May 2017 – REBGV New Average Sale Price Highs:
May 2017 – REBGV New Average Sale Price Highs:
What has this got to do with Vancouver RE? you might ask.
An excellent question, dear readers.
Ok, so the references are oblique, and we don’t fully understand them ourselves.
And, while we’re talking about elusive understanding, we don’t understand why anybody would spend a gazillion dollars to buy (lease?? test drive???) a car that is shorter than a fire-hydrant is tall…
I mean, think about it.. the fire-hydrants are looking DOWN on you when you drive past lying down in that thing…
Nostalgia for go-karts may have something to do with it.
We’ve never understood the appeal of these cars.. their engines sound like sewing machines..
Anyway, believe it or not, but this incident became a full article in what’s left of our city’s only newspaper.
Slow news day?
Back to possible RE associations:
Going too fast. Hubris. Unexpected obstacles. Superficially powerful but actually very fragile. Look at me I’ve got lots of money. Vulnerable. Walk away from deposit.
During the first two weeks in May, according to preliminary data from Toronto Real Estate Board, home listings surged 47% from the same period last year even as sales plunged 16%. The average selling price dropped 3.3% from April – and this, after a 33% year-over-year spike in home prices in March and a 25% surge in April. Something is happening to Toronto’s blistering house price bubble.
It comes after Bank of Canada Governor Stephen Poloz warned in April that home prices are in “an unsustainable zone,” that the market “has divorced itself from any fundamentals that we can identify,” that there was “no fundamental story that we could tell to justify that kind of inflation rate in housing prices,” and that “It’s time we remind folks that prices of houses can go down as well as up. People need to ask themselves very carefully, ‘Why am I buying this house?”’
“We are seeing people who paid those crazy prices over the last few months walking away from their deposits,” Carissa Turnbull, a Royal LePage broker in the Toronto suburb of Oakville, told Bloomberg. She said they didn’t get a single visitor to an open house over the weekend. “They don’t want to close anymore.”
“Definitely a perception change occurred from Home Capital,” Shubha Dasgupta, owner of Toronto-based mortgage brokerage Capital Lending Centre, told Bloomberg.
“In less than one week we went from having 40 or 50 people coming to an open house to now, when you are lucky to get five people,” Case Feenstra, an agent at Royal LePage Real Estate Services Loretta Phinney in Mississauga, Ontario, told Bloomberg. “Everyone went into hibernation.”
In Canada, the theory has spread that real estate values can never-ever go down in any significant way – on the theory that they always go up – because they didn’t take a big hit during the Financial Crisis, and because the prior declines have been forgotten. So optimism about rising home prices had been huge. Now weekly polling data by Nanos Research for Bloomberg is showing the first signs of second thoughts. Two weeks ago, the share of people saying home prices would rise in the next six months was a record 50.1%. The following week, it dropped to 47.7%. In the most recent poll, it dropped to 46%.
But those who are able to sell at what appears to be the very tippy-top of the market are not complaining. Bloomberg cites business school professor Michael Hartmann who put his north Toronto home up for sale on May 17 sold it on May 22 for C$1.65 million, C$10,000 above asking price. He and his wife are planning to rent and see.
Prices haven’t started to drop yet, so can’t really say… But, could be.
I particularly like the BOC Governor’s suggested question from April: “People need to ask themselves very carefully, “Why am I buying this house?”
Exactly! Regular readers here will know we’ve been discussing this point for years.. If even part of the answer is “because the price will go up”, the buyer is a speculator.
The Bank of Canada is keeping its key interest rate unchanged at 0.5 per cent as it weighs the clashing forces of falling inflation and a surprising burst of economic growth.
But the central bank warned Wednesday that both factors may be temporary.
The torrid growth in the first quarter – now on a pace to hit 4.7 per cent annual rate – will be followed by “some moderation” in the April-to-June quarter, the bank said in a statement. In April, the bank had forecast 3.8 per cent GDP growth in the first quarter.
Wednesday’s decision marked the 15th consecutive time since July 2015 that the central bank has left its key rate unchanged. Most economists don’t expect the bank to begin raising rates until at least early 2018.
“The main message is that the bank now clearly sees the balance leaning more to the side of raising rates, rather than cutting them,” Bank of Montreal chief economist Douglas Porter said.
The bank also acknowledged the hot Ontario and B.C. housing markets, noting that recent government efforts to stop speculation and risky borrowing “have yet to have a substantial cooling effect.”
“The Bank of Canada sees an economic boom in all the wrong places,” CIBC economist Avery Shenfeld said in a research note.
– from Bank of Canada holds rates amid boom ‘in all the wrong places’, G&M, 24 May 2017
Three-quarters of Canadian mortgage holders would be unable to manage a modest increase in interest rates.
– El Ninja, on VREAA, citing this Vancouver Sun report
I’ll just leave this here:
An economic analysis released on May 4 by the Desjardins Group predicted that the central bank may increase its benchmark rate by 0.5 percent per year starting in 2019, bringing it to about 2.5 percent by 2021. According to the Desjardins paper, that could mean a two-percent increase in variable and five-year fixed mortgages.
“It will make it even more unaffordable to buy a property,” Kadi said about the prospect of higher interest rates.”
– BlaMmO, on VREAA, citing this Georgia Straight article
Cheap money plus good story leads to housing bubbles.
Looks great on the way up, everybody loves it, especially the banks and the politicians. And owners, RE ‘investors’, Home Depot, kids with new trucks drywalling, [any poor value local item dependent on wealth effects].
‘Wealth’ is created out of thin air with every mortgage created. (Free money!)
Bonus extra level of juice if you’re importing some of the downpayments.
However, all pretty much a ponzi, and when you run out of air, what then?
The whole process in reverse really, really sucks.
This via email from a reader, who prefers to keep their name out of it, so here shared anonymously:
“I like reading your blog. Thanks for the perspectives.
The perspective that the Vanc prices are a “bubble” and “will crash”, implies that “it is all froth, no substance”, and there are no fundamentals behind what is happening.
I like reading your articles. However, l remain unconvinced about lack of fundamentals. Such as:
Globalization (ie sort of free movement of capital, people, products, information).
Low interest rates (ie:prices are about selling mortgage payments).
Low Canadian dollar make Cdn “cheap” (tanked to support oil exports).
Vancouver is a safe haven for rich people (ie: income tax evasion, no extradition, free education & health care as no income taxes).
BCLiberals and Fed’s are wealth managers for corporations/real estate & construction industry/etc. (ie: bought and rewarded by).
Property ownership is a right (ie owners and buyers can sell/buy how they like; just like for your car/used computer/etc).
Vancouver and area is a nice place to live. (for many reasons, not perfect, but nice). Some net 50,000 people moving here per year creates demand for housing.
Declining inventory of detached homes relative to all inventory (gobbled up for condos/etc).
Prices will not crash and stay low; rather they will fluctuate, but generally will follow inflation as minimum.
Vanc is not some industry dependent town that booms and busts; it has it’s own appeal/demand.
Not to say there are not issues. There are:
Public policies not in Cdn public interest.
Other sectors crushed by unaffordable housing.
And many others too in education, infrastructure, congestion, cultural.
Our governments can/should be doing more:
Buying up land in advance of transportation development (that is then allocated to public housing at cost, like how Whistler does; keeps cost lower).
Advancing mortgage money at Provincial rates.
Builds are done at cost, and exclude developers who add 20% profit to cost.
Rules to keep this housing in “affordable housing pool” (not allowed to be sold for “market”; see Whistler model, or Coop model?).
As a taxpayer – l am not in favour of subsidies. One taxpayer paying another kind of taxpayer. Not fair. And then tax payers are subsidizing the profits to banks, land developers, developers, speculators, etc. Not fair.
We need to shake off the concept that the free market solves social policies. The evidence is they don’t. The free market (made up of banks, developers, real estate industry, construction industry) can never ever sell housing that is affordable – not when their goal is “what the market will bear” or “sell to the highest bidder”, and maximize profits. Only a controlled gov’t intervention, at zero cost to the tax payer is fair to both taxpayer and those in need of affordable housing.
That there will be a crash? I don’t think so. Not permanent. Too many rich people/corporations depend on prices where they are. So does the gov’t who is both the silent partner (makes money) and wealth managers for these industries.
I think looking at what is “fair” for the most people, and “good” for all constituents, would be a more compelling perspective to effect helpful change on affordability. My two cents.
Thanks for these thoughts, Anonymous Reader.
I have many thoughts, but I’ll share just one:
Market participants (whoever they are) “depending on prices where they are” have never prevented market crashes.
Vancouver’s real estate market has attracted angry commentary from a wide variety of sources lately, and not just citizen activist groups rallying for affordable housing.
A couple of weeks ago, U.S. economist Michael Hudson sold out the Rio Theatre to talk about the city’s gone-sideways housing situation, which he compared to “a feudal society.”
