Category Archives: 20. The Limitless Demand Argument For Ongoing Market Strength

Vancouver RE: Not As Expensive Provided You Don’t Think – “It’s clear that our perception of affordability has been coloured by living on a continent where housing is unusually inexpensive.”


The following excerpts from ‘Vancouver: Not as Expensive as You Think’, Jim Sutherland, Vancouver Magazine, 1 April 2013 [no joke -ed.]:

“The real estate market is soft, and it’s going to get softer. In the last year, average prices have dropped five percent or so, and they’ll sink some more, guaranteed. Less certainly, the market will…not plunge American-style but rather drift, sometimes downward, sometimes sideways, and perhaps not for very long.”

“… the Cassandras have gained the upper hand lately, and looking at some of the numbers it’s easy to see why. Sales running at only two-thirds the normal pace. Lots of dwelling completions due this year. Historical norms that are way out of whack. The unreasonable chunk of average income that buying a house here requires. Rents that stack up well against buying. Then again, there also exist other, less ominous numbers, some of which will be revealed here for the first time.” [What cheek. MOI has been well know in local RE discussion for years, thanks to the work of jesse (YVRHousing) and others. – ed.]…
The mystic metric is called months of inventory, which is the number of homes for sale divided by a given month’s sales. When the MOI is neutral-around six or seven-average prices change little. Below six, prices rise. And an MOI in double digits results in lower prices. The formula works so reliably, it’s bizarre. … Long before prices respond, anyone willing to make a simple calculation will know.”

“Of course, the mild price drops currently predicted by MOI look nothing like the armageddon forecast by those who believe we’re in a real estate bubble. Why not a U.S.-style meltdown here? The reasons are many (shortage of land, solid financial institutions, impressive livability, fiscal health, low mortgage rates…) even if far from categorical. A major safeguard is the provincial economy.” …
How can this be the case when so many sectors are in trouble? Film production, gaming, life sciences-so much for the halo industries that were going to make us a post-industrial poster child. But at the same time, a lot of industries are thriving. … (goes on to list lumber, mining, pipelines)…
TEDtalks, HootSuite, Plenty of Fish, and Lululemon sure sound like storytime selections at the daycare centre but actually mint money while helping to define the 21st century. Fortunes can be fickle out there on the cutting technical-entertainment-design edge, as a prior generation of civic champions like Angiotech, Electronic Arts, and Ballard Power Systems proves. Still, it’s an indication that at least some cultural creatives can afford to live here. So the local economy is almost certainly going to be just fine, which will help keep the real estate market from crashing, regardless of all those micro-metrics.”

“The monster that threatens to swamp us is declining immigration-and in Vancouver that’s the worst thing that could happen to property markets.”

“But why, one might reasonably ask, are immigrants to Vancouver so fixated on buying real estate? Isn’t it foolish to dive into such a pricey market? Reasons have to do with everything from cultural predilections to the perceived riskiness of other investments; from the apparent solidity and performance of our property market to the essential nature of being adrift in a foreign land. But beyond all that, the fundamental explanation is straightforward: especially to immigrants from Asia, real estate in Vancouver doesn’t seem expensive at all. In fact, it’s pretty cheap.”

“One [analysis], by the Serbia-based crowd-sourced website, comes up with house-to-income ratios very similar to Demographia’s but analyzes 362 of the world’s largest cities in more than 100 countries. On Numbeo, Vancouver sits not second or even 25th, but as the 125th least affordable city in the world. Our price-to-income ratio is about one-third that of Chinese cities such as Beijing, Shanghai, and Shenzhen and comparable to or cheaper than most other places where Chinese emigrants might reasonably expect to land. Potboiler settings like Moscow, London, Paris, and Tokyo are up to twice as expensive, while secondary but still global cities such as Sydney, Melbourne, Amsterdam, Stockholm, and Barcelona-the kind that join us on livability surveys-are tightly bunched around us in terms of affordability as well. Comparable American spots like Seattle, San Francisco, and San Diego are a little to a lot more affordable, but prices in the U.S. recently experienced a catastrophic plunge and are now bouncing back strongly, even as ours soften. It’s clear that our perception of affordability has been coloured by living on a continent where housing is unusually inexpensive.” […and why shouldn’t our housing be inexpensive? -ed.] …

“None of this means that housing affordability isn’t a problem in Vancouver. We know that mortgage payments are taking up too much of our income, that young people discouraged by the high cost of entry are leaving town, and that the situation isn’t sustainable. We also know that prices are currently falling and that the MOI the formula says they will drop some more. But unless we lose status as a global magnet or immigration is otherwise reined in, a real estate environment akin to that of other Canadian cities or currently depressed American ones is not a realizable dream.”

See below for one reader’s impressions of the article.
Personally, we won’t attempt a comprehensive analysis at this moment.
The author deserves credit for listing evidence that Vancouver RE is overextended and some of the negative effects of high RE prices. At the same time he also throws in many of the mythical reasons for ongoing relentless support.
One critique I would offer is that there is a strong possibility that the BC economy has only seemed relatively resilient because of the RE spec mania (and all its knock-on ‘positive’ multiplier effects), and thus using apparent BC economy resilience as a reason for ongoing future RE strength is a circular argument. We still believe that our economy will suffer badly when our RE inevitably reverts to mean.
Another thing: why shouldn’t our RE be as inexpensive as places such as the US?
– vreaa

Regular reader ‘space889’, alerted us all to the above article with the following [edited] comment at VREAA 23 March 2013 at 10:19 pm:

“OMG!! You have to profile this!!! I just flip through April 2013 issue of Vancouver Magzine’s cover story about Vancouver RE. It is simply unbelievable the extent to which they try to convince people that Vancouver RE is still cheap by global standards. Two things stuck out for me

“The first is a map of Vancouver, Burnaby and North Shores redraw with new neighborhood names like – Hanoi for most of Burnaby, Macau & Kew Gardens for UBC, Downtown Abby for Cambie from Broadway to 41st, and then North & South Yorkshire from 41st to Marine Drive, Queenstown and Gaslamp Quarter for North Van, and Brighton, Monte Carlo, Chamonix Mount Blanc for West Vancouver. Unbelievable!!”

“The second is they tried to dispel the myth that Demography Survey tries to peddle that Vancouver is expensive by world standards. They gave these reasons why you shouldn’t trust that survey. One the survey only included 7 countries and excluded most of the world including Asia, Africa and South America. Second the backers of the survey is an ultra conservative right wing think tank that opposes any idea to moderate car use. As a counter example, they used data from a Serbia-based crowd-source website that shows on a price to income ratio, Vancouver is cheap, cheap, cheap, especially compared against world class cities.”

“Further, in a comparison they claimed to show that a desirable house in 7 cities with higher price to income ratios – Phnom Penh, Rome, St. Peterburgs, Tel Aviv, London, Mexico City, and Melbroune – all require you to spend “the same for less square footage, less lawn but more history”. However their comparison really got my blood pressure up… They do not compare apples to apples… The ‘desirable house’ in Vancouver they picked is a 4 bed 2 bath house near King Ed Canada Line station and they describe it as TEARDOWN! Let’s just let it sink in for a minute. An example of a desirable home in Vancouver is a teardown on a busy main artery road!!”


Here are the definitely-not-apples-to-apples vanmag comparisons that got space889’s blood-pressure up:

“Around the World in Seven (sic) Homes
What does a desirable (but you know, not outrageous) house look like in cities with higher price-to-income ratios? In many cases, you’re spending the same for less square footage, a lot less lawn, and a lot more history.” 
[P:I ratios cited appear to be median city home price to median city income, not related to the specific properties. -ed.]









More Undisclosed RE Industry Insiders Publicized As Clients – “In 1995, Allan and Karin Hoegg were mortgage-free. But no more. Today their Vancouver home is a valuable source of income as they plan for full retirement.”

Allan and Karin Hoegg are pictured in their home in Vancouver, British Columbia on March 8, 2013 [image F.Post]

“In 1995, Allan and Karin Hoegg were mortgage-free. But no more: today their Vancouver home is a valuable source of income as they plan for full retirement.
Allan Hoegg says when their son and daughter-in-law wanted to buy a house, they took out a variable-rate mortgage so they could help them out. “We wanted to take advantage of the stability of the current rates.” To cover the mortgage payments, they rent out a suite in the home to students.
The couple also established a home line of credit that allows them to free up cash for investment purposes when they need it. “It gives you maximum flexibility and you can pay it any time you want without penalty,” he says. “It’s dead easy.”
Like many people planning their retirement, there’s a sentimental side to keeping their home, he says. But there are just as many practical reasons. In the Hoeggs’ case, selling to downsize would mean substantial commissions and moving costs. “Besides, real estate is a very good investment in Vancouver,” he says. “The longer we can stay here, the greater the possibility of no-tax capital gains.”

“For the most part, people want to stay in their homes, says Rob Regan-Pollock, senior mortgage consultant with Invis – Team Rob Regan-Pollock mortgage brokers in Vancouver. “The fact is they’re sitting on a big nest egg. So when they get near to retirement, they start asking how they can use that equity to help them in their retirement.”
There are plenty of options to consider, from applying for a line of credit or reverse mortgage to renting out your property to finance your monthly costs at another residence.
A line of credit is the most flexible option, Regan-Pollock says. “If for some reason you can’t meet your monthly expenses, a line of credit on your home can be a very good buffer. The interest rates are low — typically prime or prime plus one per cent, depending on the institution and your qualifications. It’s also quite sustainable, since your home will often appreciate in value more than the amount of debt being drawn down against it.”

– from ‘Home is where the retirement money is’, Denise Deveau, Financial Post, 13 Mar 2013

Comments from ‘Bo Xilai’ below the FP article, 27 Mar 2013:
“Denise, why didn’t you mention Allan Hoegg works for Invis – Team Rob Regan-Pollock mortgage brokers. Of course he’s going to use his house as an ATM… he’s just eating his own cooking. And at the same time you’re interviewing Rob Regan-Pollock as an “expert” in your piece.
More fake real estate stories using employees as plants.” …
“They used an employee of the “expert” interviewed without disclosure and, I would argue, in a deceitful manner to promote a strategy beneficial to the “expert’s” reputation and business interests.”

Allan Hoegg (top left) part of Team Rob Regan-Pollock mortgage brokers [image]

[thanks to ‘C’, for sending news of the article and ‘Bo Xilai’s comments to vreaa via e-mail, 27 Mar 2013]

This article is interesting..
1. for the undisclosed insider publicized as client
2. for the journalist’s ineptitude or, alternatively, collaboration
3. for the retirees’ dependence on RE holdings for retirement funds
4. for the fact that such borrowings were used to purchase more RE
5. for the need for tenants in their ex-SFH to cover mortgage payments
6. for the assumption that Vancouver RE is “a very good investment”
7. for the assumption that prices will continue to rise.
– vreaa

For those readers unfamiliar with the recent high profile case of industry insiders masquerading as condo buyers, please see:
CTV TV News Featured ‘Condo Buyers’ Actually Marketers Of Very Same Condos!, VREAA 13 Mar 2013

This article also headlined and discussed by Whisperer here:
‘Another media scandal from the real estate industry? News article appears to be contrived shill piece from PR company.’, 28 Mar 2013

“Vancouver is an urban resort whose value mostly resides in its real estate and not much else.”

“Many of these people are filthy rich and treat Vancouver as the gorgeous playground that it primarily is. These are global cosmocrats who make their money in the real business centres of the world – Hong Kong, London, New York – and then drop in here as a respite from the hurly-burly of their hectic lives. Some bought condos for their kids to stay in while they attended school here. In some cases, those children have moved on but the apartment remains.
In most cases, these wealthy purchasers are buying high-end units with golden views of the city, posh pied-à-terres that are out of reach for most of us. And they pay the requisite taxes to the city to maintain them. To which I say: What is the problem?”

“Are we going to start telling people that if you’re buying a condo in Vancouver you have to make sure you, or someone else, lives in it year-round? Are we going to say you can’t buy a condo as an investment property and sit on it for as long as you want before selling it for a profit?”

“I also find it amusing that we get so up in arms about “foreigners” buying up our real estate but think nothing of the thousands of Canadians who have poured into the United States in recent years to take advantage of the housing mess down there. Does anyone doubt that many of those same Canadians are buying those condos as investments in the hopes they’ll cash in once the market returns to normal? “

“You can’t say: “Oh, it’s different because we aren’t driving up real estate values in Phoenix or Palm Springs the way investors are apparently doing in Vancouver.” You either believe in a free market system or you don’t.”

“Whether we like to admit it or not, Vancouver is an urban resort whose value mostly resides in its real estate and not much else. And when that’s the case, you’re going to encounter the types of situations that we see now, with some buying condos as expensive business-class lounges and others purchasing them as an investment decision.
And I’m not sure there’s much you can do about it or would want to.”

– from ‘The ‘great unoccupied condo scandal’? Get over it’, Gary Mason, ‘The Globe and Mail’, 22 Mar 2013

A few ‘random’ thoughts; any reader suggestions of a comprehensive critique of the article will be appreciated:
1. How is it that local judgments of Vancouver have gone from the embarrassingly over-reaching (“Best Place On Earth”), to the other, nihilistic, extreme (“Value mostly resides in its real estate and not much else”), without touching on the intervening reality (a provincial city with a fair amount going for it).

2. There is the implication that we should accept that RE is primarily a financial instrument, rather than shelter. People buying and selling RE, always, it seems, at a profit: Foreigners sitting on Vanc RE and selling for a profit; Canadians buying US RE with plans to “cash in”.

