GVRD: 24% speculative?
According to a story in the Vancouver Sun approximately 24% percent of new condo units are re-sold within 12 months (as of last april). That story puts the speculative rate peak in the early eighties at closer to 50%.. Funny how often I’m seeing comparisons these days that make our market look good compared to ‘the early eighties’.
Robyn Adamache, senior analyst with Canada Mortgage and Housing Corp. in Vancouver, said inventories of completed and unsold condominiums in Greater Vancouver remain very low — 160 in all of Greater Vancouver and only three in Abbotsford — as of July 1.
“We don’t see any evidence of oversupply so far,” Adamache said.
However, there were also some 14,779 condominium units under construction in Greater Vancouver, a near record. Another 665 are under construction in Abbotsford.
Adamache added that a clearer picture of how well housing supply is balanced with housing demand will emerge once more of those units are complete and owners either take possession of them or attempt to sell.
The article also says that sales are slowing and that Vancouver is no longer a “build it and they will come” market.
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July 31st, 2007 at 9:49 am
Standard & Poor report on housing indices
July 31st, 2007 at 9:54 am
Their 24% figure sounds hinky, especially when others in the industry have pegged it at 50%, and even that figure seems conservative when many homeowners are buying on speculation. They may not sell within 12 months as stipulated by CMHC, but they buy with future appreciation factored in and expect to sell & ‘move up’ within a few short years.
Many ‘RE experts’ claimed low inventory & supply in the US last year, but obviously that situation can change quickly when sales volume drops and specuvestors head for the exits en masse.
July 31st, 2007 at 9:58 am
July 31st, 2007 at 10:02 am
July 31st, 2007 at 11:30 am
“24% percent of new condo units are sold”
Should read “24% percent of new condo units are [b]RE[/b]sold”
———————————-
I was wondering what the hell you were talking about, if 75% are purchased in pre-sales how could only 24% be sold in the first year? But the “RE” you missed in the source article sorted it out.
IMO the reason the 12 month flip is only half of the 80’s benchmark is that many more people are holding on to their properties because they “know” that it’s just going to keep going up.
July 31st, 2007 at 11:48 am
I have railed against this silly argument many times in the past.
Defining speculation as a property resold in the past 12 months is ridiculously arbitrary. First of all, the metric lags by 12 months. We won’t see for 12 months wether TODAYS buyers are “speculating”.
IMHO, a speculator is anybody who buys out of expectation (or fear) of future appreciation in the absence of supporting fundamentals. There are other definitions, of course, but if we are want to a true measure of buyer/investor modus operandi, I immodestly think mine superior.
July 31st, 2007 at 11:53 am
July 31st, 2007 at 11:57 am
Be careful, especially with these ridiculously arbitrary metrics which are said to represent “speculation”
About 50% of condos are owned by investors, now owners. That is one metric. Interpret it any way you want.
The second one, which CMHC and others like to quote as a measure of speculation, is the number of properties sold more than once in the past 12 months.
To conclude that there is less speculation now because there is less reselling than at the peak of the 81 bubble is total bullshit (I didn’t * that profanity). It does suggest that “flipping” is down, but that does not preclude speculation. Maybe these “flippers” are so overjoyed with the appreciation machine that they don’t want to let go, hence soaking up supply and keeping the market tight, which of course entices further speculation/extrapolation.
I hope this debacle ends soon so that these disingenous asshats get run out of town.
July 31st, 2007 at 12:51 pm
July 31st, 2007 at 1:27 pm
It doesn’t prove or disprove speculation.
It strongly suggests (but does prove) lower amounts of flipping than 1981. For what its worth.
July 31st, 2007 at 1:32 pm
I have to admit (reluctantly) that we are some time away from a crash. Maybe next year?
What it would take would be one of the following: A crash in the Asian markets a la the 1980’s; a rapid increase in interest rates; another leaky condo scare; a huge wave of new condos (might see that soon); or some unforeseen global economic crisis.
IMHO the ‘81 crash was due largely to the leaky condo crisis. Some of the younger bloggers don’t remember (or know) how bad that was. We don’t have a subprime loans crisis like in the USA, and credit is still tight relative to our neighbours down south. Could be some blowback though, but not enough, since borders tend to insulate RE markets from each other. If you don’t believe me, look at the Seattle vs. Vancouver markets.
July 31st, 2007 at 1:39 pm
Real estate market researcher MPC Intelligence Inc. estimates that there is less speculation in Greater Vancouver’s condo markets, with slightly slower sales and more evidence of buyers arranging financing for their pre-sale units.
WTF? How the heck can they conclude this? You can’t base the amount of speculation only on the action at the margin. Even if the conjecture about slower sales and more buyer financing suggesting less speculation is true (I don’t think it is), it does not excuse that fact that the cumulative investor owned condo situation is alarming. Nor the fact that even owners “speculate” when they pay double rental expenses in ownership costs.
It amazes me the great lengths that the MSM/special interests will go to convince themselves/us that all is well. Reminds me of one of those “expert” witnesses who concoct outrageous theories to clear their clients.
July 31st, 2007 at 1:52 pm
Well, the wheels can be set in motion at any moment for any reason. However, I agree that even if it started yesterday, it will take time for it to unwind, much like in the States. I think Vancouver will be more like Florida than San Diego though, and we could reach double digit yoy declines rather quickly (in RE time scale).