Mother Jones magazine has a feature story about Vancouver in its current issue, Hedge City Blues: What happens when global elites invade your town?, which cautions that Seattle is next.
This week, local filmmaker Charles Wilkinson is releasing his film on Vancouver’s crisis, No Fixed Address, which opens May 2 at Toronto’s Hot Docs festival. The film will also screen at Vancouver’s DOXA Documentary Film Festival on May 6.
And in an unusual twist, a member of the region’s development community is incensed enough that he too is weighing in on our spectacular failure to regulate big foreign money.
Consultant Richard Wozny has been a key player in Vancouver’s development industry for 33 years and he just wrote a report: Low Incomes and High House Prices in Metro Vancouver. Mr. Wozny has, as he puts it, worked endlessly to make wealthy developers wealthier. Now nearing retirement, he says he wants “to give something back to society – a little knowledge the public should find useful.”
Mr. Wozny, whose company, Site Economics, has done the financial analysis and strategy for more than $120-billion worth of large-scale residential towers, shopping malls, suburban subdivisions and industrial parks, says he’s analyzed the financial feasibility of projects for all the major developers in Western Canada and the three levels of government.
He’s seen unprecedented financial windfalls in the Lower Mainland’s real estate market. Now Mr. Wozny wants to speak out on behalf of the losers: those residents who rely on their incomes to afford them a place in the property market, be it owning or renting.
He’s studied the situation and has come to several conclusions: that more supply is nothing but fuel for the unaffordability crisis; that house values that are wildly disproportionate to incomes indicate a high level of tax evasion; that government is failing to institute fair tax regulation to ensure infrastructure needs are met; and that all this “growth” is simply not paying for itself.
The result is that a basic necessity – housing – has become a low-risk profit-making tool.
“What would we think of someone who hoarded food? Why is real estate any different?” asks Mr. Wozny. Analyzing data from the Real Estate Board of Greater Vancouver and the Canada Revenue Agency, he found an odd inverse relationship between incomes and housing; the higher the house price, the lower the declared income; the lower the house price, the higher the income. In Vancouver, Richmond, West Vancouver and Burnaby, houses are routinely priced between $1.5-million and $3-million. However, taxpayers report “unusually low taxable median family incomes, well below the regional average.”
Richmond and Vancouver, says his report, are among the highest income-to-house price ratios in the world.
Meanwhile, in Port Moody, Coquitlam, Port Coquitlam, Langley and Maple Ridge, house prices are well below the regional average and reported incomes well above.
If tax returns are a guide, the suburbs are now the high-income earning areas of the region shouldering the greatest tax burden. Those closest to the central core appear to be scraping by with little income, despite their high-cost housing.
The only conclusion to reach is that incomes are not being reported, says Mr. Wozny. A segment of the population is effectively subsidizing a group that refuses to pay its taxes.
He makes the case that a home’s value is due almost entirely to its location within the city. It may provide shelter, but it is the roads and sidewalks, proximity to schools and amenities that determines its worth. The city, and public infrastructure, creates its value. But what of the buyers who capitalize on that value without putting anything back in?
“Over the past 30 years, private residential real estate has become more of an economic ‘free rider,’ enjoying speculative, low-risk increases in value generated by public investment, but avoiding making adequate contributions to the public realm which supports it,” he writes.
Because the majority of our infrastructure was built before 1990, we are continually drawing on that value with massive new developments. Government should be tapping the “vast fortunes being made in real estate” to ensure equal access to public infrastructure,” he says, echoing Mr. Hudson’s argument for far heftier taxes on speculative buying.
“The growth has not paid for itself. Much of the infrastructure is relatively dated and paid for by a generation that was far more generous, and we are drawing down on that, compromising the quality of life without growing the infrastructure. We are creating congestion, whether it’s traffic, or at the hospitals or universities, whatever. There is plenty of money in private growth, so the growth should at least pay for itself. Why should government and the people in the middle foot the bill?
“Somebody doesn’t spend $4-million on your house alone. It’s the region they are buying, not the house. It’s the community that makes it special. It wouldn’t be worth anything if the community were to decay. That’s what we don’t understand.
“Obviously something terrible is happening – the money flooding in is not a sign of a healthy functioning capitalist market.
“The only group at fault are politicians who want growth without having to pay the requisite cost.”
Another group might also be at fault: the general population.
Mr. Wilkinson, whose film will screen in Vancouver at Simon Fraser University on May 6, says a challenge he faced during the filmmaking was the general apathy of average people. He edited down discussion about big inflows of foreign money and corruption because the topic got the thumbs down from a mixed-demographic group he uses for feedback.
“Audiences don’t relate to it, they don’t get it,” says Mr. Wilkinson. “We had a bunch of stuff about corruption and money laundering and people kept saying, ‘I don’t get it. How does money laundering work?’
“Where we struggle with it is that people will often say, ‘So what? That’s just free money into our system, and money is good, right? Who cares if [buyers] are from another country or whoever comes here with $1-billion. It trickles down, right?’
“But they can’t get it in without breaking the law, which affects you,” Mr. Wilkinson says. “And there are people who say, ‘I don’t care if my community is disintegrating. I want to retire in Hawaii with an RV.’ I get that there are people like that and they are making a conscious choice.
“That’s the key focus of the show, for me, is the sense of community that I’ve always felt in Vancouver, and I see it’s under such assault.
“It’s been very frustrating.”
Instead of steering the viewer toward any conclusion, Mr. Wilkinson presents the facts of Vancouver’s affordability crisis in such a way that people can make up their own minds, according to their values. He includes interviews with David Suzuki, Bob Rennie, Raymond Wong, Seth Klein and Sandy Garossino, who is quoted saying: “We manufacture and export condominiums.”
Mr. Wilkinson became something of a media magnet when promoting the film in Toronto recently, because Toronto has entered the speculative frenzy that Vancouver has endured for years.
Toronto, he says, is even more vulnerable than Vancouver, because of its rich history of diverse ethnic communities. They will be crushed under the weight of gentrification, much the way Vancouver is losing its Chinatown.
B.C.’s economy, says Mr. Wilkinson, relies on the selling off of real estate instead of actual jobs, as a result of government inaction.
“It’s reached the point where we don’t have much to sell, other than the land itself. So when the Premier crows about how she’s created all these jobs, in a bizarre and macabre way, she has – by failing to impose any restriction on the real estate market. And of course it’s unsustainable, because there are no jobs anywhere else. When you drive past all these communities in northern B.C., everything is boarded up. Resources are simply gone.
“Jobs here are building speculative housing units.”
He wonders where this selling off of real estate to the highest bidder will eventually get us. Every time a home is sold for millions of dollars to a speculator, that home is likely forever lost to the local income-earner.
“Let’s assume everybody sells out and gets rich. What’s the plan – to build another city? But where am I going to go? This is my home,” Mr. Wilkinson says.
“I don’t feel the government really cares much about my interests, or anybody else I know, so everybody devolves into, ‘every man for himself.’ And that’s the antithesis of community.
“We’re Canadian. We weren’t supposed to be like this.”
– from ‘Housing talk gets louder and angrier in Vancouver’, Kerry Gold, G&M, 28 Apr 2017 [Whole article copied here, for the record. Hat-tip to The Auteur]
Strong feelings about RE are becoming more and more mainstream.
The ‘Anger’ factor is noteworthy. Extreme wealth inequality breeds anger. This is very, very bad for a society.
The mention of the ‘general population’ as a causative factor is good.
And don’t forget the banks allowing leverage with their mortgages, creating money from nowhere, fueling the speculation. Who needs to import money when you can create it from nowhere?
Under the B.C. Liberals, who are actually quite conservative, the gap between the super-rich and the rest of us has become a yawning chasm. For most, it has become harder to make ends meet. This demands fundamental change, not a softer tone. …
… B.C. Liberal Housing Minister Rich Coleman is laissez-faire about it: “My advice to my teens, start saving for the down payment. That is your future if you can build up that equity.”
With million-dollar homes, stagnant or declining wages and big student loans – good luck, kids.
Last week, Premier Christy Clark built on this train of thought at the leaders’ debate. “You know what you need to be able to afford a house? You need a job,” she said. Yet, unemployment is up everywhere but the Lower Mainland and Vancouver Island.
– from ‘Anger Brewing in unaffordable BC’, Garth Mullins, 24 hrs Vancouver, 23 April 2017 (with quote augmented based on Frances Bula tweet)
Meanwhile, who would benefit from the fruits of all that hard work?….
From Jan 2016:
Surging real estate values added $2.3 million to B.C. cabinet ministers’ personal wealth this year alone, as the government says coming measures to ease housing affordability won’t include any that lower prices.
One minister saw her four properties jump $765,000, more than five times a minister’s salary. Another saw gains on a portfolio of eight homes. On average, ministers made $103,000 – more than an MLA’s salary, according to a review of public records by CTV News.
