver real-estate firm admits faking investor for TV news’
Sam Cooper, The Province, 14 Feb 2013

‘Real estate marketing firm apologizes after employees posed as apartment shoppers from China’
Tracy Sherlock, The Vancouver Sun, 15 Feb 2013

‘MAC Marketing Solutions Exposed For Fake Vancouver Real Estate Investors’
The Huffington Post B.C., 14 Feb 2013

‘Real estate firm apologizes after employees pose as buyers in news stories’
Andrea Woo, The Globe and Mail, 14 Feb 2013
excerpt:
“This is the latest in a number of questionable marketing tactics to be exposed within Metro Vancouver’s real estate community. During a media blitz announcing the Groupon-style sale of units at a Surrey condo development last year, one woman identified to a television news crew as an eager local investor was in fact a sales manager for Key Marketing, the company behind the scheme.
That same company has also taken groups of Chinese buyers on helicopter tours of Metro Vancouver properties, and at least one of those trips was believed to be misleading. Garth Turner, a business journalist and former politician, reported the Chinese buyers on a Feburary, 2011, trip – on which several media outlets were invited – were in fact local real-estate agents and brokers and the trip was meant to promote a new condo development. Cam Good, president of The Key, which includes Key Marketing, was a partner at MAC Marketing Solutions from 2004 to 2009, according to his LinkedIn page.
According to 2011 data by the Landcor Data Corporation, 75 per cent of those who purchased Metro Vancouver condos as investment properties are from Metro Vancouver. About 3 per cent are from the U.S. and 2 per cent are from other countries.
The Real Estate Council of B.C will be investigating the matter.”

‘Condo marketing company admits it duped media’
CTV British Columbia, 14 Feb 2013
excerpt:
“We’re trying to understand how this happened right now, and so I’m just trying my best to be open with you and just say that I’m very sorry that it happened,” said MAC president Cam McNeill.
McNeill maintained that the theme of the story – that Lower Mainland condo sites saw a spike in Chinese buyers around Lunar New Year – was completely true.
“I think that the ladies probably fit the profile of the story,” he said. “At the moment I don’t know whose idea that was; I don’t even know if they took it upon themselves to make that up.”

fake buyers
- image from CTV News

‘Real estate marketer admits to deceiving Vancouver reporters’
CBC News, 14 Feb 2013
excerpt from News clip:
“The owner of a Vancouver real estate marketing company admits his employees misled media over the weekend, including the CBC. … MACs owner admitted the story was entirely false. Two MAC Marketing workers presented themselves as sisters from China in Vancouver looking to buy a condo over the Lunar New Year.” …
“Some say that irreparable damage has been done to the real estate marketing industry, that future claims of sold out success stories will be viewed with scepticism.”

click to enlarge
- Annotated image linked by Canadian Watchdog at greaterfool.ca 14 Feb 2013 10:32pm

Living In Van-Couver – “There’s no way they can afford a mortgage in Vancouver. I know one emergency first-responder who lived in his van to save enough money to afford a downpayment.”

DCIM100GOPRO
Mathew Arthur, a Vancouver-based designer, checks email in his converted 1987 Dodge Ram Prospector.

“Mathew Arthur ditched a renovated laneway house he shared with his two brothers to live in a cheap 45-sq. foot 1987 Dodge Ram Prospector for the next year. He’s part of the growing “van dweller” community in Vancouver, where sky-high housing costs have forced many to get creative.
The contemporary nomadic community describes itself as an “island of misfits, a family, a tribe” on a popular Yahoo! forum. Some have embraced mobile living out of necessity, while others like Arthur are doing it to challenge themselves.
“I had a good design job, but in no way found engagement in my life,” Arthur told The Huffington Post B.C.
The 30-year-old wanted to challenge his notion of comfort by engineering a personalized living space that would test his creativity.
“I iterated through ideas about living in a tent, a shipping container or a commercial space with no household amenities until I arrived at the idea of living in a van,” said Arthur in a blog he’s keeping to document his year-long nomadic venture.
In early December, Arthur bought a $500 used van off Craigslist from a farmer in the B.C. Interior. With the help of his family, the vehicle was gutted, cleaned of mice feces and rebuilt with $400 worth of furniture, wiring and insulation.
In the small space, the van has four main areas: the kitchen and sink, work space, storage and bed. Without a personal toilet or shower, he has a daily excuse to go to yoga for exercise and to use the studio’s facilities.
The difference has shown in his savings: his monthly rent has reduced from $850 to a $200 parking fee plus $50 for hydro.
The tiny living space has forced Arthur to be mindful of his use of resources; he’s producing less garbage by preparing simple, fresh foods, and is using less water and electricity overall.
“The one thing that I took for granted was the freedom to move room to room,” said Arthur of living in a house. However, the shift from a 700-sq. foot house to a van parked in an East Vancouver alley has its quirks.
More people go through the alleyway than he anticipated. He’s befriended a middle-aged woman named Edie who periodically strolls through collecting bottles from the neighbourhood’s recycle bins. The occasional drunk lovers’ midnight fight is also easily audible through the van’s walls.”