3. Contains a common “you can’t handle the truth”-type taunt about free markets. But who is this aimed at? Who in Canada is currently taking a strong position that there really should be a completely ‘free-market’ in shelter? When did Canada last have a free market in RE? The Vancouver RE market is already far from a free market. It is a market where lending risk has been mispriced, partly by ’emergency’ low interest rates (where no need for RE price support has ever existed), partly by tax-payer backstopping of lenders (through the CMHC), and partly by loose mortgage lending guidelines (political expediency). Yes, speculative manias occur in free markets, but they would be far more self-limiting if people and institutions were all forced to play with their own money rather than perversely cheap debt. If Vancouver RE was genuinely a free market, it probably wouldn’t have gotten to its 2008 heights in the first place (let alone its 2011 highs), and, if it had, it certainly wouldn’t have been ‘bailed out’ at the very moment when it least needed it.

4. The article displays the kind of hyperbole that we expect in the vicinity of bubble tops, when everything can be interpreted to be so frothy and paradigm-shifting that it’s overwhelming to some observers. It’ll be interesting to see how all these dilemmas and debates settle down after some healthy price-to-fundamental-value reconciliation.
Vancouver will still have housing and city planning challenges, but they’ll look very different once the massive speculative demand disappears.

– vreaa

“So, if you want some Vancouver real estate should you buy now even if you pay a little more and get a little less than you had hoped? Probably. And should you sell your Vancouver real estate in the hope of buying it back later for less? Definitely, not.”

“Will the Vancouver housing market crash? Should I be waiting for a major drop in prices before buying a home in Vancouver? Should I sell my Vancouver home, rent for a while and then be able to buy an equivalent home for a lot less money? The answer to all of them is a resounding NO.” …
“Housing prices did crash in the 1980’s but a major difference is that at that time many homes had been bought by speculators on very small margins and interest rates soared well into double digit levels.
Now, very few homes are held on spec and any anticipated increase in interest rates is expected to be very modest. Mortgage rates may even go down. Canadian banks make a significant share of their profits from mortgage lending and it is a low risk part of their business since their prudent lending standards reduce the chance of default. Also, many mortgages are guaranteed by the Canadian Mortgage and Housing Corporation (CMHC).” …
“The cost of housing in Vancouver is not likely to change dramatically for the foreseeable future. It may soften a bit or it may even rise a bit.” …
“Prices are about 3 per cent lower than they were six months or a year ago, but are 4 per cent higher than they were three years ago. Prices for detached homes have been the softest, while apartments and townhouses have seen much less change, reflecting the trend to condos as a more affordable form of housing.” …
“There are two groups which would benefit from declining home prices. First are people in the Vancouver area who do not own real estate and whose income level does not enable them to afford the size and location of home to which they aspire. Many have adjusted by seeking a smaller home and/or one in a less costly neighbourhood. But some cannot afford even that.
A second group are the retirement age baby boomers across Canada who hope to spend their golden years in this small corner of Canada where you don’t have to shovel snow. They are frustrated because a home anywhere else in Canada buys much less home in and around Vancouver. They are also one of the main reasons why a housing crash will not occur. Any drop in prices will lead to retirees entering the Vancouver housing market, putting a floor under prices.
Those in the international community do not seem to mind our house price levels. When looked at in a global context, home prices in Vancouver are not unreasonable. Ask anyone from London or Hong Kong. And people from around the world see not only good value in our real estate, but also an open society, a pleasant climate and a stable political environment.
Finally, the majority of people in greater Vancouver already own real estate, benefit from current housing values and would be hurt by a crash or any serious drop. They do not want to see the value of their biggest asset decline. Home equity often forms a large part of retirement savings and people count on it in their financial planning.” …
“So, if you want some Vancouver real estate should you buy now even if you pay a little more and get a little less than you had hoped? Probably. And should you sell your Vancouver real estate in the hope of buying it back later for less? Definitely, not.”
– from ‘Little chance of correction in Vancouver real estate market’, Roslyn Kunin (‘Troy Media BC’s Business columnist; consulting economist’), Troy Media, 18 Mar 2013 [hat-tip ATP, who added, perceptively same old, same old“.]

If it really was a case of paying “a little more” and getting “a little less”, few would be discussing the matter. We fully expect that people will “pay a little more and get a little less” in the Vancouver RE market. Fact is they are paying a lot more and getting a lot less.
This “same old, same old” column archived here for the record. It will eventually be noteworthy that in March 2013 some people were still making ‘limitless demand’ arguments for ongoing endless price strength in the Vancouver RE market.
And it is remarkable that an economist would not give any thought to economic fundamentals in their discussion, and wouldn’t consider indicators such as price:rent or price:income ratios in their analysis.
– vreaa

“I explained that if the present rate of price appreciation continued that same house would be worth $92 million in 2051. He astounded me by responding, yes of course. That’s why he was buying a second house.”

“My idiot neighbour.
In his mind “real estate ALWAYS goes up”. When I tried to explain to him that Vancouver was in an unsustainable bubble situation and he said I was crazy. The example I used was a westside special that I know was purchased in 1969 for $38,900 and sold in 2010 for $1.89mm.
I explained that if the present rate of price appreciation continued that same house or 50×120 piece of dirt would be worth $91,800,000 (that is Ninety One Million Eight Hundred Thousand dollars) in 2051 and asked him if he thought that would be the case.
He astounded me by not even blinking and responding, yes of course. That’s why he was buying a second house. At that point I made the decision to leave Canada.”

Bob at 12 Mar 2013 9:25pm

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

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.

From Prices Soaring Towards The ‘Stratosphere’, To The Limits Of A ‘High-Water Mark’ – “Could these maps be a snapshot of the real estate market’s high-water mark?”

“For the last three years, Andy Yan, a researcher and urban planner with Bing Thom Architects, has been mapping the assessed values of single-family residences in the city of Vancouver.
You see his latest efforts here today. …
The question is, could these maps of Yan’s be a snapshot of the real estate market’s high-water mark?”

– from ‘Pete McMartin: The high-water mark of Vancouver real estate?’, Pete McMartin, Vancouver Sun, 2 Mar 2013

Perhaps of interest because this is the same Vancouver Sun columnist who just one year ago wrote:

“Vancouver, of course, will always be the centre of things in the Metro area. It has history and critical mass on its side. And by its very nature, it is going to attract people who want to come here and live in the city.
… the market will propel any kind of property here into the stratosphere.”

– from ‘Short commutes and easy access to an Ethiopian restaurant are not the natural order of things’, Peter McMartin, Vancouver Sun, 22 Mar 2012, as headlined at VREAA 23 Mar 2012

“Many people believe that equity and house prices will be dragged down by Baby Boomers as they reduce purchases and sell holdings during their retirement years. But this forecast’s predictive power could disappoint.”

“Many people believe that equity and house prices will be dragged down by Baby Boomers as they reduce purchases and sell holdings during their retirement years. But this forecast is based on just one of the many factors that impact equity and house prices, so its predictive power could disappoint. Indeed, the track record of previous demographic-based predictions suggests such an outcome is likely. A great deal of scholarly research has established the significance of the other factors.”
– from ‘Don’t blame Boomers if housing goes bust’, Larry MacDonald, Globe and Mail, 25 Jan 2013

Retiring boomers will likely weigh heavily on Vancouver RE.
Wannabe retirees are overdependent on their RE holdings for their retirement.
– vreaa

In a related vein:

“Canada’s financial regulator has “serious concern” about the viability of a rising number of private pension plans, a sign that plans are struggling to meet obligations at a time of low interest rates and weak investment returns.The Office of the Superintendent of Financial Institutions supervises roughly 1,400 private pension plans covering more than 637,000 employees in federally regulated businesses such as banking, airlines and telecom. When pension plans give rise to “serious concern,” generally because of their financial condition, OSFI places them on a watch list to be actively monitored.”
Regulator puts more private pension plans on watch list, Tara Perkins, The Globe and Mail, 7 Jan 2013.

Universities Agree: No Bubble – “There never was a housing bubble. So it hasn’t burst, because it never existed.”

“There are articles saying we’re going to have the same kind of crash we had in the United States, but that’s not going to happen,” says Jane Londerville, a real estate and housing adviser at the University of Guelph.
James McKellar, academic director of the Real Property Program at York University’s Schulich School of Business, is even more blunt. “First of all, there never was a housing bubble. So it hasn’t burst, because it never existed.”

– from ‘No bubble, no trouble’, David Hodges, MoneySense, 16 Jan 2013

Reminiscent of:
“You can’t burst a bubble that wasn’t there.” – Tsur Somerville, Director of the UBC Centre for Urban Economics, Sauder School of Business, The Province, 14 Sep 2012

For a collection of related quotes from various market participants, see:
‘What Bubble?’

Royal Bank, CIBC, BMO, CTV, REBGV, Michael Levy, Royal LePage, Global TV – “Housing Crash Fears Unwarranted”; “There is no property bubble. Period.”

vanc re keep calm

In contrast to the recent MacLean’s ‘2013 Crash’ article, we now have a surging surfeit of reassuring commentary from other sources:

“Canada’s real estate market remains “relatively solid” and should experience a “soft landing” despite the current slowdown and fears of overbuilding in the condominium segment, the country’s leading bankers said Tuesday. …
“Our expectation is that the overall real estate market in Canada is still relatively solid,” Royal Bank CEO Gord Nixon said. …
“Pure math says that a soft landing, if it means you go back historic levels of activity, that we’re going to have some softness in our economy,” Gerry McCaughey of CIBC said.
“… That softness doesn’t necessarily come out in mortgage defaults, it comes out in employment softness and consequential unsecured consumer lending softness.” …
“In fact, house prices may just stagnate. Condominium prices may just stagnate for a couple of years. And that’s the definition of a soft landing,” Bank of Montreal CEO Bill Downe said.”

– from ‘Bankers expect soft landing for Canadian housing market despite slowdown’, Canadian Press care of CTV News, 8 Jan 2013 [hat-tip Dr. Bubble]

“I just watched ctv vancouver news. they did a 5 minute piece on real estate here. they interviewed two realtors and one guy from real estate board. they all said prices of sfh in vancouver were down 1 % for 2012 and say prices won’t fall more than 3% in 2013 as sellers don’t need to sell so they will just pull properties and wait…so buyers who are expecting big drops will not ever see that. the real estate board guy said there is nothing in the cards that is showing sellers will have to sell so prices will stay high. then the host of the news said, well, there you have it… no bubble popping here and went onto next story.”
– vancouverbubbleman at VREAA 8 Jan 2013 5:49pm

Michael Levy, financial analyst: “There is no property bubble. Period. We’ve had prices come up because of demand, both domestic and from off-shore, and demand swelled, and particularly here in Vancouver, a most desirable place to own property, you want to live here or invest here.” …
Announcer: “Prices seem to be holding, as the tug-of-war between buyers and sellers continues.”

– from ‘Experts Say No Real Estate Bubble In Vancouver’, Global TV News, 8 Jan 2013 [video archived by Greenhorn; hat-tip YVRhousinganalyst]
[“There is no property bubble. Period.” – this latter-day pronouncement added to “What Bubble?” sidebar]

“Royal LePage forecasts that the price of an average Canadian home will rise by a modest 1% in 2013.
Canadian home prices will see a “very modest” appreciation over the next two years, as economies in both the U.S. and Canada gradually improve and family incomes climb slowly, the brokerage said.
“More home buyers moved to the sidelines as 2012 progressed, as economic uncertainty abroad and reduced affordability became a drag on the market, however house prices proved resilient,” said Phil Soper, president and chief executive of Royal LePage.

– from ‘Housing-Crash Fears for 2013 Unwarranted, Forecasters Say’, WSJ, 8 Jan 2013

“I still say no crash in Vancouver in regards to single family homes.” [We Disagree]

“I still say no crash in Vancouver in regards to single family homes.
Sure real estate sales are slow – it’s December!
Spring will bring a flurry of sales in single family homes -don’t forget that “Real Estate is emotional”
As soon as the price dips a bit (maybe 10-20%) and there are lots of listings – people will flock to the market.
Vancouver is like the San Francisco of Canada. Prices never dipped there more than 20% from the peak and have rebounded to almost peak values . Check Zillow if you don’t believe me.
Vancouver has the mildest climate of any major city in Canada and is the most attractive major city in Canada.
Definitely no “crash” in Vancouver in regards to single family homes.”

western observer at 11 Dec 2012 12:26am

Keep chanting “no crash in SFHs” and perhaps that will have some kind of buoyant effect.
We disagree with this ‘argument’, which is little more than an expression of hope. It also sounds like the seeking for reassurance.
SFHs are as overvalued as any other Vancouver property type, and we fully expect them to plunge in price to pre-spec-mania levels.
– vreaa

Premature Bottom Call – “Vancouver’s housing sector may have hit its bottom with an improvement in home sales seen in October”

“Vancouver, British Columbia’s housing sector may have hit its bottom with an improvement in home sales seen in October”
Marc Pinsonneault, National Bank, Wall Street Journal, 21 Nov 2012

Added to our ‘Premature Calls Of Bottom’ sidebar collection. A steady stream should follow, over the next few years. – vreaa

[Thanks to Ben Rabidoux for pointing out this gem.
Ben is a national RE analyst whose posts at his blog ‘The Economic Analyst’ have been invaluable reading for those interested in Canada’s RE market. He is more recently working with M Hanson Advisors, ‘a market research firm catering to professional, institutional investors’. Ben tells me he is putting on a seminar regarding the state of the Vancouver RE market, next Wednesday, 28 November 2012, here in Vancouver. Details at

Detached From Reality – “My cousin is a Mortgage broker in White Rock who bought a condo 2 years ago for 265K that she has now listed for 245K with no takers. But she’s sure that her 2 detached houses won’t suffer the same fate!”