It’s natural for those ministers to welcome their own wealth boost, but they have to realize how their eye-popping gains translate into tremendous hardship for young people trying to get into the notorious Vancouver property market, said UBC professor Paul Kershaw.
“We can’t start with the presumption that housing price increases are a good thing. Housing prices that have outpaced incomes is remarkably bad news. It’s turned Vancouver into a generational ghost town,” Kershaw said, referring to how hard it is for young people to buy in neighbourhoods where they grew up.
Goya’s ‘Saturn Devouring His Son’ (1819-1823):
“If you look at the value of the dirt, there’s just no possible way that just having a stand-alone gas station makes any kind of sense financially,” Tsur Somerville, director of the University of British Columbia’s Centre for Urban Economics and Real Estate, told CTV Vancouver.
Downtown Vancouver’s second last gas station was recently sold to a development company for a staggering $72 million. That sale prompted the owners of Downtown Vancouver’s last gas station, an Esso located at the intersection of Burrard and Davie Street, to put their property on the market too.
And while that may be good news for condominium developers, Stephen Regan, executive director of the West End Business Improvement Association, says that selling the station will come with consequences.
“Losing a gas station, and possible the last gas station in downtown, is going to have some significant impacts, I think, for locals and for visitors,” he said.
The fact of the last fuel station in downtown Vancouver, here for the record.
BTW: If we were to make all decisions about what’s important in Vancouver based on the “value of the dirt”, where would that lead?
If we were to make all decisions about what we do with our lives based on maximizing income per time unit, where would that lead?
In a related sense, how does one measure success?
“Once considered Canada’s hottest locale for real estate, home values in Vancouver took a beating over the course of a year, with the average home price dropping from over $1.1 million in February 2016 to $995,583 a year later. …
Zoocasa calculated the loss (or gain) of return by taking the year-over-year change in average home prices and then dividing it by the down payment buyers would have had to make in February 2016.
By this measure, Vancouverites lost 49 per cent of the return on their down payments.”
– excerpt and image from ‘Vancouver homebuyers lost almost 50 per cent on their down payments in 1 year’, Jesse Ferreras, Global News, 28 March 2017
Yeah, it’s called ‘leverage’ – bliss on the way up, a real bummer on the way down.
Along with other factors such as no capital taxes on primary residences, it’s why RE speculating has, superficially, seemed like such a no-brainer in Vancouver for the last 17 years.
But it is on the descent where the piper gets paid… the ‘virtuous’ cycle turns ‘vicious’.
It’s noteworthy that the downside of leverage is now getting headline news.
At the time of posting, the only comment on the Global site was from a realtor complaining that the article was too negative, and suggesting that it’d be preposterous to suggest that there was high risk in RE. If this market crashes the way it very well could, many are going to be surprised. If a 10% swoon costs you 50% of your ‘investment’, what will a 30% drop cost you? Or a 50% drop? Not pretty.
A B.C. Supreme Court ruling will send shock waves through the arm of the Canadian real-estate market that is powered by foreign capital, say immigration lawyers.
The ruling targets a weakness in Canadian laws that often leads foreign owners of real estate in cites such as Metro Vancouver and Toronto to claim they are “residents of Canada for tax purposes” when they are not.
The landmark B.C. decision requires notary public Tony Liu to pay his client more than $600,000 because Liu failed to adequately determine whether the Vancouver house his client was buying for $5.5 million had been owned by a tax resident of Canada.
As a result, the Canada Revenue Agency did not get paid, at the time of the sale, the 25 per cent capital gains tax it charges non-resident sellers of Canadian property on any profit they make on the sale.
So the CRA later demanded the buyer pay the $600,000 in tax. The buyer, in turn, sued Liu, arguing Liu failed to discover the seller was not a tax resident of Canada.
The CRA considers people who don’t live in the country at least six months a year and don’t pay income taxes here to be foreign property investors and speculators and thus subject to capital gains taxes.
Three Canadian immigration lawyers said the CRA tax-residency rule is often not enforced, even in over-heated housing markets in Vancouver and Toronto that are in part fuelled by offshore money.
The complex ruling published this month by B.C. Supreme Court Justice Kenneth Affleck strikes to the heart of a gaping hole in Canadian tax, immigration and property-transfer law, say the immigration lawyers.
The B.C. decision is a stark warning to real estate agents, notaries and lawyers who fail to ensure that sellers of properties are truly tax residents of Canada, said David Lesperance, a tax and immigration lawyer based in Toronto.
“This truly is a game changer,” said Vancouver immigration lawyer Richard Kurland.
“It’s a precedent. Real estate agents can now get a knock on the door from the taxman, asking for the (capital gains) taxes that should have been collected by Ottawa, because the agent failed to make adequate inquiries.”
Sam Hyman, a Vancouver immigration lawyer, said the judge’s decision alerts purchasers to “the dire consequences” of making offers on properties sold by people who may be trying to avoid capital gains tax by falsely declaring they are tax residents of Canada.
Many buyers and their agents, Hyman said, are not being diligent in making sure the seller is a physical or tax resident of Canada, while others are being “cavalier” or “engaging in wilful blindness” about it.
The average price of a Canadian home sold in January was $470,253, just 0.2 per cent more than the same month a year earlier.
The Canadian Real Estate Association reported Wednesday that sales were down by 1.3 per cent during the month, to the second-lowest monthly level since the fall of 2015.
New government rules designed to crack down on speculation in the mortgage market came into effect in October and January’s numbers suggest they appear to be working.
“Canadian homebuyers face some challenges this year, including new mortgage rules that make it harder to qualify for a mortgage and regulatory changes that will push up mortgage financing costs,” CREA president Cliff Iverson said in a release.
“It will take some time to gauge the extent to which these challenges will weigh on home buyers in different housing markets across Canada.”
– ‘Average Canadian house price barely increased in past 12 months’, CBC 15 Feb 2017
Longtime (and long-suffering) readers will recall that our premise has always been that, in markets such as Vancouver, people have overextended themselves to buy homes at prices far above fundamental value because they anticipate ongoing outsized future price increases. This is why we have called all buyers ‘speculators’. A significant price stall or pullback will test this hypothesis. Will buyers still be eager to overextend with the prospect of ‘barely increasing’ prices in future?
Speculators are almost all momentum buyers; they hate assets that are falling in price.
Whether we like it or not, B.C. has basically become a real estate economy. The BC Assessment office recently released numbers for 2017 showing that property values ballooned by a staggering $332 billion — 25 per cent — last year. This figure is more than five times the economic value of all goods-producing industries in 2015 combined and nearly double the size of our entire service sector that same year.
Not surprisingly, 90 per cent of the increased values from last year’s property gold rush were in the urban land bubble in the Lower Mainland, which increased by $298 billion in 2016. Real estate inflation within this tiny area, representing just two per cent of B.C.’s land area, eclipsed the entire provincial GDP — the actual goods and services produced by all British Columbians in 2015.
But is this real estate wealth actually real?
– excerpt and image from ‘We’ve Let Vancouver Become a Playground for Plutocrats’, Mitchell Anderson, The Tyee, 31 Jan 2017
No commentary required. – vreaa
This requires no commentary. – vreaa
“A man who made millions as a short seller on Wall Street by betting against the odds has turned his sights from the U.S. economy to Vancouver real estate.
Former trader Marc Cohodes spent decades betting against housing “bubbles” before they burst. Now he has his eye, and his money, on the local housing market, and he has a warning to homeowners and first-time buyers.
“It’s going to blow to complete and utter smithereens,” Cohodes predicts.
“I think the market probably topped in the spring of ’16 and I think all hell is going to break loose in Vancouver in 2017.”
Cohodes is so confident in his prediction that he’s betting against one of Canada’s biggest alternative mortgage lenders, forecasting a housing crash similar to the one south of the border in 2008.
“I witnessed some of the U.S. housing fiasco here, and I said to myself, if I ever see it again, I should speak out louder than I did,” he told CTV’s Sarah MacDonald.
So this time he’s speaking out, and his predictions are drastic.
Cohodes, who is now retired from trading, predicts that all of Metro Vancouver’s multimillion-dollar homes will see their value plummet by as much as 50 to 80 per cent.”
– CTV News, 30 Dec 2016
This happens regularly — Somebody from ‘the outside’, with knowledge of markets, takes a look at Vancouver RE and sees how much of a bubble it is… they rant about it for an article or two… then nothing proceeds to change. Robert Shiller called Vancouver the ‘bubbliest city’, what?.. 10 years ago? And we’ve regularly seen traders like Cohodes try to find ways to short our RE.
One of these days, one of these guys is going to get the timing right.
[Implied comment/joke about the challenges of timing markets intended].
RE matters aside, have a really good 2017, everybody. – vreaa
“The forecast for a double-digit price drop in Vancouver’s housing market makes for a nice or nasty surprise for 2017, depending on where you are on the property ladder, but experts say it still won’t make the city affordable.