- from ‘Mobile Living: Vancouver Van Dwellers’ Nomadic Lives’, Zi-Ann Lum, Huffington Post BC, 27 Jan 2013. All photos Mathew Arthur.

slide_276998_2030124_free

“They’re a merry band of vagabonds, living in their vehicles not so much because they can’t afford rent or a mortgage — though that’s part of it — but to cast off the chains of mainstream consumer living.
They’re van-dwellers and RV gypsies, free as birds and believing that your possessions in the end wind up possessing you.
“I had all of this stuff,” said 30-year-old Shawn Linley, sitting in his Econoline RV in North Vancouver. “Stuff, stuff, stuff, so much stuff.
“I don’t want a gas-powered weed-eater any more. I don’t want a huge flatscreen TV. I don’t need ’em.
“I’m never going to live in an apartment again or buy another house.”
Linley, like many vehicle-dwellers in B.C., is a journeyman tradesman. There are no official numbers of how many people live in their vehicles in Metro Vancouver, but it’s probably more than people think.
There are little mobile squatters’ camps all over the Lower Mainland — beside treed North Shore creeks, in industrial zones, beside East Van and Burnaby parks and SkyTrain stations, and along the beaches of Kitsilano and Point Grey
It is a sub-culture that is by definition discreet and shadowy, moving every so often to avoid drawing attention.
“Basically, they’re untraceable, people who are good at flying under the radar,” said Judy Graves, advocate for the homeless with the City of Vancouver.
For the most part they have jobs, she said, at least seasonally.
“And some people just do not believe in paying rent, and there’s no way they can afford a mortgage in Vancouver,” Graves said. “In fact, I know one emergency first-responder in Vancouver who lived in his van to save enough money to afford a downpayment.”

- from Living in a vehicle confers freedom from ‘stuff’, Gordon McIntyre, The Province, 11 Feb 2013 [hat-tip Aldus Huxtable]

slide_276998_2030141_free

“I live in the new Wesbrook village on UBC campus and finally stopped by the Wesbrook Welcome Center. I wonder how long they will keep up this rate of construction?”

NTRcsdX

“I live in the new Wesbrook village on UBC campus and finally stopped by the Wesbrook Welcome Center. They have a map of all current and planned development, (captured here with my) camera phone. The grey ones have been approved but haven’t been started, apparently they should all be completed in 10-15 years. That’s a rate of .67 – 1 highrises and 2 – 3 lowrises a year. Since I moved in 6 months ago none of the show rooms or open houses have closed. I wonder how long they will keep up this rate of construction?”
- LazyCanadian at VCI 8 Feb 2013 12:24pm, image posted here.

“UBC has gotten totally out of control. I graduated there a couple years ago, and it was getting a little ridiculous with the amount of construction, but now it’s even worse. When I visited for the first time in 2005, it was beautiful and was one of the reasons I wanted to go there.
The whole campus is under construction now, and they’ve cut down massive parts on the endowment lands (a.k.a. woods) to build million dollar houses and condos (which is just what the generally poor students need).
Most of the open green spaces are now huge condo towers. You can barely walk across campus anymore, with all the detours. Some people recently hung up a bunch of signs. [see below]
Back in 2007 they permanently cancelled the annual big party students have on the last day of classes, because the people in their million dollar homes on campus didn’t like the students drunkenly walking through to the stadium. Apparently the realtors didn’t tell them that they lived on a campus…
Nothing against UBC, I loved the school when I went there, but now when I visit campus, I feel bad for the current students.”