“My cousin is a Mortgage broker in White Rock who claims that detached homes are motoring ahead in WR but agrees that Condo prices are down. She bought a condo 2 years ago for 265 that she has listed for 245 with no takers. But she is sure that her 2 detached houses won’t suffer the same fate! Detachment from reality or what!”
Signs of the End at VREAA 3 Sep 2012 6:39pm

The ‘Detached-Is-Different-From-Attached Premise’, commonly used to argue for never-ending strength for detached prices, often stridently expressed on these and other pages, it is, however, false.
By the trough, prices of all property types will have dropped by roughly similar percentages.
– vreaa

CIBC – “Demographic forces will be as supportive to real estate markets in the coming decade as they were in the past decade.”

“Demographic forces will be as supportive to real estate markets in the coming decade as they were in the past decade,” CIBC economist Benjamin Tal says in a report. …
“The growth in the number of Canadians in the age group 25-34, which accounts for the vast majority of first-time buyers, is projected to be much stronger. In other words, the group that is most likely to buy a house will grow faster in the coming decade,” Tal says. …
“The housing correction in the 1990s came with a softening in demographically-based housing demand, CIBC says, which dropped from an average annual rate of more than 2 percent in the late-1980s to 0.2 percent during the 1990s.” …
“Assuming that any upcoming adjustment in housing market activity will occur in a non-recessionary environment, demand for housing in the coming decade should be more than four times stronger than it was during the dreary market of the 1990s,” Tal says.
An increase in immigration is also expected to boost the housing market, according to CIBC, as home ownership rates for immigrants ten years after they have arrived are higher than among those born in Canada.
“So, while housing market activity is projected to soften in the near-term, the good news is that any adjustment will not be aggravated by negative demographic forces,” Tal says. “In fact, at least for the next decade, demographic forces will be strong enough to mitigate the damage and probably shorten the duration of the upcoming market adjustment.”

– from ‘Housing crash fears overblown: CIBC’,, 23 Aug 2012

Real demand for housing supports fundamental-derived prices, not speculative-derived prices.
Perhaps the weakness in the Canadian market in the 90’s came from waning demographic demand.
The weakness now commencing is the result of a cresting speculative mania. Fundamental-derived price supports (based on rent yields or local incomes) only come in at prices far below current market prices. A slight increase in demand due to demographic factors will not substantially change the reconciliation that is going to be occurring.
– vreaa

It’s Where Nature Is – “We take a hit; it’s more expensive for us to live in Vancouver. We choose to live here because it’s where our family and friends are, and where nature is.”

“We take a hit; it’s more expensive for us to live in Vancouver. We choose to live here because it’s where our family and friends are and where nature is,” says one Vancouverite.
– from ‘Thousands of people leaving BC for other provinces’,, 16 Aug 2012

The bubble RE has been fuelled by preposterous claims and beliefs about our fine city. People had to tell themselves ridiculous stories to justify overextending themselves into overvalued RE.
“Best Place On Earth” was one.
“It’s Where Nature Is” appears to be another.
– vreaa

A Riddle, Wrapped in a Mystery, Inside an Enigma

“In fact, most detached homes in my neighbourhood that had stagnated for two months are now sold, but data not posted.
Is real estate board deliberately holding these sales back so it produces data that makes the market appear in “buyers market” territory?”

eyesthebye at RETalks 11 Aug 2012 7:33am

Hmmm. So, by this argument: Things are actually good but the realtors are conspiring to make them look bad in order to make them even better?
Let’s rather keep things simple: The market looks weak because it is weak.
– vreaa

“I met a realtor today at an open house. He was totally convinced that this was a quite summer lull and that there would be a feeding frenzy come September.”

“I met a realtor today at an open house. He was totally convinced that this was a quite summer lull and that there would be a feeding frenzy come September. He also mentioned that other realtors were very worried that this is the end of the good times, but not him. Essentially he was saying that we should buy now because prices will be shooting up again. I told him good luck with that.”
Loon at VCI 4 Aug 2012 6:47pm

“I never thought I would actually hear the words spoken, but I did: “It’s different here!” and, “EVERYONE wants to live here; that’s why prices will never go down.”

“I never thought I would actually hear the words spoken flat out. But, I did. “It’s different here!” and, “EVERYONE wants to live here; that’s why prices will never go down.”
This was yesterday afternoon at a Port Moody BBQ. People in their late 60′s-early 70′s.
So, the meme is still alive and kicking. (I think it’ll take quite a while time to steer public perceptions in the other direction).”

Boombust at VCI 29 Jul 2012 9:42pm

‘High-Volume Local Vancouver Realtor’ – “The appraisers told me they just don’t see the value in a lot of properties and want to make sure they do not over-value in view of an anticipated market correction.”

“As you are no doubt aware there has been a huge slowing in the market and predictions are that there will be a correction of approximately 25% on detached properties and up to 30% on condos. The other prediction is that we will not see any sort of recovery for another 2 years. How much of the above is true only time will tell. One thing I do know is that The Federal government has not helped by a) cancelling nearly 300,000 investor applicants who were already 2 years into their application process and b) Making it much harder to get a mortgage without proof of income and increasing the ratio of income to borrowing. This has directly affected the numbers of people looking to buy from outside our borders.
The other problem I have personally experienced is purchasers that bought properties I had listed have hit HUGE problems getting a mortgage, as banks would not appraise the property at what they paid for it even though it was sold on the MLS and in some cases at multiple offers! The appraisers told me they just don’t see the value in a lot of properties and want to make sure they do not over-value in view again of an anticipated market correction.
Good quality properties that are priced well are still selling and there have been some big sales, as you will see from my attached stats sheet. If you don’t have to sell then don’t, if you do then make sure you price it right, choose a Realtor who will promote it right and last but not least prepare now with photos, floor plans etc., so you can come to market as soon as there is a change – even if it is nominal.”

– this letter from a “high-volume local Vancouver realtor” posted by Simeon Garratt at his website 23 July 2012, in a post entitled ‘IS THE CANADIAN GOVERNMENT KILLING VANCOUVER REAL ESTATE?’.
Simeon Garratt himself adds:
“I think that the Federal Government is directly curbing the growth in the real estate sector. Canada -Vancouver specifically- has been on the ‘hot spot’ radar of people from all over the globe. We have been ranked the best place to live, the safest place to live and have an economy that is second to none. A huge amount of our economy’s growth is based on our need to grow as a population. Currently, Canada’s population is dwindling and without the support of a strong immigration system, it will get worse.
I believe that if we focus on creating good quality jobs and giving young people quality education, we will attract higher salaries, bigger companies and housing prices will become less of a factor. It is common in most metropolis cities around the world to commute an hour to work. For some reason, we think we are the exception.”

1. The appraisers are to be commended for their caution: it is currently very hard to reconcile ‘price’ and ‘value’ for local properties.
2. We do not foresee local economic strength so powerful and so sustained that it raises local incomes such that RE prices make sense by that fundamental measure. Incomes would have to double or more for that to happen. Can you imagine that happening without mortgage rates rising?
3. We don’t know what Simeon Garratt means when he says “(we) have an economy that is second to none”, or “a huge amount of our economy’s growth is based on our need to grow as a population.” We see lots of signs that our economy is over-dependent on: the RE industry, industries directly related to RE, and the other temporary knock-on wealth effects of a speculative mania in RE.
– vreaa

600,000 square feet is to be dedicated to office space packed in around Rogers Arena and BC Place – “We have our work cut out for us to fill that space.”

“The city’s planning department, concerned about the loss of key office sites on Vancouver’s small downtown peninsula to the condo boom of the 1990s and 2000s, decided several years ago that the last bit of undeveloped former industrial land that was the site of Expo 86 – Northeast False Creek – should include 1.8 million square feet of commercial space.
Of that, 600,000 is to be dedicated to office or, as the planners call it, “job space,” packed in around Rogers Arena, the home of the Vancouver Canucks hockey team, and BC Place, the government-owned stadium where the B.C. Lions play football and Whitecaps play soccer.
That 600,000 square feet is the equivalent of a whole Park Place tower in Vancouver’s business district or the new PricewaterhouseCoopers tower on York Street in Toronto.
Now, landowners in that area are trying to figure out who they’ll get as tenants.
“We have our work cut out for us to fill that space,” says David Negrin, president of Aquilini Development, one division of the Aquilini family empire that includes the Canucks, Rogers Arena and a host of other businesses and development projects. “It’s just a tough location because it’s on the edge of the [central business district].”

– from ‘Canucks owners gamble on new office district in Vancouver’, Globe and Mail, 30 Jul 2012

“We will buy a house in Spain in 2014. We would be happy to pay $150K Canadian for a detatched Villa with Ocean views and a pool. I have to disagree with the predictions for a housing crash here in Vancouver.”

“I’m waiting to buy a house in Spain. A country house 5 to 20 K away from the drab concrete settings of the coast. I used to live in Gibraltar in the mid 80s when the Costa Del Sol was pretty much sand dunes and an acre of waterfront was $40,000.
We will buy in 2014 which is when we would be happy to pay $150K Canadian for a detatched Villa with Ocean views and a pool. I have no idea if the market would be at the bottom then but that is one hell of a deal and we would be very happy to purchase at that price. We have duel Citizenship .
I have to disagree with the comments about a housing crash here in Vancouver.
It’s pretty solid on all fronts. There may be a level or even a 10% correction but there will be no crash.
I used to think there would be a crash (since 2004) but after much thought I became aware that as crappy as Vancouver is during the winter etc its still the warmest and most interesting place in the entire country to live. Our banking system is tight. Commodities + resources are in abundance.
Canada is rocking on the business front as is evident in the real estate prices across the country. If you have cash its a very safe country to bring your treasure to.
It’s just not comparable to Spains economic woes and the parallel is stretching it a bit.”

– comment by ‘a different fred’* at VREAA 29 Jul 2012 3:50pm [*’fred’ is not the same fred who posts many trollish comments. ed.]

Vancouver; Spain – “It was certain, Andy explained, that real estate prices would not decline. The demand was insatiable at almost any price.”

“I remember in 2003 my mother had a New Year’s Eve party at our family home in Málaga, in southern Spain, at which over 80 people sat for dinner, including most of my old friends still around from high school days. That night I had one of those epiphanies (as you often do on New Year’s Eve, I guess) about the real estate market when I suddenly realized that nearly every one at the party was involved in one way or the other in real estate. Most of the people there (including my Persian sister-in-law) were real estate developers, real estate agents, real estate lawyers, architects, or owners of building and construction companies. All of them lived off (and had prospered mightily from) the real estate boom in southern Spain.

But this cannot be, I thought in my naiveté. If the only industry around is real estate, then we must be living through a real estate bubble of enormous proportions.

Later that night I spoke to one of my old high-school friends, Andy, who was at the time a prosperous real estate agent with houses in Marbella (purchased on borrowed money, naturally), a Mercedes, and all the trappings that accrue to an immensely charming and self-confident real estate agent during a real estate boom. In our conversations, and ones that took place subsequently over the next few years, I warned him that the property market in the south of Spain looked out of control, and it would be a good idea from him to diversify his savings out of real estate.

Same old same old

Of course Andy didn’t. He explained to me that what we were seeing in southern Spain was not a bubble because there were very strong reasons to believe that real estate prices were undervalued and were going to rise a lot more. Europe, he told me, is aging rapidly, and old people, as everyone knows, like nothing better than to retire in some warm and sunny place, preferably on the beach. With an infinite supply of European old people and limited European beachfront property, mostly in Spain, Italy, and Greece, where in addition you had great food, warm-hearted people, and plenty of immigrants to keep the prices of services (and servants) down, it was certain, Andy explained, that real estate prices would not decline. The demand was insatiable at almost any price.

This seemed like a perfectly reasonable argument on the face of it, and it was widely proposed to justify ever-soaring Spanish real estate prices for many years, not just on the Spanish coast but also, perhaps a little bizarrely, in every nook and cranny of the country, including some pretty gray and inaccessible building projects outside cold, northern industrial cities.

The weakness in the argument, of course, was that although there might have been near-infinite demand, this could not justify near-infinite increases in prices, especially since the demand itself was likely to be highly pro-cyclical because the Spanish economy had itself become dependent on real estate development.”

– from ‘The unacceptable behaviour of the market’, by Michael Pettis, at, 17 Jul 2012

“Same old same old”, indeed.
Change the date, and a few words, and Vancouver fits like a glove.
– vreaa

Bear Wins Bet – “Earlier in the year a bull at my work asked me for my prediction for house prices for end of 2012, to which I said 10%-off and he immediately bet me $100 so I took it.”

“Earlier in the year I mentioned a bull at my work, who knows about my bearish views asked my prediction for house prices for end of the year, to which I said 10% and he immediately bet me 100 dollars so I took it.
He came up to me fri and said looks like I might owe you 100, so we kind of got into theories about what is causing the recent declines and he believes it solely has to do with the global economic troubles, namely Europe.
He believes the uncertainty is causing people to slow down buying.
I go on to explain the exact same thing I told him a few months ago, locals over extending themselves and local incomes do not support prices and the recent mortgage rules magnify how sensitive locals economic health are.
But no he still believes what he believes and says I focus only on facts and not the “fuzzy things” his words, such as everyone wants to live here, no land, growing demand etc.