Royal LePage CEO Phil Soper said prices are headed for double-digit decline in 2017 as buyers drop out of the market.
“Home prices had got so out of whack with the growth in underlying wages and salaries that there had to be a correction,” said Soper. “And it’ll happen in 2017.”
– ‘above the fold’ front page headline in The Vancouver Sun, 22 Dec 2016
A realtor citing fundamentals. Times are indeed changing. – vreaa
Listing prices for detached homes appear to be falling as Vancouver’s real estate market faces what an expert calls “significant headwinds.”
Data released Friday showed that those looking to buy a single family detached home in the city last month forked over about $1.5 million in Metro Vancouver, but recent listings suggest that the benchmark is falling.
CTV News found a number of East Vancouver homes priced under then $1 million mark during a search of MLS listings on Monday, including one that sold for $560,000 below the initial asking price.
That home, located in Renfrew Heights, was initially listed at $1.36 million in August, but sold for $800,000 in mid-November.
Sutton West Coast realtor David Hutchinson has been tracking plunging prices and found several detached homes listed below $1 million, some of which had been recently renovated.
“If you want to sell, you have to be priced sharply, and you see a lot of price drops,” Hutchinson told CTV.
Sales have slowed and prices are beginning to soften. Fundamentals remain shockingly poor, and there are ‘headwinds’ like rising mortgage rates and financing restrictions. 2017 will tell whether this is the beginning of the crash we’ve expected for years. – vreaa
VICE: People often choose buying over renting because there is stability and community for family life. What changes when we stop buying houses?
Milevsky: We suddenly lose the stickiness of our labour force. It’s very important for Canada to have more than just high wages keeping us here. The last thing we want is to be a commodity labour market. What’s stopped us from doing that is the connections we’ve had to our community. If the younger generation sees housing as unaffordable and uninteresting they’re more likely to move internationally.
People may lose their anchor to a particular geographic location. I want my neighbourhood park to be clean and green and well maintained. If I just live their temporarily, do we lose our interest in the environment beyond our immediate needs? There’s also the transient nature of politicking. Who are your constituents if communities change?
Kershaw: If you opt out of home ownership, you opt out of the most secure opportunity for starting families and to have your kids in the same school, childcare, and community. Home ownership has also been a route to get access to the ground and playing outside. Renting in bigger cities is not having the kind of stock suitable for families. Big cities aren’t losing 20 somethings, it’s when the biological clock starts ticking you see a bit more of an exodus.
If renting is going to become a common practise for adults, systems such as childcare need to be improved. I’d like my child to be in the same childcare space for a few years. I don’t want to move around from neighbourhood to neighbourhood because I’m being evicted because my landlord can make more on other renters. We need to think about how renting can create that kind of security.
Finance Minister Bill Morneau introduced tighter new mortgage regulations last month, requiring a “stress” test for borrowers of Canada’s most common mortgage, the five-year fixed-rate.
It requires borrowers to qualify for loans at the Bank of Canada’s posted rate, which is about two percentage points higher than current offered rates.
Of course, most people aren’t going to see a pay raise of 20 per cent or more this fall, so the likely outcome of the new mortgage rules will be a decline in home sales (something the Finance Department itself predicted) and slowing or declining house prices.
In Toronto, you’ll need nearly 25 per cent more income (an extra $29,000 or so) than before to afford an average house, while in Vancouver you’ll need 27 per cent more — an extra $33,000 in income.
Fortunately, in Vancouver there is no relationship between income and housing prices. So this new rule is unlikely to have any effect. -ed.
“Vancouver has launched a new initiative to develop an inventory of its assets – everything from buildings and cars to its awards programs and even its website – that could make good candidates for sponsorship and naming rights.
The Vancouver consultant is being asked to look at the policies in other cities and then “develop the criteria to identify all marketable components (i.e. programs and facilities) associated with those assets and determine the type of sponsorships that can be leveraged, such as naming rights for a facility.” In addition, it will need to explain why some assets are not appropriate for naming rights or sponsorships.
The final report is supposed to “provide the City with realistic revenue projections and return on investment based on various sponsorship/agreement terms (e.g. 5, 10, 15, 20 years)” and “suggest how the city can maximize the market value of these assets or potential revenues via targeted sponsorships and bundling.”
“Berlin and Vancouver are very, very different cities. Just culturally, it’s extremely different. I went to Berlin because I was making music and art consecutively and it was a place where you could afford to have space and time, which was a tricky thing in Vancouver, and continues to be a very tricky thing as an artist. So Berlin allowed me time, more than anything. Time to work on my art because I wasn’t on this insane anxiety of the financial pressure of the city. So, the working is different. In Berlin you have to be quite self-motivated, because you can easily just go down a hole and not work, because of the lack of pressure to pay your bills. I still love Vancouver deeply and it’s where I’m from, but at the moment Berlin is where I call home.”
– Artist Jeremy Shaw, winner of the 2016 Sobey Award, in interview with Canadian Art magazine 1 Nov 2016
It was a mock proposal so realistic that, for a moment, Toronto collectively gasped – was Old City Hall really being turned into a condo? The artists behind the stunt, self-identified ‘urban interventionists’ known only as Glo’erm and Tuggy, intended to spark outrage when they erected a fake public notice last week. They wanted people to be angry – so angry that they started caring about how this city is developing.
“In the real estate frenzy this city is experiencing, it feels like nothing is too sacred not to be considered for development. Our faux proposals featuring Toronto’s most beloved buildings address our concern that the development proposal process in this city is broken. How many of us are meaningfully included in the shaping of Toronto?”
– Daniel Rotsztain
Vancouver and London came first and second on the 2016 list of cities most at risk of real estate bubbles. Bubble risk was also evident in Stockholm, Sydney, Munich and Hong Kong: house prices in these six cities have increased by nearly 50% on average since 2011. The average price rise in other financial centers has been less than 15%.
Who is to blame for this latest global bubble? Why your friendly, local central banker of course.
As the WSJ summarizes, loose monetary policy at global central banks is a key driver behind rising prices, the report claims. Low interest rates have pushed investors to hunt for returns in tangible assets, “so it is hardly any wonder that housing markets are again overheating,” according to report authors Claudio Saputelli and Matthias Holzhey. …
Meanwhile, Vancouver house prices have been significantly overvalued since 2007, according to UBS. The culprit there is not so much the BOC as the PBOC: until recently Vancouver served as the primary offshore target for Chinese money launderers, which neither the financial crisis nor weakening commodity prices managed to dent. However, this bubble now appears to have finally burst after the provincial government of British Columbia introduced a 15% transfer tax on foreign home buyers in August, leading to a crash in the most expensive local housing segments.
– from Zerohedge, 27 Sep 2016
Vancouver RE, ‘Overvalued since 2007’. Care of weak monetary policy, and strong local narrative. – vreaa
“We need to recognize that living in a great place may just be more expensive than some people want it to be.” [6:30]
For this and lots of similar material, watch the Video from BNN 12 Sept 2016
The headline reminds us of Stevie Smith’s ‘Not Waving but Drowning‘. -vreaa
“A Vancouver accountant told The Globe that she and her colleagues see questionable real-estate transactions all the time, which they believe have contributed to skyrocketing prices. “This has become a huge mess. You have no idea how angry I am,” says Corina Ciortan. “A generation of people has been screwed. It’s so obvious. Everyone I work with is so angry because there is a select group of people who have profited from this.”
One of the Vancouver homes Mr. Gu flipped sat vacant for three years, in a city where many people can’t find a place to live.
Ottawa says it is studying the issue, and B.C. has brought in a tax on foreigners who buy residential real estate in Vancouver. But those who see firsthand how real estate is traded like stocks and bonds say this isn’t nearly enough. “We have governments that are not doing their job,” argues Mr. Lazos, who acquired his inside knowledge while working for Jun Gang Gu, also known as Kenny Gu, a former civil servant originally from Nanjing, near Shanghai.
Mr. Gu came to Canada in 2009 under Ottawa’s now-defunct immigrant-investor program, which gave permanent residency to applicants who agreed to lend a significant amount of money to the federal government. He started out here as a developer, but the documents show that his business evolved to buying homes – using other people’s money– and then flipping them. His deals are financed with investor money from China and mortgages issued to those investors by Canadian banks.
In addition to holes in the tax system, speculators like Mr. Gu also rely heavily on Canadian financial institutions to give their clients multimillion-dollar loans. “They are using this money temporarily – to make more money – instead of using their own money,” Mr. Lazos says. “Then prices go up. We are making the bank richer and the Canadians poorer.”
Mr. Lazos says that his whistle-blowing will be worth it only if it jolts Ottawa and B.C. into action. And his reasons, at least in part, lie close to home: “I hate the fact that for my daughter and my grandchildren, there is no way they can own a house in this city.”