- Andrew at VCI 8 Feb 2013 2:38pm

Guerilla signs protesting construction on UBC campus, images from blog post ‘Anonymous snarker channels construction anger into guerilla memes’, Ubyssey Social Club, 12 Oct 2012. Archived here for the chronological record:

constructionsign2

constructionsign3

constructionsign4

“Over 6k of the announced 16K job losses in BC were due to real estate development slowdown in the Lower Mainland.”

“Labour Minister Pat Bell was on CBC radio earlier today. He said that over 6k of the announced 16K job losses in BC were due to real estate development slowdown in the Lower Mainland.”
- Patiently Waiting at VCI 8 Feb 2013 3:37pm

It does seem that things are slowing down on various fronts.
These are the kinds of self-perpetuating downward-spiral/vicious-cycle factors that will cause lower prices to beget lower prices still.
Our recollection is that we have roughly 7%-8% of the work-force directly involved in RE construction, whereas more normal levels are 3%-4%.
- vreaa

Usual Suspects – “Nothing To See Here” – “When they realize they’re not going to see significant declines in pricing, they’ll get on with their lives and move on with purchasing decisions.”

“January’s numbers are not a surprise. Some buyers may be sitting on the sideline waiting for a deflationary spiral to develop. When that doesn’t develop, when they realize they’re not going to see significant declines in pricing, they’ll get on with their lives and move on with purchasing decisions.”
- Cameron Muir, chief economist for the B.C. Real Estate Association.

“January’s numbers suggest that there is a possibility the decline in sales should well flatten out.”
- Tsur Somerville, director of the centre for urban economics and real estate in the Sauder School of Business at the University of B.C.

“When a home seller isn’t receiving the kind of offers they want, there comes a point when they decide to either lower the price or remove the home from the market. Right now, it seems many home sellers are opting for the latter.”
- Eugen Klein, president of the Real Estate Board of Greater Vancouver

Above quotes from ‘Lower Mainland home sales continue downward trend’, Derrick Penner, Vancouver Sun, 5 Feb 2013

The tune doesn’t change, despite the substantial change in the backbeat.
Perhaps this is the first time that Muir has used the term ‘deflationary spiral’.
And, we’ll say it again: it’d be nice to see Sommerville at least sketch out a few alternative scenarios for the benefit of Vancouver citizens. The lack of critical analysis of this market from local academics remains one of our bubble’s most remarkable features.
- vreaa

“I am in LOVE with the natural beauty here, but I can’t find work! The more time goes on, the more sad, lonely, desperate and lost I feel in this city.”

“Wow, this is really defeating. I mean, I am in LOVE with the natural beauty here, but I can’t find work! it’s ridiculous! I live in Surrey and the job market seems horrendous. I’ve applied for about five months straight, and nothing. nada. it’s like you’ve got to be super cut throat to find that you’ve competed with hundreds of other sorry applicants. forget having credentials. really? this is sad. I want to believe that it’s possible to find a way to stay here, but the more time goes on, the more sad, lonely, desperate and lost I feel in this city…which feels absolutely awful as I left Toronto feeling the same way. What the hell kind of life are we supposed to live where your next meal is being paid by the service industry job that you abhor and can’t wait until you find your next soul sucking job? where are the JOBS other than the oil loving alberta? what the hell is wrong with this country?”
- Tova at VREAA 2 Feb 2013

“A friend of mine had to ditch his Vancouver Kitsilano rental condo because every month he was dishing out expense after expense but his rental income didn’t come close to covering the expenses.”

“One can have problem tenants even in great areas in Vancouver based on my experience. However, unless you are paying almost entirely in cash, you will have a losing investment. A friend of mine had to ditch his Vancouver Kitsilano rental condo because every month he was dishing out expense after expense but his rent didn’t come close to covering the expenses (with a 20% down payment). My family has OK luck with Vancouver rental property but that’s only because they paid cash but even then some of their tenants have been problematic. Victoria has worked OK, too, but that’s because we bought years ago – again the cash flow just isn’t there if you were to buy today. I will say I have had excellent results over the last six years in Saskatchewan – specifically Regina. And I’m still buying there. Even today, you can still buy a SFH for $300,000 or so in a good part of town and get $1800 month rent plus utilities and get your pick of good quality tenants. And that’s without an in-law suite – you just buy a place in a good part of town, rent it to tenants with good jobs and not worry too much. You can get other homes at even better cap rates in not so nice parts of town but they will be high maintenance and definitely not suitable for the out of town landlord. With a vacancy rate of 0.8%, it is actually easier to get good quality tenants with stable jobs in Regina than in Downtown Vancouver, believe it or not.”
- westar99 at RE Talks, 15 Dec 2012 4:11pm

Condo Ad Booklet – “The Provincial Government will send you a tax free cheque for $10,000 if you buy a qualifying condo by March 31, 2013 and you are a first-time home buyer.”