“(When he suggested the bet) he got so frustrated debating me that he basically said fine whats your prediction, I said 10%(which I thought was conservative) and he was the one who suggested we bet $100.
He was so sure of himself I think he thought I would have backed down after money was on the table and all the people listening to our conversation.
At the times he had a little group of bulls around him and they all thought I was crazy. Most of those bulls are in the bear camp now. Although I don’t believe they really know the extent of what is to come, they just parrot what they hear in the MSM currently and right now that is bearish news.
This is a smart guy too, and had sold in 08. I think he felt he lost out and never should have sold then because prices dropped but of course shot back up to new highs so he now believes Van RE is bulletproof.”

– 4SlicesofCheese at VREAA 8 Jul 2012 at 1:15am and 9:13am

Bets can be fun, and socially important (they often serve the purpose of modern day duels!), but, as we all know, that’s not where the real ‘betting’ is happening.
– vreaa

British Author – “I’ve owned my current house, a six-bedroom detached property, for 25 years. I paid £47,000 and it’s now worth around £750,000. Buying property has always been my best form of investment.”

“I wouldn’t recommend anyone take out a pension; much better to invest in bricks and mortar.”
“Yes. I’ve owned my current house, a six-bedroom detached property, for 25 years. I paid £47,000 and it’s now worth around £750,000. Buying property has always been my best form of investment. After doing them up, often a member of my family would take them on or I’d sell for a good profit and reinvest in a new place.”
“Yes, but I’ve got rid of them all and wouldn’t buy again. Years ago, I knew there would be a financial crash. People who didn’t have money were being lent loads, getting 100pc mortgages with no real hope of paying anything back; it was a ticking time bomb. That’s when I decided to get rid of all my investments – mostly shares – and turn them into cash before investing in property.”
– from ‘Adrian Mole author Sue Townsend talks money’, Richard Webber, The Telegraph, 1 Jul 2012

The global bubble in RE will only be over when people have been taught to doubt recently ingrained ‘truisms’ about ‘bricks and mortar’.
– vreaa

Don Campbell, ‘Real Estate Expert and Educator’ – “We can’t ride that emotional roller coaster thinking that it’s about making money.”

Don Campbell: “We’re probably 12-15% above what the underlying economic fundamentals should say the prices are in Vancouver… so it’s not a bubble, but it is overpriced.”

Don Campbell: “Go through Kits, go through the Westend, you start to see a lot more properties up for sale. It’s a psychological thing… people are thinking ‘oh my goodness I have to get out now’… even though they probably bought it for 300, it went up to 600, it’s probably now 550.. they’ve still made their 300 grand… but as we’ve talked before there’s fear and greed, fear and greed, the greed gland goes (inaudible).. you haven’t lost any money, you’re still living in a place.. The important thing is that in Canada, owning your own home is the only.. the only tax shelter that we have left.”

Don Campbell: “I’ve been doing this for 20 years, the values go up, and the values go down… we can’t ride that emotional roller coaster thinking that it’s about making money.”

Interviewer: “Right, so, get into the market if you can, but, what about the interest rates?”
Don Campbell: “Interest rates will not be moving. .. Love them or hate them, what they did with these changes was brilliant. .. They put a 1% targeted interest rate [hike] on the housing markets.”

Interviewer: “Now, it is ridiculously expensive to get into the market if you’re looking to buy a detached home..”
Don Campbell: “Mmmhmm [agreement]”
Announcer: “..anywhere in…”
Don Campbell: “…anywhere!..”
Announcer: “…except in the States! … You get way more for your money than in Vancouver… So, are we ever going to see the prices come back to reflect reality here?”
Don Campbell: “Yes, we’re starting to see a slowdown in the market, we’re going to see a bunch of listings, but you’ve got to realize that what happened in the Phoenixes and the Palm Deserts isn’t going to happen here.. down there it was.. really.. it was a bubble.. a pure and clear bubble.. here it’s not.. it’s just the pendulum has swung towards overvalued… it’s not to the point of going all the way around… so, we’ll see a slowdown, and we are witnessing that, but we will not see a slowdown where job creation is occurring, the Dawson Creeks, the Albertas, the southern Saskatchewans, there’s none of these rules there, there’s nothings going to happen there other than pressure up..”

Don Campbell, ‘Real Estate Expert and Educator’, on Global TV, 30 Jun 2012. Archived on youtube by Campbell’s own ‘Real Estate Investment Network’. [hat-tip Ben Rabidoux and jesse]


1. We are not “12-15% above what the underlying economic fundamentals should say the prices are in Vancouver”. It’d be interesting to see on which numbers Campbell is basing that assertion.
We are actually more close to being greater than 100% overvalued; 100% above what underlying economic fundamentals such as rents and incomes say the prices should be in Vancouver. This means that we’d need a price drop of 50% or more to attain fair value. If that sounds preposterous to any reader, remember that the publication ‘The Economist’ calculates that housing prices for the whole of Canada are 75% overvalued as calculated by rents (perhaps the most valid fundamental).

2. No, the Kits owner in Campbell’s example has not “still made their 300 grand”. Their 300K paper profit has dropped to 250K, and is threatening to fall further, quite possibly to zero ‘grand’ (if prices were to drop 50%).

3. Homes are not “the only tax shelter we have left”. TFSA’s are another tax shelter, admittedly smaller and far less broadly used.

4. It is to the interviewer’s credit that she asserts that Vancouver homes are “ridiculously expensive” and that prices do not “reflect reality”. Campbell does not convincingly respond to these challenges, however. His last quoted statement above, for instance, shows him taking a question about Vancouver RE overvaluation and answering it with reassurances that job creation in Dawson Creek and Saskatchewan will support those markets. Huh?

5. Campbell is on record repeatedly reassuring market participants that there is no bubble, but it’s not clear he even knows how to define a bubble. In this interview he seems to express the fuzzy opinion that it’s “(when the pendulum) is to the point of going all the way round”.

6. Imagine the thousands of homeowners heavily dependent on the value of their RE holdings for their future financial health. As those holdings begin to plummet in price, tell them not to worry, that “it’s not about making money”. Take note of the responses you receive.

– vreaa

Prior posts featuring Don Campbell:

BNN Don Campbell Interview Transcript – “The Apocalypse Is Not Coming” – ‘Plateau’ As Worse Case Scenario
[VREAA 30 Oct 2010]

Don R. Campbell, President of REIN, In His Own Words – “Bubble, bubble boil and trouble! I just keep hearing this whole thing about bubbles this and bubbles that… It’s not a bubble. It is a very readable cycle.”
[VREAA 17 Nov 2011]


In comments on this and another thread, Ben Rabidoux added:
“I am SHOCKED that no one caught the unbelievable error in Don’s discussion of the new mortgage rule changes. Apparently, according to this “real estate expert” you used to be able to avoid CMHC insurance by putting 15% down and now that has changed to 20%. What an unbelievable oversight!!!!! How is that excusable for someone who claims to be an expert? +80% LTV mortgages have required CMHC insurance for years!” …
“Oh and as a kicker, after I pointed the mistake out to Don via twitter, he removed the blog entry on his site that contained this video and then messaged me asking me to be more discreet when I correct him in the future by direct messaging him instead. I guess he can’t afford to have the REIN flock lose faith in their infallible leader.”

Giant 2000 Condo Arch Proposal For False Creek North

“James K. M. Cheng Architects Inc. submitted a rezoning application to the City of Vancouver that outlines a plan for a multi-use site at 750 Pacific Blvd., known commonly as the Plaza of Nations. Commercial use would include small-scale retail, hotel, office, restaurants and cafes, while community use would include a sports-science centre, a daycare and an ice rink that could serve as a part-time practice arena for the Canucks.
The proposed pièce de résistance is a residential structure, with between 1,700 and 2,000 units, that takes the form of a giant arch. The development would provide a mix of housing types and include private ownership and purpose-built rentals for residents of various ages and income levels, according to the application.
James Cheng said the arch-shaped building will serve as a window through to BC Place. “Vancouver has been criticized for having so many towers, and everything looking the same,” he said. “What we tried to do is create an urban piece that is strong enough to stand up to the stadium, but still have a relationship to it.” —
“The developments in that section of our city, which is our largest and last big waterfront property, should be a special place,” said Councillor Raymond Louie. “For a long time, it sat empty. This is an opportunity for us to develop it in a sustainable fashion where it is able to serve the people who will eventually live there, but the wider community as well.”
– from ‘Proposed complex would pump life into dead zone’, G&M 4 Jul 2012 [hat-tip Joe]

A tad reminiscent of Paris’ ‘Grande Arche de la Defense’ (above), only even more poorly proportioned and even less pleasing on the eye.
Bad sci-fi design. (“Could I get my star-fighter through that?”)
– vreaa

Seller Psychology In A Falling Market – “While the market may have sags, don’t hold your breath for the $600K plus houses to return to $200K ever again. It simply won’t happen, because nobody will sell for that kind of loss.” [We Disagree]

From discussion at (25 Jun 2012):

ionpulse: “Housing in Vancouver is overvalued (bubble!) so the value of homes will ‘diminish’, affordable housing or not.”

mike_sol: “That’s been said before, and it will be said again; but while the market may have sags, don’t hold your breath for the $600K plus houses to return to $200K ever again. It simply won’t happen, because nobody will sell for that kind of loss.”

incognito_crocoduck: “We’re seeing it in a micro fashion right now. The factors that should be causing a sag in the market are all in play, but that sag is being delayed and perhaps even lessened because people are simply refusing to lower their prices below what they think they should get.
People are perfectly willing to sit on the market for up to a year rather than go below their preferred price range. Eventually most of them find a buyer and prices stay relatively high – the market just moves slow as molasses.
The economy isn’t in the state where many people are truly desperate to sell, and unless that changes dramatically prices can only go down so much.”

We disagree with the last two commenters.
For one thing, 600K houses may very well become 200K houses again when the bubble completely unwinds.
And for another, we don’t by any means need a weakening economy for the speculative mania in housing to collapse (even though we are indeed at risk of an economic ‘squeeze’ by virtue of local and international factors).
Mostly, however, we disagree with these posters regarding the psychology of sellers in a falling market.
Many people seem to believe that, in a stagnant or falling market, sellers will simply take their homes off the market, or simply ‘sit’; even prospective sellers themselves seem to believe that’s what they’ll do. But they are speaking from their current perspective, where they have been conditioned over years of Vancouver RE price increases that homes are ‘worth’ ‘x’, and are soon to be worth ‘x + y’, and thus they can’t possibly imagine ‘giving them away’ for less, or ‘selling for a loss’, or even the idea of houses selling for the same prices they fetched a few short years ago.
Further, the very brief 2008-2009 drop conditioned market participants to believe that dips would be short-lived; that the market is ‘bullet-proof’.
None of these beliefs takes into account the market psychology that will exist when price drops clearly declare themselves. All it takes is for a handful of necessary sales at lower prices to establish new, lower price levels that are modestly but definitely below the levels at peak. Once prices show that they are dropping, a percentage of potential sellers will stir. Those who own multiple properties with leverage, those who are holding ‘flips’, those who had planned to sell to fund imminent retirement, those who had been waiting to ‘pull the trigger at the top’, and other subgroups, will come to market.
Greed for higher prices will be replaced by fear of lower ones.
There will then exist a situation where sellers are competing with other sellers for a smaller pool of buyers.
Anybody who has been a participant in a market which is unwinding from speculative heights knows the psychology that prevails as prices fall. The prevailing sentiment is very, very different from that on the way up and at the top. Seller confidence and patience becomes doubt and impatience, and then urgency.
We never expect the Vancouver RE market to move as rapidly as markets for stocks or commodities, RE always moves slower, but the factors at play in the unwinding of different types of speculative mania are the same, and the price charts for manias in all markets look remarkably similar after the fact.
– vreaa

“I know a young couple who bought a 400K condo assignment in Vancouver. In discussion they generally deflected, avoided or otherwise tried to bury their heads in the sand. If it wasn’t so sad, it would have been amusing. However, I came to observe a few things…”

“I know a young couple who bought a condo assignment (for a 400k condo in Vancouver). The condo will be finished sometime next year. They are both moving to rural Alberta for a year or two to earn a lot more money to pay off the wife’s student loans for dentist school and the mortgage. They leased another car (SUV) recently so they can drive there. They are not going to rent out the condo when it’s finished because they wanted a new place. They have also extracted all their RRSPs (with maybe help from parents) for a down payment.

In the discussion with the husband and family that followed, (as expected) they generally deflected, avoided or otherwise tried to bury their heads in the sand. If it wasn’t so sad, it would have been amusing. However, I came to observe a few things.

1) They have no idea how the market works.

When I told them that house prices may be down, and listings were up, the responses were:

“I don’t care about house prices, of course those are going down, but condos are still going up or holding their value.” Huh??

“The reason there are so many listings are that people are just seeing what they can get for their houses, they’re not trying to sell.” Uhh? Apparently it’s free to list. (Both in time and money.)

2) They have no clear idea how debt works.

The counter to “when prices correct to 50%..”, was that at that point, it would just be cheaper to “upgrade”. I was shocked. In a debt-equity relationship, when “equity” goes down, you first lose value in your equity, not in your debt. In fact, you never “lose” your debt. I used 5% down as an example, and he didn’t realize that at the end of 5 years, unless everything they both earn are paying for the mortgage, that a 50% drop would mean that they’re probably 30% underwater. They will have NO equity to “upgrade” if they can even renew their mortgage. At this point, he disregarded that and went back to his example of how if his condo was worth 200k, he could still…

3) They use select anecdotal evidence only, with no statistics or any other information to back their opinions.

Sometimes these pieces contradict themselves — I don’t see how they could not see it.

“My friend works at the RBC and approves of mortgages. There’s a lot of cash only buyers from China.” … I thought cash-only meant they didn’t need a mortgage…

And of course the standard “housing prices always go up”. Anything that shocks them, just gets deflected and any statistics are ignored and rationalized by some made-up opinion.