“As was largely expected, the first official data since the bursting of the Vancouver housing bubble following the 15% luxury real estate tax, was ugly: on one hand, the number of Vancouver home sales fell 26% from a year earlier, and tumbled by 23% comparted to July, to
2,489 transactions. Detached properties were hit hardest as sales dropped 45% from a year earlier. Transactions of attached homes such as town-houses dipped 25% and apartment sales were down 10%. On the other, prices likewise slumped, with the average price of detached Vancouver properties crashing 17% in just one month, and already down 0.6% on the year, to C$1.47 million in August, the lowest price since September 2015.
What is worse, is that what was until now a mostly regional housing bubble, is starting to spread in the form of a hit to Canadian consumer confidence. As Bloomberg reports, “a shifting real estate market in Vancouver led Canada’s consumer confidence index lower for a second week.” According to the BBG Nanos telephone poll shows, the share of respondents who see local real estate prices falling has almost doubled in the last two weeks, rising to 22.5% in the latest survey, up from previous readings of 20.5% and 12%. Conversely, the share of those who see higher prices fell to below 40 percent for the first time since April.”
“Three weeks ago, when we looked at the long-overdue sudden change in the Vancouver housing market, long a receptacle for Chinese hot and laundered money, we found that as a result of the implementation of the 15% property tax implemented by British Columbia (something we recommended over a month earlier), that the Vancouver housing bubble has burst.
We concluded this based on anecdotal evidence by local real estate professionals: “As a new dawn breaks in Metro Vancouver’s real estate market, realty companies and real estate boards are reporting the first anecdotes of deals falling through as foreign buyers forfeited deposits on binding deals rather than pay the new tax. Worse, if only for the unprecedented local housing bubble, and certainly better for potential local homeowners who were locked out from the massively overpriced market, they report evidence of local buyers withdrawing offers in expectation that the market will soften.”
Less than a month later, there is also hard evidence to confirm this assessment. According to Global News, evidence from realtors and MLS data is showing the Vancouver real estate market is in the midst of a major slow down, with prices dropping and sales plummeting.
While August is typically one of the slowest months for real estate transactions, MLS sales data from the first two weeks of the month shows what many have been hoping for during the last few years of escalating prices. According to realtor Brent Eilers, using MLS listing data, there were only three home sales in West Vancouver between Aug. 1 and 14 this year, compared to 52 during the same period last year. That’s a decrease of 94%.”
Global News obtained MLS sales data from several key Metro Vancouver markets and found the number of homes sold during the first two weeks of August in Greater Vancouver dropped by 85% on average. Richmond experienced a 96% drop in the number of sales and Burnaby North fell by 95%. Vancouver’s West Side, West Vancouver, and Coquitlam also took major hits.
It appears that the Vancouver housing market has slammed shut.
Which is hardly a surprise: virtually everyone saw it coming, the only question was when. Eilers says he’s been warning of a real estate slow-down for at least a year due to the region’s unsustainable and unsupportable prices. West Vancouver, where he does a large part of his business, had a benchmark detached home price of almost $3.4 million in July according to the Real Estate Board of Greater Vancouver.
“The market in West Van is up 450 per cent since 2001. So is everyone making 600 per cent more income than they were so they can pay their taxes and buy their houses? Of course not. So how is this inflation been financed? By off-shore money and record debt.” Precisely what we said at the start of the year when we first heard horror stories about Chinese buyers paying cash, sight unseen, for any and every local luxury, and not so luxury home.
It appears that it is not just the 15% luxury tax implemented on on July 25 that has burst the bubble: according to Eilers sales were dropping even before the tax. According to the data, July was another slow month in West Vancouver with only 44 sales, down from 80 in 2015. June saw 74 sales, also down from 102 the year before.
The pattern has left the market “devastated”, Eilers adds.
While it may be too early to make a definitive conclusion, after all while earlier this month, the REBGV released its statistics for the month of July, saying the data showed the market had slowed down to “normal levels”, there was still no official August data available, and thus no actual indication of the slowdown. Fortunately for buyers, real-time data proves otherwise.
Zolo, a Canadian real estate brokerage, keeps track of MLS home sales in real-time and reports prices as an average rather than the “benchmark price” used by the REBGV. It currently shows a major correction underway in most Metro Vancouver markets. According to the website, the City of Vancouver currently has an average home price of $1.1 million, down 20.7% over the last 28 days and down 24.5% over the last three months. The average detached home is $2.6 million, down 7% compared to three months ago.
If the bubble has indeed burst, things are about to get very ugly. Eilers says that in the 1980 housing crash, prices dropped by 40 to 60% within a year and took six years to recover. “So your $2 million house became $800,000 in five months. There’s a lot of economists and a lot of wise people that believe that our financial structure is much closer to that structure from a corrections’ point of view,” Eilers explained.
One thing, however, appears certain: the foreign money influx has stopped. Zolo’s CEO says the foreign buyer tax has certainly stopped speculative buyers. This has caused many other buyers to take on a “wait and see” approach, which has essentially frozen the market.
News of the foreign buyer tax has spread to China, where Chinese real estate website Juwai now promotes other Canadian cities as foreign capital destinations. The website used to promote Vancouver as one of the best places for wealthy Chinese to invest, but has now switched to publicizing Calgary and Alberta due to the tax.
Which means that while one bubble is bursting, another is about to start, even if it is smack in the middle of Canada’s bleeding oil patch.
That said, this is good news for ordinary Vancouver residents. NDP MLA David Eby says the tax has caused a lot of people to hit the pause button on buying homes, but all those people might come back into the market in September. Despite his reservations on how the tax was implemented – he would have preferred an incrementally-increasing tax – he says a market slow down is good news.
“A lot of people have said to me quietly that they hope there is a substantial housing crash.”
Well, it appears they got what they wanted. Now the only question is what happens once Vancouver “corrects” by 30%, 40% or more – will the Chinese buyers stay away permanently or, like a good S&P500 algos, simply BTFD. We will have the answer in a few months.
As the article says: “If the bubble has indeed burst, things are about to get very ugly.” – vreaa
The important thing is not the direct effects of the tax itself, it is the effect that this may have on the story that locals are telling themselves about Vancouver RE.
From what I informally overhear, many people are talking about the effects of this tax.
If enough people believe that this will lead to dropping prices, drops will occur.
Local owners intending to sell will hurry to realize paper gains; Local prospective buyers will evaporate (see Spot the Speculator).
Speculators abhor falling prices.
Momentum speculators (off-shore and local) will withdraw.
Locals intending to buy far, far above wage or rent determined fundamental values will stay away if they can no longer be ‘certain’ of future price gains.
A market like Vancouver RE circa 2016 (25% gains in the last year!!) is dependent on ever rising prices to suck in new buyers.
Once it is seen, or believed, that Vancouver RE prices can drop substantially, at what level will prices stop falling?
[50% of uber-astronomically-overvalued is still substantially over-priced.]
Speaking on Global BC News Morning, Cohodes made it clear that he has no personal stake in the Vancouver real estate market.
Cohodes said he wants to speak out about the housing market in Vancouver because he feels strongly “people are being taken advantage of.”
The Greater Vancouver real estate board says the benchmark price of a detached home in Vancouver hit $1.56 million in June, which is up 38.7 per cent in one year.
“I think it’s a money laundering-induced market,” said Cohodes. “Where the local politicians, or the BC Liberals, are kept or in cahoots with the real estate brokers, developers, lawyers, that angle. And they have sought Chinese money to keep the market propped up and it won’t last.”
“China has capital controls on and Vancouver has become the money laundering mecca of either the world or North America and something is going to change and change drastically.”
Cohodes said if the provincial government doesn’t step in to change the market, they’re going to be voted out.
“This is sheer insanity,” he said. “What’s going on is you’re pricing local, hardworking people out of the market and as I’ve said before, the housing market in Vancouver resembles the Vancouver stock exchange and penny stocks many years ago and that didn’t end well at all.”
Finance Minister Mike de Jong has said he does not believe Vancouver is in a real estate bubble, to which Cohodes said “he’s full of more crap than a Christmas turkey.”
“The market is ridiculously high and Christy Clark goes and takes real estate people over to China.”
“They have the records,” said Cohodes,” they just don’t want people to really know or they don’t want people to know the truth.”
In a statement to Global News, de Jong said:
We continue to work with both local governments and the federal government to address issues in Vancouver’s real estate sector, particularly to help bring new supply of homes to the market at affordable prices, and acting on concerns about regulation and enforcement. The premier announced last week that the province will end self-regulation of the real estate industry, and further steps aimed at helping make homes more affordable for the middle class will follow in the near future.
Cohodes said he has solutions to fix what the “issues are” but B.C. politicians don’t want to “take the medicine because their livelihoods depend on this.”
According to Cohodes, people who buy in this market will only become “debt servants for the rest of their lives.” He said when Vancouver’s market does tank or collapse, people are going to lose a generation of savings and equity.
“It’s fueled by a money laundering bubble that politicians don’t want to end.”