IMG_1642

IMG_1641

- above from a set of images sent by ‘Ordinary Average’, via e-mail, 22 Jan 2013, and who adds:
“Today in my mailbox I found the following booklet. Pages 4-5
state “Borrow the down-payment from your favourite uncle and pay him back when you get the $10,000!”. Condo advertisements have become a weekly occurrence in my mailbox lately, this one blows me away.”

UPDATE [hat-tip bullwhip]:

7869358.bin
Doug Bigg and his daughter Krista check out a condo developer’s brochure that makes unauthorized use of the provincial logo.

“A major condo developer has been reprimanded by the B.C. government for the unauthorized use of the provincial logo in a promotional brochure for a new development in Langley.
Quadra Homes agreed Thursday to delete all references of the government’s registered logo from its website and to destroy the remaining promotional brochures for the development, named Yorkson Creek, which carried the B.C. logo on its front and back page.
The issue came to head on Wednesday after The Province contacted the Ministry of Finance asking about the 28-page, glossy brochure, which began arriving on doorsteps in the Langley and Abbotsford areas within the last two weeks.
“British Columbia [the logo is used] is handing out $10,000 in cash … ” read the cover and back of the brochure.
“Borrow the down payment from your uncle and pay him back when you get the $10,000,” read another page.
Another read: “We have the qualifying condos and will fill out the paper work for you.”
The $10,000 refers to the government’s first-time homebuyer’s bonus, which was detailed in the first few pages of the brochure. The rest of the pages are dedicated to the benefits of buying at Yorkson Creek.
“It is not just misleading, it is wrong,” said Doug Bigg, who received the brochure last week. “I interpreted it as taxpayers’ dollars being used to advertise condos for a multi-million dollar corporation. If I thought that, then I’m sure most other people would think that.”
But the government had nothing to do with the brochure, the Ministry of Finance said. And on Thursday, the company was ordered to remove all unauthorized references of the logo.”

- from ‘Major developer reprimanded over unauthorized use of provincial logo to help sell condos’, The Province, 24 Jan 2013

‘Old Curmudgeon’ Has Audacity To “Force People To Confront The Consequences Of Their Own Debt”

“I own my house. I have no debt. Why? Not because I was lucky or rich. But because I never borrowed for consumables. My house is not an investment. Whether it is worth $100,000 or $1,000,000 is irrelevant. It’s where I live. It’s a roof over my head. I had to get a mortgage for the house, but worked on paying it off with spare cash. I didn’t have to have a car. Nor yearly vacations in exotic locales. I didn’t eat out a lot. I didn’t need a lot of clothes. And I don’t give a sh*t about impressing the neighbours.
For the most part, all the debt problems people have stem from their own greed, consumerism and lack of self-control. Don’t blame the market. Don’t blame the banks. Blame yourselves. But in our society, it is impolite to force people to confront the consequences of their own actions.”

- Old Curmudgeon, commenting at ‘Why lower home prices are a national priority’, Globe and Mail, 11 Jan 2013 9:26PM

‘Old Curmudgeon’ is in this situation in part because of his sensible ways with money, but also because he was very likely fortunate enough to buy at a time when house prices were more reflective of underlying fundamental value. And that is how it should be, after all. Homes as places to live, rather than as financial instruments.
His indignation with debt-spending is well placed.
- vreaa

From the article on which ‘Old Curmudgeon’ is commenting:

If Canada wants to slay its household-debt dragon, it will have to cut down house prices at the knees. But there’s an economic price to pay for that – and it goes well beyond a cooling of the residential real estate sector. …
“…house prices appear to drive non-mortgage debt, too – the more valuable your house, the more debt you’re likely to take on outside of your mortgage. And, since close to half of all non-mortgage debt is used to finance consumer purchases, higher house prices ultimately boost our national consumption, too.” …
“… the 52-per-cent rise in national house prices from 1999 to 2007 was responsible for a 19-per-cent increase in homeowners’ non-mortgage debt.”… “Multiply that by approximately 13 million households, and that’s nearly $10-billion more in annual consumption – or roughly a 2-per-cent juicing of non-housing consumer spending.” …
“A substantial downturn in prices – say, 10 to 20 per cent – would, in theory, not only reduce mortgage debts for new home buyers, but, significantly, push down non-mortgage debt to the tune of 4 to 8 per cent.” …
“A downturn in consumer borrowing is going to put a serious lid on consumer spending growth – which up until now has been a critical driver in Canada’s economic outperformance since the 2008-2009 global recession.
In the long term, this is the price to pay to get Canadians back living within their means, and the economy on more solid footing. But in the nearer term, the medicine could well feel worse than the disease.