4) They don’t understand the relationship between “home” and “equity”.

“We don’t see this as an investment. We plan to stay there long term, at least 5 years. If you want to start a family, you will have to buy a place, you won’t be able to time it.”

Yup, the standard arguments. It’s almost like they all have the same script. Anyhow, I wasn’t cruel enough to break it to them, but they ARE using it and treating it as an investment. If not, they would not talk about using the “equity” in the condo to upgrade. At the end of the day, they do plan for their place to have “value” in it. Otherwise, what’s wrong with renting? (See next observation…)

5) Any alternative is seen as impossible.

No no no… no talking about renting. “Well, if I were to rent, I’ll have to deal w/ having to find a new place when the landlord kicks me out. That’s a hassle and represents time. And time is money.”

I really wish no one coined the “time is money” bit, it’s always misused. Time represents sweat equity (maybe) which maybe translates into money.

I was also not cruel enough to point out that the inconvenience of renting is probably a lot lower than the inconvenience of being homeless, but I kept it zipped.

I’ve shown them graphs and blog entries and videos already. I’ve done my good turn already. I don’t expect them to change their minds on the spot, I am just hoping it’ll give them something to reflect on — that doesn’t fit in their current world view. Perhaps that difference might mean being poor compared being homeless.

As has been said here before, speculative mania can turn regular people into crazies…”

RE Lurker at VREAA 11 Jun 2012 3:35pm

“He showed her how, using his hand like an airplane, the real estate market would go down by 5%. Then, plane angling up, it would go back up again and that at the end of 10 years it would not lose any money.”

“We went to a Chinese restaurant near Main St. and who was booming real estate advice to a middle-aged woman but this crazy realtor. He showed her how, using his hand like an airplane, the real estate market would go down by 5%. Then, plane angling up, it would go back up again and that at the end of 10 years it would not lose any money. (Why again are stock brokers forbidden from making similar comments on the market but RE agents aren’t?)
He then tried to sell her on a condo downtown telling her there were good deals there as prices were down (dunno… maybe part of the predicted 5% dip). Then, she said something, we couldn’t hear, and next thing you know he said condos would go nowhere for the foreseeable future and they weren’t a good deal, a way to lose money. The best deal now was a house with a yard. Eventually I had to drown him out by putting my chopsticks in my ears. I don’t know how I managed to digest dinner.”

mac at VCI 23 May 2012 10:12pm

Realtors are salespeople, and are unwise to be making predictions about market direction.
What if clients took them to task on these predictions later?
– vreaa

Global TV; CMHC; Sommerville; Pastrick – “No Bubble” – “We don’t have a sort of financial environment where people are looking at major financial corrections”.

Announcer: “Is the Canadian housing market a bubble ready to burst, or is it steady as she goes? Finance Minister Jim Flaherty is warning Canadians against taking too much debt against the value of their homes, but the latest report from the Canadian Mortgage and Housing Corporation is dismissing those fears saying there is no clear evidence of a real estate bubble.”

Tsur Sommerville: “There is clearly a slowing down in the market you see an increase in the number of listings, drop in sales, all things that create less pressure on the market.”

Announcer: “According to the Real Estate Board of Greater Vancouver home sales were down 19% compared with this time last year.”

Helmut Pastrick: “The comparison to last year was heavily influenced by the change in the federal government’s mortgage insurance criteria which pulled forward a large number of sales into early 2011. So we’re comparing that high point to activity so far this year.”

Announcer: “But don’t get too excited, even though sales are down, home price indexes show a 4% increase in the price of a home in greater Vancouver. … The message to buyers, the economy is in reasonable shape, there’s a lot of supplier there, and interest rates are low. So just because sales are slumping don’t bank on prices doing the same.”

Tsur Sommerville: “We don’t have a sort of financial environment where people are looking at major financial corrections, you know, double digit increase in interest rates, or, you know, huge tightening of liquidity, that just doesn’t seem to be on the horizon, you know, to expect across-the-board 10%, 15%, 20% drop in house prices, I think that being rather, er, hopeful, for a buyer to expect that.”

– from ‘No Bubble In Vancouver Real Estate’, Global TV, 16 May 2012
[hat-tip, and thanks as usual for the video archive, to Greenhorn.]

OK, predictions noted, for the record, namely:
1. Price drops of 10% or more are not to be expected.
2. Tightening of liquidity doesn’t appear to be on the horizon.
3. Again, No bubble.
We believe that the price strength predictions are extremely overly bullish, given the internal market action, and the national and global economic climate.

BTW, when Sommerville says “double digit increases in interest rates”, what does he mean exactly by that phrase?
Does he mean interest rates increasing to double digits or by double digits? – there is a massive difference.
Nobody, but nobody, is predicting the former: In fact, if we thought there was a chance of interest rates increasing to “double digits” we’d change our price predictions from 50%-66% off to 80% off. So, if Sommerville was implying that bears are predicting interest rates of 10% or more, he was just trying to make critics look foolish.
If interest rates rise by double digits, for instance from 3% to 3.3% (an increase of 10%), well, even such a small increase may be enough to speed a price descent.
– vreaa

Guest Post – An ‘Ex-Vancouverite In Asia Considering A Return’ Lays Out ‘Why Vancouver Real Estate Prices Might be Justifiable’

The View from Asia: Why Vancouver Real Estate Prices Might be Justifiable
[A guest post kindly submitted by ‘an ex-Vancouverite in Asia considering a return’ (handle ‘BLM’), 27 Apr 2012.]

Like many of you, I too have been in shock and denial at the astronomical rise of Vancouver’s property prices. How could the city I grew up in, without the jobs to keep me there in the first place, support such exuberant real estate prices?

After nearly a decade living in Asia, I am now contemplating a return to Vancouver because there really is no better place to live – economics aside. I hope to share with you a new perspective as a prospective buyer of Vancouver real estate and to provide insight into the thinking of several investors I’ve conversed with here in Asia.

It all started back. Such a long, long time back.

The year was 2001, when the US Fed rate began the year near its historical average at 6%. By December it fell to 1.75% – the lowest in over 40 years. Alan Greenspan was steering the slowing US economy away from a recession following the bursting of the dot-com bubble and the 9/11 terrorist attacks. With rates that low for the next three years, the scene was set for hard asset prices to rise.

The rates did go back up very briefly to the 5% level in 2006 to 2007 but quickly returned to a historical low of 0.25% after the financial crisis of 2008. The rate today continues to stand at 0.25% and is expected to until well into 2014.

Simplistically speaking, this is why real estate prices in select cities around the world have become out of reach for many locals – not just in Vancouver.

Why are Vancouver property prices more adversely affected?

One could argue Vancouver is Canada’s most international city in terms of ‘main street’ capital flows (i.e. money earned in Asia but spent in Vancouver). Being on the Pacific Rim and acting as Canada’s strategic link to Asia Pacific means its economy will take on characteristics unique from other Canadian cities. Canadian economists only have hard Canadian economic data to work with which is why it has been so difficult to forecast and explain Vancouver’s economy (and indeed real estate prices)!

What about Toronto? Don’t they have large ethnic groups and immigration inflows?

The difference is in the foreign economies they link to and the quality of the capital flows. There are far fewer direct flights from Asia to Toronto than there are in Vancouver. This means, on a whole, Asians who immigrate to Toronto are less likely to maintain regular links to Asia and therefore fewer capital flows.

Why Asian ‘main street’ capital flows matter?

Asian economies are booming. For countries that aren’t, like Japan, they have huge aggregate amounts of savings that if deployed in numbers to any one country (think Australia), it would have a very meaningful impact on asset prices. What makes Asia’s economies matter to Vancouver, other than the ‘main street’ capital flows mentioned earlier, is perhaps their close reliance to the US economy and ultimately the US Fed rate. To simply put it, Asia’s booming economies, fueled indirectly by cheap US borrowing costs, is expediting a new wave of middle class savings and a new breadth of real millionaires and billionaires in the region (fact: there are more billionaires in China than in the US). This glut of savings, together with low savings interest rates coupled with low borrowing costs, in places like Hong Kong and Singapore have pushed domestic property prices up to become some of the world’s most expensive.

Why don’t they just buy more property at home rather than abroad?

For the wealthy in China, where there are limited avenues for investments other than stocks and property, many have begun to move some of their wealth offshore. It is also partly driven by the lack of trust in their own government and legal system. It doesn’t hurt that there are still living memories of the revolutions that began in the 40s which led to personal possessions being confiscated. Additionally, the Chinese government has been implementing policies to rein in domestic property prices making it harder for the middle class and the wealthy to invest in multiple properties even if they are financially capable in doing so.

Other regions such as Hong Kong and Singapore have also seen their governments implement policies making real estate investments less attractive for speculators and investors.

Limited investment options in China and extremely low interest rates in places like Hong Kong and Singapore are forcing capital to go offshore and back into the West.

Why are they choosing Vancouver?

So why are investors looking to Vancouver? To answer that, let’s put ourselves in the shoes of an investor in Asia looking to diversify their assets in real estate abroad in a politically and economically sound country.

Closer to home, you have Hong Kong and Singapore but prices there have become some of the world’s most expensive. Further abroad, you have time zone friendly Sydney and Melbourne but their prices too, along with their currency, have risen to what some call ‘frothy’ levels as a result of Chinese trade and Japanese capital. Then there is London, with its property priced in the expensive Sterling and New York with its tough immigration laws. These have been some of the more popular destinations for Asian capital to invest in which brings us to Vancouver.

Vancouver has no major policies to limit real estate investment . It’s currency is cheap relative to the Sterling and the Australian dollar. The Canadian dollar is also expected to appreciate which provides either a limited hedge to falling property prices or a bonus return on investment. Access to the city is easy with numerous airlines flying direct from a variety of Asian cities. The list goes on and on.

How did they acquiring their wealth?

No one can clearly answer that but if we just think of the thousands and thousands of companies in Asia (especially China) that have gone public in stock exchanges at home and around the world, it is not hard to imagine the number of affluent individuals in Asia.

Others have surely made their money in property along with the region’s economic rise. In Hong Kong, for example, the equivalent of a 400sqft 1 bedroom apartment in a similar district to Coal Harbour now goes for about CAD $1.2mn – thanks in part to Chinese money inflating the city’s property prices.

For some families who immigrate to Canada from Asia, it makes all the sense in the world to diversify their assets into Canada with the view of settling there. Some might even buy a few condos, lowly leveraged, to generate CAD income for their living expenses as a bubble popping in Vancouver is perceived to be no more likely than in Asia.

Brown barbaloots

Vancouver is not an exception where locals have been pushed out of the city core. This is a phenomenon that has been repeated many times throughout history. Today, in many cities across Asia, where there is a lack of a social safety net, high property prices are leading to street protests and influencing election outcomes.

Unfortunately, the wealth gap across the world has been widening for many reasons. Vancouver is not alone in that young couples are finding it hard to develop a career, start a family or to purchase their first home. In fact, let’s not forget these problems are more magnified in China, the source of hot Asian money, than anywhere else in the world.


Unless there is global economic calamity or unforseen restrictive policies towards immigration/real estate as an investment, prices are likely to tread higher, retreat slightly, or stabilize in the long term regardless of the ‘expected’ interest rate moves.

It is hard to see a scenario where Vancouver prices will ‘crash’ with supportive interest rates and rising Asian economies. What makes Vancouver unique is that the majority of home owners are not overly leveraged (from my own anecdotal observation). Certainly the newly landed buyers and existing homeowners of SFHs do not appear to be. Yes, there were a few who took out 40 year mortgages and those who put down a 5% down payment but those days are long gone and prices have risen since then.

More importantly, the majority of the most vulnerable seems to be first time buyers who typically bought into the $250k-$400k range over the last 10 years in the lower mainland. Should there be a decline of 25% percent, a clear crash, even a $400k property would still be worth $300k. With interest rates this low, principals are being paid down rather quickly.

Foreclosures will be the first sign of real trouble, not price declines.

Covered bonds

The final thing I wish to touch on, as a keen observer of the bond markets, is Canada’s mortgage market in relation to covered bonds being issued by Canadian banks. Canadian banks are keen to expand their mortgage businesses in pursuit of profitability. However, this tenacity differs from that of the US sub prime crisis. Canadian banks have been active issuers of covered bonds, which unlike the toxic CDOs that US banks issued before 2008, are guaranteed by the banks’ balance sheets. With Canadian banks being some of the world’s strongest, many of the covered bonds they issue (which consists of mortgage loans) are rated AAA – the same credit worthiness as US treasuries, which are considered to be the world’s safest investments. Institutional investors are keen to buy as much Canadian covered bonds as possible given the lack of AAA bonds in the world and because of the expected currency appreciation of the Canadian dollar.

We can blame many factors for Vancouver’s high real estate prices but ultimately, through the invisible hand of the markets, it is only a result of the low US Fed rate.

My considerations as a prospective buyer with foreign assets

My wife and I have decided to return to Vancouver with our young family at some point in the future. The hope is to give them the same experience we had growing up – Canucks, PNE, Stanley Park, Granville Island, street hockey, camping, fishing, etc. This view is increasingly shared by ex-Vancouverites all over the world. Even some of the immigrants from Hong Kong of the 90’s who have since left Vancouver seem to have budding fantasies of returning once they have children.

We’re squarely middle class with decent savings and significant equity in our home in Hong Kong. Property prices here have appreciated with the same velocity as Vancouver. In our minds, we have several decisions to make. When to move and whether to move all or some of our assets back.

If we decide to move back this summer, we have the option of renting out our home here and refinancing it (mortgage rates at 1.5%-2% in Hong Kong currently) so that we have a substantial amount along with our savings to shop for a condo or townhouse. Or we could sell all of our assets here and look for a SFH completely paid off (or with minimal leverage).