“At some point, bubbles burst.”
– from ‘Vancouver’s real estate is ‘fuelled by a money laundering bubble’: Market analyst’, Amy Judd, Global News, 5 July 2016
Prime Minister Justin Trudeau says his government is concerned about the ballooning cost of housing in Vancouver and Toronto but it wants to be certain any action it takes doesn’t make the problem worse.
Speaking Friday morning on CBC Radio in Vancouver, Trudeau said any solutions will require collaboration between all levels of government, as well as academics and stakeholders.
He said overseas money is playing a role in fuelling superheated markets such as Vancouver, where the average price of a single-family detached home is $1.5 million.
But Trudeau cautioned that any federal measures to cap soaring house prices could backfire elsewhere in the country.
He said officials are examining Australia’s decision to tax homes owned by foreigners, but warns federal levers to curb offshore ownership in Vancouver or Toronto have the potential to harm other regions of the country where overseas investment can be beneficial.
Trudeau was scheduled to attend several events in Vancouver on Friday, including a roundtable on housing affordability attended by industry experts and several Metro Vancouver Liberal members of Parliament.
“How do we make sure we are helping people (in Vancouver) in exactly the right and targeted way,” Trudeau said. “That is where the kind of collaboration we haven’t had for 10 years between the federal government and different orders of government is so important to work on together.”
Most Vancouver homeowners know the inflated housing market must be stabilized, because the current trajectory “doesn’t have any good outcomes,” he added.
But any action must not completely devalue those people whose retirements and equity are tied to their homes, he said.
“We just have to make sure we are keeping people protected in how we stabilize it.”
It’s going to be interesting watching Trudeau and his surrogates try to land a B52 on a sail-boat.
In a Bubble, it is beyond the powers of government to orchestrate either ‘stability’, or a ‘soft landing’. -ed.
Correct Answer: “No good reason.” (full marks plus bonus)
Alternative Answer: “It’s a Bubble, Stupid.” (full marks, but no bonus due to unnecessary impoliteness)
Incorrect Answers: “Supply and Demand”, “Everybody Wants One (or two or three)”, “The Views”, “Only Insiders Will Be Able To Live Here”, “Because Downsizers Are Richer Here”, “We Are Running Out Of… Fresh Air?”
Points Further Deducted For Any Answer Qualified With: “Last Year I Made More Money In RE Than In My Last 20 Years Working As A (xyz)” or “What Else Are You Going To Do With Your Money?”
Back of the Class: “(anything involving the words ‘Property Ladder’ or ‘Bullet-Proof’)”, “I’ll Get Rich, Rich I Tell You!! (manic laughter)”
Obliquely related story:
Major condo developers in Vancouver are shutting out average buyers by selling their most affordable new units privately – to clients of select realtors and “family and friends” – before their advertised sale dates, The Globe and Mail has learned.
Eager buyers camp out in lineups for hours or days before the sales events. Thousands also sign up online to get “VIP” access, only to find out on opening day they had no chance. Several have said they were then invited to buy something more expensive.
Mr. Rennie said developers advertise to the public as a sort of fallback policy. If the insiders who get first dibs do not buy enough units, they can sell what is left to the next tier of interested buyers.
Toronto realtor Andrew la Fleur said condos are selling out to insiders in that hot market, too. He said he is one of the few agents whose clients get first crack at properties before the public. He estimates 95 per cent to 100 per cent of new condos are sold to insiders that way. “I think the public is just unfortunately misinformed or uneducated,” Mr. la Fleur said. “Those of us in the industry can see this coming a mile away and we know how to get our clients in at an opportune time.”
However, he said he does not think most units in Toronto will be flipped, because condo prices are not increasing in that city like they are in Vancouver.
– from ‘Vancouver developers shutting out regular buyers with insider condo sales’, Kathy Tomlinson, G&M, 17 Jun 2016 [hat-tip 3rdRock]
So profound, it deserves to be said again:
“The average price of a single-family detached home in the Greater Vancouver area has increased as much in the past five months as it did from 1981 to 2005.”
– from ‘World Out Of Whack! Which of these crazy real estate markets will be the first to bust?’, Zerohedge, 16 Jun 2016
After surviving a serious illness and divorce, Denise Franklin was more than ready to start over. With a $25,000 budget, she approached architect Henry Yorke Mann to help her build a home fit for a fresh start in rural British Columbia. Mann saved money by severely restricting the size and material cost. Designing the 280-square-foot space in a mandala shape, Mann gave this home all the essentials and more. Franklin loves nature, and it was important that the home feel connected to the outdoors. A front porch reaches out into her front yard and vegetable garden. Mann used all natural and local materials — no synthetic or plastic materials were used in any part of the home. Durable, insulated metal roofing keeps the home well protected from the elements.
– from ‘Tiny B.C. cabin — at 280 sq. ft. — provides more than enough space to start a new life, and garden’, National Post, 14 Jun 2016
Watch The Money Go Round
“Given the rogue nature of the industry in this province, I’m not surprised someone calling for more transparency and professionalism would be considered a threat. In a sector that often seems unregulated, it has never been easier to make gobs of cash – legally or illegally. Few want to jeopardize the dynamics that are allowing many to get filthy rich very quickly.”
– from ‘Oversight of British Columbia’s housing market is a sham’, Gary Mason, G&M, 31 May 2016
“Representatives of two real estate companies are traveling with the B.C. Premier on a trade mission to Asia, raising questions about the optics of the perceived partnership at a time when many are calling for an end to foreign real estate investment.
The B.C. government lists more than 60 companies taking part in the trade mission to Korea, Japan and the Philippines as part of the province’s strategy to create more international trading partners.
Listed among those companies are two real estate brokerages Nu Stream Realty and Sutton West Coast Realty.”
“It’s bad optics,” said University of British Columbia business professor Tsur Somerville.
“At a time when people in the Lower Mainland are very concerned about the extent to which foreign capital is driving up prices here and contributing to affordability options, it seems a little bit politically dicey to take [brokerage] firms … along on a trip to Asia.”
– from ‘B.C. real estate companies join Christy Clark on trade mission to Asia’, CBC, 28 May 2016 [hat-tip 3rdRock]
The interests of BC Liberal Party donors who fund Premier Christy Clark’s salary top-up appear to be determining the government’s response to the housing affordability crisis in the province, says NDP critic David Eby.
A lot of BC Liberal donations come from wealthy people in the real estate industry, and the party’s person in charge of keeping them flowing is himself a top marketer of condo developments, Bob Rennie.
A recent City of Vancouver study found that roughly 12.5 per cent of condos in the city are empty, Eby said. And yet the government has declined to take steps to discourage owners from allowing condos or other homes to sit empty.
Asked Eby, “Why would [Clark] rush to put an additional tax on international investors holding these condos empty if she’s getting major donations from luxury condo builders who want this to continue?”
Clark confirmed this week that she has personally received in total more than $300,000 from the BC Liberal Party in annual stipends since she became leader in 2011.
Elections BC’s database of political contributions shows many people and companies involved in the real estate industry gave the BC Liberals donations in the tens of thousands of dollars in 2015, the most recent year for which figures are available.
Names appearing near the top of the list, each having given at least $50,000 during the year, include the Aquilini family, Bosa Properties Inc., Concord Pacific, Developments Corp. Inc., Shape Properties, and developers Rick Ilich and Peter Redekop.
The fundraising chair for the Liberals is condo marketer Rennie, whom The Tyee recently reported gave the party $73,500 in 2015.
“Bob Rennie’s a great example,” Eby said. “Here’s a guy who is one of the most famous condominium sales agents in North America who is running the fundraising for the Premier who refuses to put a tax on speculative investors driving up the prices of condos in Metro Vancouver.”
People can’t help but ask questions about Rennie’s involvement in the party and how it might affect Clark’s policy choices, said Eby. “Why is she refusing to act? Is it because the chair of her fundraising committee is a condo salesman? That is a legitimate question in my mind and one we should all be asking.”
– from ‘Clark’s Pay from Donors Too Tied to Real Estate Moguls’, Andrew MacLeod, TheTyee.ca, 2 May 2016
Gayle Swain shared the story of her outof-the-ordinary Vancouver-born parents while sitting at a sidewalk table with four friends at Wicked Café, at Seventh and Hemlock. One of those friends was born in B.C., in Port Alberni, while two are immigrants, from Britain and the U.S.
The foursome had mixed feelings about what is happening to this fast-changing city, where relatively few have deep roots.
Even though they valued how the world’s cultures peacefully coexist in the city, they also regretted how in-migration has been a factor in the city’s fast-rising housing prices and in the way neighbourhoods are becoming “construction zones.”
When a flashy sports car interrupted their conversation by roaring down Hemlock, the friends also commented on how traffic in the city was becoming increasingly “aggressive” and “crazy.”
Justin Fung is among the Vancouver-born who are struggling with whether they should become more mobile.