- from ‘Why lower home prices are a national priority’, David Parkinson, The Globe and Mail, 11 Jan 2013

‘The Economist’ “Home Truth” – “Overvaluation is especially marked in Canada.”

“Overvaluation is especially marked in Canada, particularly with respect to rents (78%) but also in relation to income (34%). Mark Carney, the country’s central-bank governor, who is soon to jump ship to join the Bank of England, where he takes over from Sir Mervyn King in July, may have shown good market timing with his move to London as well as a deft hand in negotiating his lavish remuneration. …
At some point, central banks will have to take away the balm of easy money. If housing markets remain so fragile when they are getting so much help, they may break when it is removed.”

- from ‘Home truths’, The Economist, 12 Jan 2013

And Vancouver rent and income ratios are far more extreme than the national averages.
- vreaa

‘The Economist’ has steadily been warning of a Canadian RE bubble for some time:
‘The Economist’ – Rental Income Shows Canadian Home Prices Are 71% Overvalued, 25 Nov 2011

“In the past year, out of about 15 empty units (out of 32 total) in my west side townhouse complex, only one sold.”

“In the past year, out of about 15 empty units (out of 32) in my west side townhouse complex, only one sold, in January 2012 for 1.28m. Thus, for my townhouse complex there is at least 15 years of inventory. This isn’t counting all the other buildings going up around me still. You don’t need much of a brain to see supply is far outstripping demand.”
- Brian at VREAA 4 Jan 2013.

“You might feel differently if you’re a baby boomer who plans to sell the family home soon to help finance your retirement. The same applies if you bought recently and expect rising prices to carry you into a bigger home in a few years.”

“None of this matters to people who own homes they’ll live in for many years to come and thus shouldn’t care much about the current value. You might feel differently if you’re a baby boomer who plans to sell the family home soon to help finance your retirement. The same applies if you bought recently and expect rising prices to carry you into a bigger home in a few years.”
- from ‘Canada’s housing hangover: Real estate boom, meet dot-com crash’, The Globe and Mail, 2 Jan 2012[Hat-tip Nemesis and other readers]

In Vancouver, almost every owner has come to ‘care much’ about the ‘current value’ of their home. – vreaa

RE In The Minds Of Vancouver Authors – “People everywhere are taking out second mortgages on their homes in the hopes of accomplishing what Mother Nature has not, and here, biology at work! How extraordinary!”

In the CBC ‘Canada Writes’ 2011-2012 Creative Non-Fiction competition, the winning entry came from Toronto; two the three runners up from were from Vancouver. The entries are only 1200 – 1500 words in length. Both Vancouver authors referenced RE in their stories: One deals in part with a construction site injury; the other mentions people taking HELOCs to pay for fertility therapies.
Co-incidence? We think not! In RE speculative manias, the subject of RE is mentioned in popular culture more often than in typical times. – vreaa

“The call comes on a Monday morning. Your son’s boss. An accident, he says. He fell.” …
“The job site is closed down. Notices taped to a rented fence. You peer through the wire, your husband silent beside you. The roof soars above you, shiny, corrugated, supported by massive dark red beams. You squint, hoping to make out the corrugation that caught his boot, but it’s late in the day, the light dim.
You stare up and up. The roof so high.
Neither of you speak.
The skylight opening, cut that day, covered with flimsy sheets of plywood, the kind that flex and bow when pressed hard by something solid like a young man’s body. You stare up at it, the square of light too bright for you.
Forty feet. A concrete floor.
The wind shifts and hits your face. Your husband takes your hand and together you walk back to the car.”

- excerpts from ‘After, and Before’, Judy McFarlane, Vancouver.

“People everywhere are taking out second mortgages on their homes in the hopes of accomplishing what Mother Nature has not, and here, biology at work! How extraordinary!”
- excerpt from