However, if we decide to delay our move, we could consider hedging, for better or worse, by buying into a pre-sale condo. Our savings needs to be invested and the stock market does not offer the same sense of security for our future plans. So if we are to make an investment, it might as well offer some hedge for our future aspirations.

As a prospective buyer with foreign assets, I have two variables to consider: FX and real estate prices. This makes me see things very differently compared to a local buyer. Property prices may stay high but if the Canadian dollar falls by 10% against the Hong Kong dollar (in effect the US dollar), it makes it very attractive for me to take action.

I will be in Vancouver for vacation this summer and no doubt visiting some open houses. We shall see where the Canadian dollar stands and what the state of the real estate market is at the time. Stay tuned as I will report back in due course.

Editor’s comments:

Many thanks to ‘an ex-Vancouverite in Asia considering a return’ (handle ‘BLM’) for submitting this carefully considered piece. We welcome all stories of the effects that the Vancouver RE market is having on citizens, and BLM generously shares with us his own considerations as he looks to buy property in Vancouver. He weighs information at his disposal, concludes that the market will remain strong into the future and, despite price levels that he’s found “shocking”, and price rises that he judges to be “astronomical”, he is planning to buy. This is all very important information to students of the Vancouver RE markets: If enough people continue to see what BLM sees, and act on their conclusions by buying, will the Vancouver RE market simply power upwards, relentlessly, forever?

BLM offered this piece for the sake of discussion, and he welcomes your thoughts on his opinions and circumstances; he also invited comments from vreaa, so here are a few thoughts and questions on some of the specific points he raises:

1. “I am now contemplating a return to Vancouver because there really is no better place to live…”
– The vast majority of us here know that Vancouver is a fine city. Welcome back.
When you say “there really is no better place to live”, is that based largely on a direct comparison with HK? Are there other places you’ve considered living?

2. We’d agree with the conclusion that easy money has caused the global RE price inflation, and that the Fed’s profligate ways were a central cause.

3. Are “capital flows” really that dependent on direct jet flights?

4. When comparing us with Australia, the Aussie dollar is not really that much stronger than ours, is it? And their real estate is similarly “frothy” compared to Vancouver, not moreso. In fact, aren’t we now ‘ahead’ of them in that regard, in some recent survey? (There are so many surveys, one can’t keep up). So it’s not that more expensive RE makes Australia less attractive to buyers outside the country. One difference of significance is that Australia has moved to limit off-shore ownership of RE.

5. More billionaires in China than in the US? I don’t believe that’s true. Wikipedia says 412 in the US vs 115 in China (2011). So, yes, there are rich people in China, a lot, but let’s not get too far ahead of ourselves (or underestimate the staying power of the US).

6. We have little doubt that, in the long run, China will become a stable and firmly established economic power. It’s already large, that’s for sure. Currently, however, we read much about China’s own (deflating) RE bubble, and about the shaky foundations of their GDP numbers; we hear credible commentators predicting a period of much slower real growth for China. Such a period of contraction would be expected to effect capital flows out of China, but by how much? Massive? Negligible?

7. Yes, the perception that the loonie will rise may make Canada more attractive, and the fact that it has been strong compared with the USD has made Vancouver RE gains seem even larger from outside of Canada.
But is this to remain the case? Couldn’t the loonie just as easily see 80c-85c US again before it sees $1.15c? If RE prices drop, and the loonie drops (the scenario we see as most likely),  how would foreign holders of Canadian RE respond? Buy more at ‘discount’ prices? Or worry that a Vancouver RE bubble has begun to deflate and hurry to sell? We’ll find out in the coming ‘grand experiment’.

8. “With interest rates this low, principals are being paid down rather quickly.”
– On aggregate, surprisingly not; it is stunning to consider, but total equity in Canadian homes has been falling despite increasing home values.

9. “With Canadian banks being some of the world’s strongest..”
– It’s a nice thought, and we know it’s gospel in some circles, but is this true? Or do they look strong because they haven’t been tested yet?

10. “What makes Vancouver unique is that the majority of home owners are not overly leveraged (from my own anecdotal observation).”
– Not being overly leveraged doesn’t mean that an owner is not overly dependent on RE price strength.
Of the owners you know, what percentage of their net-worth would you estimate they have tied up in Vancouver RE? How dependent are they on rising or at the very least stable RE prices, for their financial futures? How will they respond to price drops of 10%? 15%? 20%?

11. We particularly appreciated the section where BLM shared his own considerations as a prospective buyer.

12. “We’re squarely middle class with decent savings and significant equity in our home in Hong Kong.”
– Great; you’re in a similar position to many Vancouver owners. Well, apart from the savings bit, that is… Most Vancouver owners are over-invested in RE, especially when age, net-worth, and retirement plans are taken into account. So, it sounds like you’re actually better off than most “squarely middle class” Vancouver owners with young families.

13. “…we have the option of renting out our home (in HK) and refinancing it (mortgage rates at 1.5%-2% in Hong Kong currently) so that we have a substantial amount along with our savings to shop for a condo or townhouse.”
– In which case you’d have no savings and own a property in Vancouver and a property in HK; with low leverage. What would you estimate your maximum downside risk would be in that scenario?

14. “…we could consider hedging, for better or worse, by buying into a pre-sale condo. Our savings needs to be invested and the stock market does not offer the same sense of security for our future plans.”
– We personally consider Vancouver pre-sale condos one of the worst investments imaginable at present. But, yes, the stock market is likely to be volatile through the next year or two (with significant downside risk). Why do your savings ‘need to be invested’ in one or the other?

15. “Property prices may stay high but if the Canadian dollar falls by 10% against the Hong Kong dollar (in effect the US dollar), it makes it very attractive for me to take action.”
– Are you sure that would lead you to act? Imagine a global deflationary wave, in which Vancouver property prices started falling, fell 15%, and the loonie dropped 10%. Are you sure you’d be looking to buy at that point? Would you be having any other thoughts in that scenario?

‘An ex-Vancouverite in Asia considering a return’ (BLM), many thanks for your thoughts and your story. Thanks, too, for your promise to keep us updated; please report back, we’ll be interested to hear how things play out for you, and we’ll headline your updates. All the best with all of your endeavours.

– vreaa

‘First We Take London and Manhattan, Then We Take Berlin’ – Limitless Demand Argument Revisited, Again – “Anytime a midlevel city grows and becomes a popular destination to live, people come, demand increases, supply dwindles, and prices go up.”

“Anytime a midlevel city grows and becomes a popular destination to live, people come, demand increases, supply dwindles, and prices go up. Witness New York and London 100 years ago and what it’s like now.
New York City police and firefighters earn about $100k a year yet can’t afford to live in Manhattan. They live in New Jersey and commute. When I was in London, a shuttle bus driver told me he grew up in Earl’s Court, but had to move to Reading and commuted to work. This is a normal state of affairs.
Vancouver is an international city. People are going to move here, as is happening in Germany. Real estate prices in Berlin and other cities are increasing because the remaining wealthy Europeans are moving and investing there because of the solid economy and collapsing prices in their home countries. They are pushing out middle-class Germans. The movement of people and capital to better places is normal development. What’s happening is not new. It has happened since the dawn of civilization.
If [anybody] feels disenfranchised and displaced, [they] should remember the plight of the First Nations people. Their homes were taken from gun point and they were subjected to genocide. The remainder were made to feel really welcome by being forced to live on reserves and treated like second-class citizens in their ancestral homeland. At least the Chinese purchased their homes legally and are contributing to the economy by buying Canadian natural resources from which she is benefitting.”

Terry Chan, Letter To Editor, Vancouver Courier, 20 Apr 2012

Excellent debating technique, Terry.
– Hand-waving comparisons linking our (modest, small, provincial) city to capitals such as New York, London, Berlin.
– Vague claims of historical precedent (“since the dawn of civilization”).
– Superficially arresting but essentially empty concepts (“Vancouver is an international city”)
– Avoid mention of all non-supportive data (thus let’s not talk about any actual numbers)
– Pre-empt dissent by associating any would-be opponents with historical atrocities (“plight of First Nations people”).

While it is true that cities do develop, the problem is that the vague arguments used by Terry, if accepted, can be used as an excuse to justify just about any price, for any property, in any growing city.
Show us the math that supports current Vancouver prices. None does.
Yes, Vancouver will develop.
But, yes, too, Vancouver is in a huge speculative RE mania that can only end with implosion.
The two ideas are not mutually exclusive.
There are at least 150 other cities around the globe as important as Vancouver – Does Terry argue they are all on the brink of becoming the next NYC; London; Berlin?
– vreaa

Also see:
Various posts in the sidebar category “Limitless Demand Argument For Ongoing Market Strength”.

Tom Davidoff’s ‘Fantastic, Pragmatic Lecture’ – “Vancouver RE price future is uncertain, with clear downside risk. Prices could, absolutely, fall 50%. But long run growth is easy to envision, and Vancouver will never be cheap.”

“Today [16 Feb 2012] the UBC Faculty Association hosted a lecture titled “Is Real Estate Part of Your Financial Plan?” as part of their Financial Planning Lecture Series. The speaker was Tom Davidoff, Assistant Professor at UBC Sauder School of Business. In the past Prof. Davidoff had been interviewed on CTV, and discussed on this blog.” [1. ‘Tom Davidoff, Sauder School of Business, UBC – “There’s not going to be any free lunch in Vancouver. There’s no entitlement to own a nice home in the most beautiful place on earth. So I think people need to be prepared just to accept that reality.”, VREAA, 1 Dec 2012; 2. ‘Tom Davidoff, Sauder School of Business, UBC – Clarification’, VREAA, 2 Dec 2012; 3. ‘Tom Davidoff Knows About RE Cycles’, VREAA, 4 Dec 2012 -ed.]

“Today’s lecture was fantastic. He did not adopt a dogmatic bull or bear stance, but instead was quite pragmatic.”

“His main points were:
1) It’s ok to rent
2) Discussion of legitimate rationalizations of owning
3) Vancouver price future is uncertain with clear downside risk
4) Vancouver is not going to be cheap anytime soon
5) Owning housing can be viewed as both risk and insurance.”

The slides from his talk are available here, and here:

“I jotted down some interesting remarks, some of which are taken from the slides:
– (concerning slide 4) “If you want something to be distressed about, try this. Vancouver vs Seattle: the rents are the same, but prices are 40-50% greater, even though the tax rules tell us it should be the other way around.”
– (concerning slide 13) “Prices here have risen way faster than rents. This is worrisome and reason to be pessimistic”
– “Vancouver is the nicest city in China” (slide 19)
– “Short run risk of bubble collapse in China” (slide 19)
– “There is a risk of a bubble. Prices could absolutely fall 50%.”
– “There are other nice cities on the coast, but you can’t buy citizenship there like you can in Canada”
– “20-50% of sales are mainland Chinese buyers” (did not state precisely where or what)
– “If you need a 20% downpayment on a $1m home, which in Vancouver is a starter home, and not a very nice one, then it will be very hard to achieve this [if you a UBC employee] with a PhD in English”

“I commend Prof. Davidoff for being the first Sauder faculty (that I have seen) to publicly give a useful and rational discussion of the Vancouver housing market. I apologize for any erroneous quotations.”

– the above account and commentary from ‘Anonymous UBC Professor’ forwarded to VREAA via e-mail 16 Feb 2012

Thanks, indirectly, for the talk, Tom Davidoff; and thanks for the reporting thereof, ‘Anonymous UBC Professor’.
For those of us who weren’t at the talk, the pdf slides give a fairly good idea of the material covered. It’d be great if video, or audio, or transcription, of the entire talk emerges.
Davidoff discusses Vancouver rent vs buy, and pricing, in a more complex and more subtle way than we have seen elsewhere. Ideas regarding interpersonal differences in desire for mobility and stability involve important (and very difficult) calculations.
He honestly states that there is a possibility of large magnitude price drops, and is open about his lack of certainty going forward. When Tom states: “Easy to see downside risks; Easy to envision long run growth”, we wonder about how he would weight the probabilities of various different outcomes.
What are his best guesstimates regarding chances of ongoing growth; chances of a crash?
When a careful student of RE markets says “I can’t say if we’re in a bubble or not”, and “Prices could absolutely fall 50%”, but also “It’s easy to envision long run growth”, how are prudent owners and prospective buyers to respond?
When we ourselves join the available dots that the current market lays out, we continue to see very prominent downside risk, with only a very small chance of an ongoing price growth scenario. But we, too, acknowledge lack of complete certainty.
Isn’t that always the way in markets?: One can never be certain, but, one way or another, you have to take a position. You assess and weigh the probability of various outcomes as best you can, and then make decisions about how to position yourself, keeping in mind the consequences of various outcomes, and the particular effects they could have on you. Thus, a couple in their 20’s with 5% down on a condo, and a retired couple worth $10M who own their own $3M westside home outright, may have very little quality of life to lose from a RE crash, and may happily go on owning. But a 58 year old with 3 dependents, inadequate retirement funds, and more than their entire net-worth in a $1.3M east-side house, may suffer devastating consequences from the very same crash. We’d expect the 58 year old to be worried about even a low probability of crash outcome, because the consequences would be so dire, and for them to take up a more defensive stance towards their RE exposure. At what ‘best estimate level of crash-probability’ should the 58 year old sell? 30%? 15%? 5%?
Davidoff is reluctant to jump on what he appears to see as some kind of ‘bubble-caller bandwagon’. Perhaps his perspective is at least partly the result of his US post-bubble experience, where, post-implosion, everybody came out of the woodwork with “we-knew-all-along” fudging. Here in Vancouver itself, ‘bubble callers’, amazingly, remain in the small contrarian minority. Tom says “Many are willing to declare a bubble”; but we can think of few local examples. At least he is now on record as saying we’re possibly in a bubble. We agree, of course.
Overall, a stimulating series of slides, and as our invaluable reporter-on-the-ground says, the talk appears to have been both “fantastic” and “pragmatic”. Tom Davidoff’s analysis is a welcome addition to the local discussion. We continue to extend an open invitation to him to post a piece discussing Vancouver RE on these pages. We’d just as eagerly like to see a comprehensive essay by him in the local press.
– vreaa

Limitless Demand Argument Still Being Voiced – “Over the next decade Van RE will prove to be an excellent investment.”