Fung has a solid career in Vancouver’s high-tech industry. But he believes he could get more out of his salary if he moved to the Seattle or San Francisco areas.
Fung, his wife (also born in Vancouver) and young daughter squeeze into a small condo in Vancouver. “There’s no space to yourself.”
He believes the family could afford to live in a larger home, even a detached one, in the U.S.’s West Coast high-tech regions.
Many of Fung’s ethnic Chinese and Caucasian friends with children have already moved to the suburbs or other cities.
“But some are already coming back to Vancouver. They miss the city and there’s a long commute,” he said. “I feel frustrated at where this city is going.”
The key reason Fung’s family is trying to stay close to the west side of Vancouver is to be near his inlaws and parents, who immigrated to Canada from Hong Kong in the 1970s.
Fung attended Eric Hamber Secondary School, where he said the student population in the 1990s became 95 per cent Asian, most with roots in Hong Kong and Taiwan.
“There was a kind of cultural exchange when I was attending high school in Vancouver. But I think that’s largely missing now,” he said, adding: “There’s a general negativity” about Metro’s in-migration trends.
“I’m very pro-immigrant for the right kind of people, for those with skills who will bring innovation,” Fung said.
But, echoing the findings of UBC geographers and others, Fung regrets how the federal government has welcomed many “wealthy people who drive up housing prices and treat this as a resort town.”
When Fung visits his parents on the west side of Vancouver, he notices many of the neighbouring houses are empty. It’s leading, he said, to a “hollowing out” of the city’s culture.
Lorne Korman, a psychologist, is among the 16 per cent of Metro Vancouver’s population who have arrived from other Canadian provinces or territories. He was raised in Montreal and has worked in Toronto.
He finds Metro Vancouver’s inhabitants are “less connected” than Quebeckers and more “laidback” than Torontonians. “In Montreal, we knew all our neighbours. We’d always be having a cup of coffee or glass of wine with them,” said Korman, who came to B.C. a decade ago with his Chinese-Canadian wife.
Living in Richmond and working in Vancouver, he has found residents of the growing metropolis tend to be “friendly on the outside. But you can never quite know what’s happening underneath. They’re polite, they make eye contact, but they’re harder to get to know.”
Given the city’s high mobility rate, Korman isn’t surprised a Vancouver Foundation study discovered that “loneliness” is a leading anxiety of city residents.
Even though Metro has a reputation as a “Lotus Land” of nature lovers and yoga practitioners, Korman said he’s found it surprisingly right wing.
“The B.C. Liberals aren’t really liberals.” He thinks the predominance of right-wing politicians is due to an exaggerated individualism among the relatively transient population.
The clinical psychologist says residents have allowed B.C. politicians to cut mental-health services to the marrow, unlike in Ontario. Too many people in Metro Vancouver, he says, “have a let-them-eat-cake kind of attitude. People without a voice are being neglected.”
With house prices and rents soaring in part because of wealthy newcomers, Korman wonders about the future of community and the middle and lower classes. “Who is going to drive our buses and make art?”
He finds Metro Vancouver has a “surreal” quality. As he cycles each day to his Broadway office from Richmond, he notices how many grand-looking new houses are, despite appearances, vacant.
“Their sprinklers go on in the rain.”
“I asked Bing Thom about the changes. The property boom has, of course, been good for the architectural profession, but Thom, who is now in his early seventies, is troubled by what is happening to his home town. “By all accounts, I have done pretty well in my business, but I made more money from sitting on my Vancouver property than I made by working an entire lifetime,” he said. “That tells you something.” Thom was alarmed that consumption has effectively replaced production as Vancouver’s growth industry. “The city has become a hotel,” he said.
– from The Golden Generation, by Jiayang Fan, The New Yorker, 22 Feb 2016
“…a few dozen Vision Vancouver supporters and other Vancouver residents gathered at a Downtown Eastside coffee shop to hear [Vancouver city councillor] Geoff Meggs speak about “the urgent challenges” of housing affordability and skyrocketing home prices.
“Let’s be honest — for a long time we really enjoyed that ride. There wasn’t a lot of people complaining about the escalation of single-family home values until relatively recently. That love of speculative gains from land is something that’s part of — I think — our province’s DNA and it’s not good for us. We’re finally hitting the point where we see that it has very negative consequences for the majority of the population,” Meggs said.
“It’s not just a crisis for people in poverty. It’s not just a crisis for people who would like to live and work in the city of Vancouver, it’s not just a crisis for those who someday hope to buy a place,” he said, noting that the high market is harming the economy and social cohesion.”
– from ‘Vancouver’s housing market shows signs of overheating’, Vancouver Sun 29 Feb 2016
“The house at 3555 West 1st Avenue was built in 1912, is 3,400 square feet and sits on a standard 33 x 120 foot lot without a view,” Vancity Buzz notes. “The selling price of $4.23 million is about $1.6 million above the lot’s assessed property value.”
For his part, real estate agent Brandan Price is incredulous. “For it to go over $4 million is remarkable. I had five offers,” he said. “These were local buyers just looking to make a shift who wanted to move into this area.”
“They were willing to sacrifice lot size to move into this area.”
Maybe, but things seem to be getting out of hand and part of the “problem” may indeed be demand from investors attempting to find a home for capital they’ve moved out of China. As Thomas Davidoff with UBC’s Sauder School of Business told Vancity Buzz: “These prices are getting pretty freaking nuts in my opinion.”
“As a proposition for someone who’s going to live in that house and what you’re getting for four million plus – that is a ridiculous joke and that is not something that’s going to work for people who just make a living in Vancouver,” Davidoff says.
“If by cool you mean actually reduce the value of people’s major asset, their home, clearly we were not interested in taking that step,” said de Jong [BC Minister of Finance, and owner of 8 properties in Abbotsford]. …
Critics say the budget amounts to half-measures from a government that’s stuck between not wanting to intervene directly in the housing market and needing to look responsive to public frustration. …
“It [the tax break on new homes] will probably be effective to some extent but I don’t think you’re going to see a dramatic change,” added Ken Peacock, B.C. Business Council’s chief economist. It would be “very difficult” for government to change the housing market prices, he said.
– from ‘B.C. budget offers help to buyers of new homes’, Vancouver Sun, 16 Feb 2016
The announced tax break on new homes will have no effect on the market and no effect on affordability. If anything, it will juice the market further by a small amount – it will simply increase prices of said homes by the amount of said tax break, as (largely local) buyers continue to extend themselves into as much BC RE as they can afford, drunk with the certainty that riches will ensue. Only the cold hand of Mr. Market will eventually stop this trend. – vreaa
“I’ve made it a rule of life never to dislike people simply for what they have — dismissing them for being rich is as unpleasantly irrational as dismissing them for being poor. Neither wealth nor poverty have innate characters; they are both prone to their own turpitudes. But over years of travelling, I’ve discovered the contrary truth that the slums money makes are far more depressing and disgusting than the ones the absence of money creates. And Berkeley Street is a self-made money slum.
I also believe restaurants are a force for good. Nothing polices a street like a neighbourhood bistro, or evokes community and civic pride as a theatre of free assembly. They are society’s social workers, its romance, guidance and business advisers. But it is an incontrovertible truth that the tasteless stew of Berkeley Street has been created by restaurants.
There’s Novikov, with its oriental and Italian kitchens and meat-rack bar; and Nobu, which has gone from being one of the earliest fusion restaurants into an embarrassing playground of entitled youth and socially hapless sportsmen. Then there’s the newly opened Sexy Fish — packed and, as anecdotal gossip has it, with an average table spend north of £1,000. Most recently, Alan Yau has opened his long-anticipated, turgidly gestated restaurant.
As we walked down the road towards it, there was the honk of imperviously parked Mercedes, blacked-out Range Rovers and furious cabbies. The pavement is thronged with manically smiling young women who, while not actually prostitutes, have the look down pat, with smartly streamlined faces and angry mouths, sucking the life out of cigarettes, black eyes sliding over the ranks of young, stateless men dressed in awkward collections of branded expense, guarded and manoeuvred by platoons of doormen, bouncers, bodyguards and muscled maître d’s.”
– from AA Gill reviews Park Chinois, Mayfair W1, Sunday Times UK, 10 Jan 2016
“Recruiting talent to this city is easy, but retaining it is not. The engine of startups and innovative businesses are its people, and when highly educated folks making six figures still can’t afford to live in your city (and it takes over an hour’s commute to get to downtown from slightly more affordable areas), you simply don’t have the conditions to grow a knowledge economy. Businesses like the one I work for typically move to more welcoming ecosystems, and so too with them will go the people that make up the vibrancy of the city. Indeed since 2012 British Columbia has experienced a net migration loss of young people, largely speculated to be directly a result of housing prices. …
A massive capital injection from abroad makes Vancouverites feel wealthy, while the city is in no real terms wealthier. Talented people continue to leave and with them the future of our city.”