“I am looking at buying in Vancouver and torn between the obvious paranoia of some people who think the Van RE market is in a bubble and will crash and my belief that Vancouver will always be a safe place to park you money, as long as it is quality. Let me explain – buying a condo which has no direct interest in the underlying land is always a risk, if it has no unique features, (like to die for view) or in an area where where future new buildings will sprout up like daisies on a warm spring day, these are not good investments and over the long run will depreciate. Buying your typical 3BR home in the valley or suburbs with an hour commute, again not a good investment. I believe real estate which has a land component, duplex or Single Family house within 30-45 minutes of the CBD, in a good area will hold it’s value and although we may be in a market where increases are minimal, over the next decade Van RE will prove to be an excellent investment. The reason I believe this are 1) Having traveled all over Canada, given a choice Vancouver is the place to live. 2) China and the Asian Pacific view Vancouver as a safe place to purchase in order to diversify overall investments position, regardless of current market prices this will continue, soon the rich Indians (from India) will be coming. 3) ALR, US Border, Mountains all limit the supply of land in the lower mainland, combine this with my buy RE with a land component close to the CBD and you have a winning formula, providing of course you can afford it.
I have a lot of sympathy for working Vancouverites looking to get into the market, people who grew up in Vancouver and want to stay and raise their families, yet can not afford the market and see their dream of providing for their family like their parents did fade.Hey it’s not fair but it does not change the situation. If you are one of these angry people who desperately want the market to crash or use screwed logic to justify renting and your pessimism, I suggest you consider moving. If I was young and unable to get into the Vancouver RE market, I would move to a place like Saskatchewan where real estate is cheap, the economy is strong and prospects are good, sure the winters crap but it doesn’t rain. Having left BC 20 years ago, I would never be in the situation I am now, able to come back and buy quality real estate, looking through global glasses and liking what I see.”
Sam Waterman at VREAA, 25 Jan 2012 8:16pm

Sam, it doesn’t seem like you’re really “torn” at all.
If what you say is genuinely what you believe, you’re clearly going to go ahead and buy a Vancouver SFH.
Please keep in touch, and we’ll see how that has worked out for you in coming years.

We humbly disagree with Sam, being one of the “paranoid” few who believe Vancouver is in a bubble.
We predict that all sectors of the market will implode, SFHs as much as any other.
Remember, SFHs have been bid up through the mania, with people using the very exclusivity that Sam cites to justify that much more stratospheric pricing. SFHs are, by degree, as overpriced as condos or townhouses or any other sub-sector you care to name. In the same way, no geographical areas are bullet-proof.
We archive this post, along with others in a similar vein, under ‘The Limitless Demand Argument For Ongoing Market Strength’ sidebar category. These kinds of arguments are very common during speculative manias.
– vreaa

‘Sell Your Property In China’ – “This postcard was in my mailbox yesterday. Lots of lucky red colouring.”

– scan of a card flier distributed to residential addresses in Vancouver, e-mailed by ‘J’ to VREAA, 20 Jan 2012. J writes “This postcard was in my mailbox yesterday.  Lots of lucky red colouring.”

Sentiment & Prediction – “This city is for those with equity. Your governments have abandoned you. Everyone wants the RE gravy train to continue and measures will, and have been taken, to keep the party going. Nobody cares about a small, silent minority of prudent renters. You are invisible.”

“Ah…another year and another year of failed predictions to come for the bears…
I always love January…its the start of the delusional bear “wishful thinking” season…
January rolls around, and out comes the threat to prices from a blossoming inventory; soon, after no price declines, we move into Spring, with the criticism of stupid buyers as bears watch strong sales and inching up prices; then comes summer, with declining inventory, and wails of dirty asian money and cheap money; then comes fall with increasing inventory, but no price declines despite “poor” sales; then comes the next year…
Ah, repeat….for the 7th year of failed predictions for some of you (circa 2005)
You have one life to live bears…
Maybe its time to take a page out of “formervancouverresident”‘s play book, and move on…
This city is for those with equity after not “sitting on the sidelines” for almost a decade and those rich Asians that have no problem laundering their ill-gotten gains here.
Face it, the federal government has abandoned you; your provincial government has abandoned you; and your local government has abandoned you. Everyone wants the RE gravy train to continue and measures will, and have been taken, to keep the party going. Nobody cares about a small, silent minority of prudent renters… you are invisible.
Your family and friends all question your intelligence for sitting on the sidelines, and quietly whisper “I wish they would just do the right thing, and settle down, and buy a place”…
Time to move on boys and girls…”

Move On at 1 Jan 2012 11:35am

Vancouver RE has indeed been in a speculative mania since 2005, perhaps it started as early as 2002-2003, and ‘Move On’ is correct to note that a small group of bears have been pointing this out since then. Remarkable, eh? The audacity!… the tenacity! But that is what happens in bubbles. Bears look sillier and sillier until they suddenly, spectacularly, look right. (Then everybody goes back to ignoring the contrarians, again…).
But ‘Move On’ is wrong about other things:
Just because a bubble expands for a long time doesn’t mean it transforms into a stable entity. On the contrary, it becomes more and more likely to implode, and the implications of the implosion get more dire the bigger it gets.
Also, there are no powerful ‘hands’ supporting the speculative mania. It has been the product of self-perpetuating market forces and myths; the results are far larger than any entities could hope to ‘orchestrate’. Conversely, when the bubble begins to implode, governments will be powerless in attempts to keep it inflated. Market forces are far more powerful than any available ‘measures’.
‘Move On’ will be proven wrong; until then, ‘Move On’ appears to the superficial observer to be ‘right’. This is always the way it is with these market phenomena.
– vreaa

Land: Not Making Any More; Don’t Need To

How much of the earth’s surface would it take to provide each and every one of the 7 Billion people in the world a Vancouver-standard 33ft by 122ft lot?

Preposterous thought, right?
We’re packed into the planet so tight as it is, there certainly isn’t enough space on the globe to do it, so we’d have to be thinking of using the moon, and Mars, right?

One of the perennial bull arguments for never-ending future price strength is the old “They’re not making any more land” litany.
Well, apart from a few rare land reclamation examples, this is indeed correct. But it has also been correct through all prior RE booms and busts.

We’re so used to seeing images of busy streets, packed highways, towering condos, that we’re certain it’s all getting extremely crowded.

So, how much space would it take to provide every person on the planet with a standard lot?
Turns out it’d take a square of 1000 miles by 1000 miles, about the size of the square on the North American map below.

[*Note: Before civil engineers, town planners, and Habitat for Humanity folks chime in, let’s make it clear that we are not advocating for a community like this in the midwest. And we do realize that much of the world’s land is uninhabitable, etc, etc… but… you get the picture. – vreaa]

[hat-tip to Harper’s Index, where a line item about how the entire world’s population could be packed into Texas at the same density as NYC (10m by 10m each), got us to do the math above.]

Related posts:

“Vancouver has a finite amount of land. The prices are only ever going to go up.” – Douglas Coupland, 2000
VREAA 10 Dec 2012

Avocados and Christmas Trees – Vancouver Land Use; ALR; Food
VREAA 11 Dec 2012

“I am a Vancouver realtor, and here are a few facts. I would characterize 7.5% per annum as a relatively modest gain.”

“I am a Vancouver realtor, and here are a few facts:
1. Yes, a couple of specific areas such as Vancouver’s West Side and West Vancouver have enjoyed the effects of an infux of Chinese money and property values in those areas have risen dramatically in the past year or so. Is this sustainable? I don’t know but time will tell..
2. These localized surges in value are not representative of values in the overall Greater Vancouver real estate market.
3. According to the board, the Housing Price Index for all residential properties in Greater Vancouver shows an increase in value of 7.5%. I would characterize this as a modest gain when compared to recent gains in the areas listed in above [Vancouver East detached YOY +16.2% , Vancouver West detached YOY +23.4%].
4. The benchmark price of apartment (condo) properties – generally the type of properties that speculators buy – has risen 3.2% from Oct 2010. Again, quite a modest number compared with the numbers quoted above.
5. Listing a $4MM condo at $8MM or increasing a list price 78% after not selling does not make a bubble. It means the sellers and their realtors are idiots but it does not mean Vancouver is in a bubble.
6. Some areas of Vancouver’s real estate market are not just locally driven and local incomes are not the sole determinant of affordability. Like it or not, Vancouver is somewhat of a resort city to the world.
Vancouver’s real estate market may well follow global trends if the influx of Chinese buyers slows, or even reverses and if/when global economics deteriorate further. Only time will tell. However, the fact is Canada, and indeed Vancouver, is viewed as a relative safe haven by many international real estate buyers. Given European turmoil and USA economics vis-a-vis debt etc, I seems entirely possible that the Vancouver real estate market will continue to do relatively well. Where would you rather leave your money? Iran, China, or Vancouver? Not a tough choice.”

– local Vancouver realtor Shaun Kimmins, commenting on the article “House Won’t Sell? No Problem, Simply Raise the Price by 78%; It’s Different in Bizarro World”, at Mike Shedlock’s ‘Global Economic Trend Analysis’ blog, Nov 2011
[hat-tip Makaya]

1. People have been conditioned to believe that 7.5% per annum gains in local RE are ‘relatively modest’.
2. There are alternatives to keeping your assets in “Iran, China, or Vancouver”.
3. What does it take for a “safe haven” to suddenly seem “unsafe”? Will off-shore investors keep buying, or sell, into falling prices?
4. “It means the sellers and their realtors are idiots but it does not mean Vancouver is in a bubble.” No, but it doesn’t mean that Vancouver is not in a bubble, either. Is that behaviour characteristic of typical market periods?
– vreaa

Opinion – “This is what I hear: Vancouver house prices are determined in China. The house can become the main life investment.”

“This is what I hear: Vancouver house prices are determined in China. Vancouver houses can be bought right in China. Many, with even a bit of money or more, want one foot in China and one outside, and Vancouver is the main place. A new Chinese middle class is becoming prosperous, but the lower class has not. Only a redistribution of wealth to the lower class prevents violent revolutions, of which the west has gone to the extreme of redistribution. In China, many see that situation. Also, for children’s education opportunities. In China, without a good education, such as engineering, computer science, etc., life will most likely be poor. And that education is hard to get in China, but easy to access in Canada. More and more, the available university seats in China, are taken unfairly, by the ruling classes.” and
“In Canada, the mortgage interest is not tax deductible, but there is no capital gains tax when you sell your principal residence., and I prefer it that way. The house can become the main life investment. The city is behind in mass transit and efficient transportation, to and from areas farther from the city center, where more affordable housing could be built. To avoid 2-4 hours driving, living close to the city center is abnormally attractive, which is multi-family residence for most. It now takes two good incomes to rent, and the city’s skyline is mostly high rise condo and apartments. Compare to Calgary which is far ahead on mass transit and highways, allowing quick commute from far out in all directions, where one good income is ample to afford rent in the center, and where the skyline is dominated by office and business buildings. Some maintain the distortion in Vancouver was partly deliberate by socialist planners, to promote multi residence buildings as the norm, to benefit the environment.”
– two comments from Russell Turner at ‘Mish’s blog, ‘Global Economic Analysis’, 20 Nov 2011

Realtor Opinion – “Prices are actually quite stable and have only increased modestly in value in the last year or two. Given immigration predictions, low interest rates and the fact that Vancouver has become an urban resort to the world’s wealthy, there doesn’t really appear to be as much froth as one would think.”

“As a Vancouver real estate agent I share the disbelief at the bizzaro real estate pricing we see so often here. This practice of re-listing at a higher price than a previous, unsuccessful listing is nothing new to Vancouver real estate. Last year I watched a “star” realtor list a $3.5MM condo for $8MM. Not surprisingly the listing was unsuccessful and the property remains unsold and off the market. Vancouver has managed to buck global real estate trends, however, it’s important to remember that sale prices, not list prices are indicative of the presence or absence of a bubble. The motivation for an agent to list a property at twice its justifiable market value is debatable but it does happen regularly. Many agents and sellers are pinning their hopes on the recent influx of Chinese buyers. Regardless, these tactics are not effective and do not necessarily point to a bubble. The reality of our real estate market is that prices are actually quite stable and have only increased modestly in value in the last year or two. Given immigration predictions, low interest rates and the fact that Vancouver has become an urban resort to the world’s wealthy, there doesn’t really appear to be as much froth as one would think.”
– comment from shaunkimmins at Global Economic Analysis 20 Nov 2011

“He’s an intelligent person, but he bought in 2009 so he’s highly leveraged, financially and opinion-wise. He agrees it’s a bubble but I’m not quite sure he understands the full implications.”

“I stopped by my old job to visit. Boss mentions Vancouver RE. Says that he doesn’t think it’s going to go down because it’s been recession-proof. Doesn’t think it’s going to go any higher mind you, thinks it should stay the same for awhile. Also buys into investor-immigrant theory.
He agrees it’s a bubble (but I’m not quite sure he understands the full implications). It might be that by bubble he means it’s just unreasonably high. He’s an intelligent person, but he bought in 2009 so he’s highly leveraged, financially and opinion-wise. Changing his POV might be admitting to a gargantuan mistake.
Kind of upsetting since he’s a relatively new/young researcher, and the size of the mortgage will probably detrimentally impact his family’s life.
Sometimes I think along the same lines, but I can’t bring myself to seriously believe it. There’s just no way he can be right. This has to end sometime and it won’t end in a flat-line. It’s not that I want to say “I told you so” to him, I just wish others didn’t fall into the same trap. The longer this goes on, the more people become absorbed, and the harder the eventual fall.”

Moe at VREAA 31 Oct 2011 12:20pm

There is a subgroup of owners who see that the market is frothy, but woefully underestimate the kind of collapse that happens when a speculative mania ends. These are the folks anticipating a 10%-15% pullback, ‘tops’. – vreaa

It’s Official: No Longer “Best Place On Earth” – “Best Place on Earth” was a “broader brand” used only in B.C. “to help motivate British Columbians.”

In April 2007, VANOC CEO John Furlong (left) and then Premier Gordon Campbell unveiled licence plate naming B.C. ‘The Best Place on Earth.’

“BC No Longer Calls Self ‘Best Place on Earth’.
The boast is vanishing from official branding. Where did it go, and why?

The “Best Place on Earth” and the sunshine-and-mountains logo (is it setting or rising?), was launched in 2005 and registered with Industry Canada’s Canadian Intellectual Property Office the following year. It appeared on ICBC’s Vancouver 2010 Winter Olympics licence plates in 2007, replacing the traditional “Beautiful” above a photograph of Mount Garibaldi and the VANOC inukshuk logo.
But something funny happened on the way to the biggest show on Earth. When Campbell put on his salesman-in-chief hat and attended the Beijing Olympics in 2008, he called British Columbia “Canada’s Pacific Gateway” instead of the “Best Place on Earth.” With a pinch of sarcasm, I asked him, why? If B.C. is really the best place anywhere, why not tell the world?
First the world has to find B.C. on the map, he said.
Jobs, Tourism and Innovation minister Pat Bell offered few hints about the slogan’s fate when he was grilled by NDP critic Spencer Chandra Herbert in a May 5 budget estimates debate.
“Yes, I am proud of the province and I think it’s the best place on earth, but it was probably not the best way to attract people from other parts of the world who think their little section of the world was the best place on earth,” Chandra Herbert said to Bell. “I’m just wondering: is ‘best place on earth’ shelved for now, and we’re now not going to see that anymore, and we’ll see ‘Super, natural B.C.’ in its place?
Bell answered that “Best Place on Earth” was a “broader brand” used only in B.C. “to help motivate British Columbians.”

Since Premier Christy Clark’s March swearing-in, the bold advertising slogan of the Gordon Campbell era has slowly and quietly disappeared from government websites and letterhead. You can still find it if you look, but blink and it could be gone.
How could a province with a misery-filled neighbourhood like the Downtown Eastside and a nation-leading child poverty rate ever call itself best-on-Earth in the first place? How did the politicians and bureaucrats decide to deep-six the slogan?
The decision, I am told, was not even of the “back-of-the-napkin” variety, because no scrap of paper was used to record it.

– Bob Mackin,, 4 Oct 2011
[hat-tip Nemesis]

So, now we understand. We have always been puzzled by the claim, this explains all.
The slogan was not an actual claim that BC was the “Best Place on Earth”, it was used “only in B.C., to help motivate British Columbians.”
So, citizens of BC, how does it feel to have been treated all these years like children; like the second to last team in the local Under-7 hockey league?
The real problem is that many folks lapped it up. And, relevant to us here, it helped push them to reach for that much more debt, so they could overextend even further to buy that much more unaffordable ‘BPOE’ real estate.
“C’mon, you can do it, you can do it… Bid another $75K beyond your means! You can do it! Stretch, stretch…!”
– vreaa

UPDATE: More on this story from Doug Ward, Vanc Sun, 7 Oct 2011
“My initial reaction is ‘hurray,'” said Peter Williams, director of Simon Fraser University’s Centre for Tourism Policy and Research, about the slogan’s demise.
“It was presumptuous. If it was meant to endear people to us, it probably wasn’t going to do that given that a lot of other people live in other parts of the world that are pretty nice. And probably quite competitive to B.C. in many senses.”

[Off with his head! -ed.]
Government communications director Greer said the slogan was aimed at British Columbians and not for a global market. “It was more of in-province pride thing.”
[See: appropriate for 6 year olds, above. -ed.]
“Canada Starts Here” is also the brand used in the marketing of Clark’s new jobs strategy.
[Actually, wouldn’t it be just as accurate to say “Canada Ends Here” ? -ed.]
B.C.’s tourism brand continues to be the venerable “Super Natural British Columbia.”
SFU’s Williams said the “Super Natural British Columbia” brand has gone through “many reincarnations but it’s held up pretty well and I thought this ‘Best Place On Earth’ was creating some confusion in the marketplace that we didn’t really need.”

[Whereas “Super Natural British Columbia” was a big hit with visiting goblins, gremlins, elves and apparitions. -ed.]

Such Stupidity Should Not Be Rewarded – “I have a relative that said that she and her husband would ‘buy their dream house’ when their east Vancouver shack, for which they paid $750K, “doubles or triples in value over the next few years”.”

“I have a relative that said that she and her husband would ‘buy their dream house’ when their east Vancouver shack, for which they paid $750K, “doubles or triples in value over the next few years”. She’s a high school teacher; he works in sales.
Such stupidity should not be rewarded.”

VancouverContrarian at 4 Oct 2011 at 10:03 pm

Their Past Is Our Present – Phoenix Bull Hubris, circa 2006

In July 2006, in response to a US ‘Housing Bubble Blog’ post ‘Realistically, how overvalued are Phoenix home prices? 5%? 10%? 20%? 50%?‘ [housingpanic 21 July 2006], Greg Swann, a Realtor from Phoenix, wrote ‘21 reasons to bank on the Phoenix real estate market…‘ [ 21 Jul 2006].
Excerpts from Swann’s post:
“Obviously, I consider this a profoundly silly question, but to lurk among the BubbleBloggers and their seething commentariat is to acquire an education in a slice of America invisible from this side of the sewer gratings. Notwithstanding the idiotic economic analysis, which is really no worse than the static-market fallacies paraded as profundities in the pages of the Arizona Republic, these sites — and not just HousingPanic — are infested with a cult-like fever to inflict suffering — at second hand, to be sure — on people who are in fact guilty of nothing except failing to have drunk the BubbleBlogger KoolAde.”

“Will prices drop by the huge amounts HousingPanic and his flying monkeys seem to yearn for? This seems very unlikely.
What seems much more likely is that Phoenix will recover from the hangover of last year’s buying binge and get back to a steady rate of growth — historically 6% a year. The reason this should happen is very simple: Population growth.
Metropolitan Phoenix is a unique real estate market. While other cities experience static — or even negative — population change, The Valley of the Sun routinely adds 100,000 new residents every year. There is no reason to think this will stop — not now and not soon. The carrying capacity of Greater Phoenix is eight million souls, about 266% our present population. We will hit that number — but not until 2040 or after.”

Forgive us if we had to pinch ourselves reading this. Does this argument remind one of anything we’ve heard here recently?: “Unique” (yawn); “5% p.a. price increases”; “40,000 new residents per year”; “steady immigration growth until 2050”. Why, it’s the “ Limitless Demand Argument For Ongoing Market Strength” that we hear proposed repeatedly by Vancouver RE bulls.
Anyway, that was then, and this is now: see the ‘Bull Hubris‘ sidebar for an ongoing collection of made-in-Vancouver puffery.
– vreaa

[with hat-tip to Gord]

“Intuition and Instinct” Reassures North Vancouver ‘Residential Designer’ – “We’ll be able to weather whatever market storms come our way.”

“I’ve intuitively felt that our housing values in Vancouver, specifically here on the North Shore, are not artificially inflated but rather reflect desirability of the locale and the limited supply of buildable land that our topography permits. Our communities on the North Shore are delineated by a perimeter of mountains and ocean that creates one of the most beautiful locales on earth while preventing outward growth. The fact that we’re only minutes from a thriving, world-class metropolis suggests to me more than ever the adage “location, location, location.”
There are those who argue that the trap door will eventually drop but I suspect it won’t be anything so dramatic. My instinct tells me that we’ll be able to weather whatever market storms come our way.”

Kevin Vallely, a ‘residential designer in North Vancouver’, North Shore News, 28 Sep 2011

When it comes to markets, “intuition and instinct” send the very opposite messages to which one needs to pay heed, more often than not. – vreaa

“A Caucasian friend who owns a house told me that in 20 years time in Vancouver the only Caucasians left will be serving moneyed Asians. Does he intend to then sell for 10 million dollars and leave?”

“A friend (who has a house) told me that in 20 years time Vancouver will be populated by HAM [‘Hot Asian Money’], and that the only Caucasians left will be serving them.
Does he picture himself living in such a community, being Caucasian himself? Does he intend to sell for 10 million dollars and leave?
I thought I did not agree with that vision of the future, until I went to Telus World of Science and noticed bilingual exhibition panels: English/Chinese. Not other language. I will sent them a letter expressing my frustration as a non-Chinese ESL immigrant, since they made my kids feel like secondary citizens.”

painted turtle at 26 Sep 2011 8:06am

We personally don’t foresee that “20 years time” outcome, but we wouldn’t be at all surprised if a good number of local owners, who DO imagine this happening, are harbouring fantasies of cashing-out big and then leaving to retire elsewhere.
– vreaa

CTV Host Tamara Taggart – “Real Estate stories are always great, they never get tiring, you know?”

Tamara Taggart: When you want to buy a home, you want to buy a home now..!
Linda Steele: You do
T: …you don’t want to wait until 2013. Oh and, by the way very nice apartment [featured earlier in clip] they were looking at, I like it a lot
S: I know…
T: Gorgeous…
S: They didn’t buy it, by the way..
T: Oh, so it’s still on the market! (smiles and waggles head) … What about off-shore people… are they jumping at prices?
S: Well, that’s kind of a fiction, the Chief Economist of the BC RE Board says not true, a lot of people have heard these rumours, but only 2-3% of the buyers are foreign investors from mainland China, the vast majority are just recent immigrants who bought homes to live in and they are your neighbours and they’re staying.
T: There you go, thank you… Real Estate stories are always great, they never get tiring, you know? Thanks a lot.
– from ‘Is Vancouver’s housing bubble about to burst?’, CTV 27 Sept 2011 [time 2:50 onwards]

“On the one hand, I love real estate; on the other hand, real estate is fabulous!”

Taggart demonstrates the excitable frisson that many owners of appreciating homes in BC demonstrate for the sport of Real Estate.
Watch as glee turns to disgust in coming years.
Hardcore contrarian bears will only consider buying when CTV ‘news’ is completely and utterly devoid of any RE stories.
– vreaa

BCREA – The Bubble Hasn’t Burst So It Doesn’t Exist

“Well I guess the first question is, is there a real estate bubble at all? … We had a financial crisis, the largest we’ve seen since the Great Depression, we had an ensuing global recession, and if that isn’t a trigger or tipping point, for any kind of inflated market to see a major correction, I don’t know what is.”
– Cameron Muir, Economist, BC Real Estate Association
(from ‘Is Vancouver’s housing bubble about to burst?’, CTV 27 Sept 2011)

The argument is that the bubble hasn’t yet imploded so it doesn’t exist.
– vreaa

“I do not see this trend of rising house prices in Vancouver ending until in-migration stops, likely not until 2050 when the world population is forecasted to be peaking.”

“I do not see this trend of rising house prices in Vancouver to end until this in-migration stops .. likely not until 2050 when the world population is forecasted to be peaking and Canada has perhaps 50,000,000+ people !
People come here because the scenery is spectacular, air is clean, flights are plentiful, low corruption, law & order, great education K-12-Uni .. and because house prices are still reasonable compared to other world class cities like Singapore, London, New York, Munich, Paris, Moscow, HongKong.
Yours Sincerely,
Thomas Beyer, President
Prestigious Properties Group”

RE Talks, 21 Sep 2011 3:22pm

Another post for our collection of ‘Limitless Demand Argument For Ongoing Market Strength’ personal opinions. – vreaa

“A buyer from China bought the remaining 20 townhouses of a project in Langley. He is not looking to flip, he believes prices will go up.”

“Just had dinner with a close friend. He is not realtor. But he helps facilitate rich chinese buyers to locate investment opportunities in lower mainland. He said he just helped a buyer from China bought the remaining 20 townhouses of a project located at 208 st and 82 Ave in Langley.
While this is not the first time we hear someone from China spend the mega bucks on houses here, a few comments my friend made were pretty interesting.
1) the buyer never saw the site. He is in China but his wife and children will come soon. which means they already got the immigration paper. He sent his assistant who used to live in Burnaby to come back to close the deal
2) according to the assistant, people like his boss considers houses liquid investment instead of real assets

3) the buyer is not looking forward to flip, he believes price eventually will go up
4) seems the developer provides the buyer rental guarantee for the 20 units
5) the assistant also helps his boss to close 2 deals in West Van
6) the buyer is also looking for opportunities here for property with business, like hotels, or retirement care facilities.”

unicas, at RE Talks, 10 Sep 2011 7:36pm

When prices start dropping, this kind of demand will turn into supply, perhaps precipitously.
RE is not a liquid investment, it can turn ‘illiquid’ in an instant.
– vreaa