– from The Decline of Vancouver, by Saeid Fard, March 2015 [hattip Zei]
“With a $2.398-million asking price, the fixer-upper built in 1930 might seem overvalued.
But in Vancouver’s crazed real estate market, that price would likely be a bargain. The new listing is priced more than $1.1-million under the recent average price for single-family detached houses sold on the city’s west side.
From the street, it looks like a bungalow, but there are two bedrooms upstairs. A mountain view to the north would be possible if a developer were to demolish the home and build a two-storey house. The listing created a sensation on social media last Friday, quickly turning into a stark symbol of just how expensive Vancouver housing has become – a teardown, with the main value in the land.”
– G&M, 3 Feb 2016
A syndicate of Chinese investors seeks to turn one of Vancouver’s last protected industrial sites, the iconic Molson Coors factory, into “a great sea view apartment development” according to investment documents.
In November 2015, Molson Coors confirmed to Postmedia News the sale of its three-hectare site at the foot of Burrard Bridge to a mystery buyer, for an undisclosed price. Postmedia reported that the sale wouldn’t close until early 2016 and experts estimated the price could have been about $190 million.
Property documents still connect the site to Molson Inc. The site is zoned industrial and protected in that usage by Metro Vancouver’s board and Vancouver city planners, Vancouver’s assistant planning director Kent Munro told The Province on Wednesday.
Munro said the city doesn’t know who the Molson site buyer is and “no one has come in and talked to us.”
Both the city and Metro Vancouver see the site as important for long-term industrial job creation.
Munro said Metro Vancouver would have to approve a residential rezoning before Vancouver council did the same through a public hearing.
“Last year Molson spoke to us before they tried to sell it, about (rezoning) potential, and we gave the same answer,” Munro said.
“It’s in Metro Vancouver’s regional context statement, and the City … don’t have any plans to change it.”
A spokesman said Mayor Gregor Robertson has not received “any new applications” for the Molson site.
But in online advertisements at vansky.com, a Chinese-language site for investors in the Lower Mainland, Sun Commercial Real Estate apparently announces residential plans for the lands with an ad that includes pictures of the brewery site.
“Sun Commercial real estate brewery project recruit shareholders, 330,000 feet of great sea view apartment development,” says an English translation of Sun Commercial’s materials. The plan says small investors are required to contribute $150,000 and “VIP customers” must invest $100 million. However the VIP contribution is already “full,” documents say.
The plan is “zero risk, high return,” the translated Sun Commercial document says, and “existing brewery investment project in full swing … almost nearing completion.” …
In one deal advertised online, Sun Commercial reported buying a Cambie property across from Oakridge for $19 million in July 2013 and selling it for $26 million in October 2013, after holding it for just three months. Kevin Sun is director of Qiji, one of the companies connected to the deal in legal documents.
– from ‘Sea view apartment development’ on tap for Vancouver’s Molson site, Sam Cooper, The Province, 14 Jan 2016 [hat-tip to ‘hello …anybody listening’]
So, a (large) wager based on the belief that the City zoning for this site can be changed or that a greater fool can be convinced that that will be the case. A “speculative land play”, as Sam Cooper puts it in the video. Hats-off to Cooper and The Province for the investigative journalism. – ed.
Taking action to reduce housing prices in Vancouver could sap the equity people have built up in real estate, British Columbia Finance Minister Mike de Jong warned last year.
The hit from anything the provincial government might do to drop real estate prices in B.C. would be particularly painful for investors like de Jong, who has a personal ownership stake in seven investment properties in Abbotsford, an hour’s drive from Vancouver.
“You’ve got to be careful about intervening, about having the state intervene to try and regulate pricing, or depress pricing,” de Jong said last May as the #Don’tHave1Million campaign drew attention to the negative effects of high house prices in the region.
“Those who are expressing a concern, I think if you really assess what they are seeking, it is a reduction in the value of homes in Vancouver and that will have consequences for a lot of families,” de Jong said.
“If property values in Vancouver were to reduce by, let us say five per cent, that could easily translate into a reduction in equity for families that own homes in Vancouver of 60, 70 or $80,000,” he said.
“All I’m saying is you’ve got to be careful about how you use the tools and levers of taxation, and you have to be clear on what your objective is.” …
… de Jong owned or part-owned seven investment properties in Abbotsford, plus the home he lives in on the family farm where he grew up. It shows he received rental income from all seven of the investment properties.
– from ‘As Housing Prices Soar, Finance Minister Is Well Invested’, The Tyee, Jan 2016
Did you hear any objections from this individual regarding intervention when the state intervened by mispricing risk with preposterously low interest rates and government sponsored mortgages? No, you didn’t. Hypocrisy.
Intervention will not be necessary for the market to (eventually!) implode.
But, if intervention does occur, many will point to it as the cause.
A B.C. developer wants to sell condos in Metro Vancouver’s red hot real estate market to first-time buyers without the cash for a down payment, but not everyone is sure it’s a good idea.
“It’s just a different spin on, ‘How do we provide an affordable home ownership option to buyers who otherwise can’t get into the market?'” says Townline vice-president of marketing Chris Colbeck.
The company is proposing buyers on limited incomes could be allowed to purchase a unit in its Port Moody development for eight percent less than the appraised market value.
The appraisal would be done by an independent third party, allowing the eight per cent to be used as a virtual down payment for a mortgage.
That would mean the bank would be financing 100 per cent of cost for the consumer, says Colbeck.
The idea has already been approved by B.C. Housing, says Colbeck, and Townline is hoping Canada Mortgage and Housing Corporation (CMHC) will approve the program as well.
“It’s a partnership we’ve made with B.C. Housing that’s providing us the ability to do this affordability program that hasn’t been done before. They’re the ones that have structured this program,” he says.
– from ‘Condos without down payments could be sold by B.C. developer’, CBC, 12 Jan 2016
Enjoy, but don’t be this guy. -ed.
[cartoon by Art Young, 1920]
The federal government, concerned about sky-high real estate prices in Vancouver and Toronto, announced Friday it will make new buyers come up with a heftier down payment starting in mid-February.
The move was part of a three-pronged effort aimed at lowering risks in the housing market, though Finance Minister Bill Morneau rejected the suggestion that Ottawa fears a real estate “bubble” in the two cities.
“We’re not talking about bubbles here,” he told reporters. …
“We are talking about ensuring that Canadians take the right approach to investing in a home. It’s to protect the market for the existing homeowners and it’s to protect new home buyers as well, so they have the appropriate amount of equity in their home.”
Morneau was asked by The Vancouver Sun why the federal government is targeting first-time buyers in cities like Vancouver, while doing nothing to deal with the alleged impact of speculators and foreign buyers driving up prices.
“You know, we are taking measured approaches to make sure we protect Canadians,” he replied.
“We are looking at how we can ensure the Canadians who already have homes recognize there is a stable housing market, and those people that are aspiring to have homes can be assured that their biggest financial investment is in a stable and effective market.”
Details of mortgage changes: [Effective February 15 of 2016, the minimum down payment for new Canada Mortgage and Housing Corp.-insured mortgages will jump from five to 10 per cent – though that extra five per cent will apply only to home purchase prices exceeding $500,000. In other words, the current minimum payment on a $500,000 house would be $25,000. If the house costs $600,000 a 10 per cent charge is levied only on the extra $100,000, bringing the minimum payment to $35,000.The new rule will not apply to Canadians who already hold mortgages, and doesn’t impact sales of properties of $1 million or more because they already require 20-per-cent down payments. Morneau, in a statement to reporters, made clear his concern in targeting homes in the $500,000-$1 million range was Vancouver and Toronto.]
“We are looking at how we can ensure the Canadians who already have homes recognize there is a stable housing market.”
Why does that even come up?
What’s with “protecting the market for the existing homeowners”?
Doesn’t a sound market inherently protect its participants?
If we really aren’t “talking about bubbles”, if prices really are driven by fundamentals, if there really is a “stable housing market” in Vancouver, why the need for any of these reassurances?
How many years has it been since Vancouver RE buyers have “taken the right approach to investing in a home”?
And, who can blame them? – how many years has it been since our government sensibly priced the risk of borrowing money?
“It’s a little disingenuous,” said Tom Davidoff at UBC Sauder School of Business. “They really mean they want to protect themselves” from a potential housing market meltdown spurred by imprudent buyers.
“If you have to put 10 per cent down on a house over $500,000, that doesn’t sound like the most crazy thing I’ve ever heard,” Davidoff said. “If people are like lemmings buying houses, when interest rates go up it protects them from jumping off the cliff.”
But that doesn’t place housing more in reach of home buyers or renters, Davidoff notes.
“It makes me nuts that nobody’s acting on the more obvious issue — that there’s an affordability problem. Trudeau should really have to answer for his lack of affordability policy. I’m a little mind-boggled by the lack of leadership there.”
– The Tyee, 12 Dec 2015