July 31st, 2007 at 2:10 pm
There was no wholesale change in the macro scene in the US, yet the bubble burst, and in spite of what the paid “usual suspects’ say the worse is yet to come.
Interest rates, and unemployment rate, in the US have not jumped dramatically, yet foreclosures are up significantly.
The sub-prime meltdown is a symptom, not the cause of the RE crash. The home debtors are walking away, and going into foreclosure because values have dropped significantly enough that they owe more than what the home is worth.
During the run up in prices, if debtors got in too deep, they would simply sell, and still walk away with a tidy profit, or refinance. Now that prices are in reverse, the longer they wait to bail the deeper in debt they get into.
Conveniently the bankruptcy laws change in the US about 1 year ago.
On another note:
Anyone see the headlines in the Vancouver Sun: Re fake students, bogus schools etc?
July 31st, 2007 at 2:19 pm
In other words, we will know how much speculation there is once the speculators all try to sell and nobody buys their units at inflated prices combined with real buyers who are attempting to sell their existing home when their new home is completed. Once we see that then we will say that there was oversupply.
We have a rocket scientist here!
Tongue out of cheek now. Assuming that developers are acting in a “balanced” fashion is a completely ridiculous suggestion which history and the current US situation would suggest is wrong-headed.
July 31st, 2007 at 4:21 pm
Yes, the notion that all is well because all construction is pre-sold needs to be put to rest. Once the unit is complete, one more physical unit of housing supply exists. Whoever moved in there vacated or sold elsewhere. Yes, a small portion will go to new residents, and inevitably some boomerang kids fly the coop.
July 31st, 2007 at 4:40 pm
shut the star off
do we have state of katrina and charlie in vancouver?.does vancouver deal with 16 billion dollars damage to property every few year like florida does?.do we have land and the size of florida in vancouver?
what are you talking about.when ever i go away from my desk you guys screwing up things here.I would say “sense is bigger than education”
there are few cities in this world,which are powered by both natural cause and human controled nature.
city of vancouver is one of them,
we might have run out of land,but for price to go up this city have lots of potential and lots more room. this city is build to go up only.
boc is just playing little part just to control rapid magnitude to turn into gradual speed,but there are lots who don’t need mortgage approval or rental income they can manage their properties by keeping them empty.
when people want more, price are definitely going to cross all the fundamentals.thats why there were lots of calls for our own residents to make final attempts.
there is a saying that”people who wait for crash were never in position or nor they going to be” because hell can not be measure by square feets.
don’t be misguided about vancouver your expectations were never been recieved since when ever to what ever, nor that is going to be ever after.hey krrish can I have glass of water?thanx.
July 31st, 2007 at 4:51 pm
As already mentioned, you will not know current speculation % until 12 months from now, according to Adamache’s measure anyways. He later says you don’t know the true measure of speculation until after it occurs but the connection was not made obvious in the article.
I am not sure when the peak of speculative activity occurred in the 1980s: when prices were rising or when prices were falling. I wonder when the 50% number he cited occurred…?
To be fair, the 1980s runup was very steep compared to the current runup so he may have a point about short-term flippers, though I’m not so sure about the medium-term guys who can live with negative cash flow for years.
July 31st, 2007 at 5:23 pm
Vancouver is a lot like Miami.
Vancouver is a lot like Miami.
Vancouver is a lot like Miami.
Vancouver is a lot like Miami.
Vancouver is a lot like Miami.
Vancouver is a lot like Miami.
Vancouver is a lot like Miami.
Vancouver is a lot like Miami.
Vancouver is a lot like Miami.
July 31st, 2007 at 5:32 pm
The similarity between 1981 is size of the runup on poor fundamentals.
There are also large differences. The runup and crash happened quite quickly. If you went a broad for a couple of years in 1980, nothing really changed. Cam has mentioned that affordability was poorer than. While true, there is a big difference. Very ordinary people entered the market during that short time. In the present, however, a large number of owners have a very high cost base, and will roast like marshmallows if rates rise. As I have mentioned untold times, when you have piss poor affordability at historically low rates and record employment, there is huge downside.
If 1982 was the SARS, the past 5 years is the plague. It is much more pervasive in terms of the number of people it will impact.
July 31st, 2007 at 5:32 pm
do they have blackcomb on the head of that city.
July 31st, 2007 at 5:41 pm
Nor does Vancouver. BTW, did I mention that Vancouver’s real estate situation bears a resemblance to Miami? With two year lag of course.
July 31st, 2007 at 5:51 pm
July 31st, 2007 at 5:58 pm
I will invest other to write down to my document.
July 31st, 2007 at 6:32 pm
PS u be vely nice of we call Robnumbers and make infection s on your Windows32 file.
July 31st, 2007 at 7:12 pm
these are some crazy who might thinking i have million’s of $$$in my pigyy bank.
remote address:
218.50.1.119
74.107.174.26
222.68.64.14.0
60.41.217.65 these decent peoples are trying to download malware in my computer.most decent in above is “mydoom in” this lady is active 24/7.
they are blocked now so far, but I think even elementry kids can genrate anything.well I have nothing to loose . I just published those don’s(underworld dogs)if any body else have same guest or above to make in future just compare with them.
I would like to thanks ms kids-akhen-vineland-patiently waiting-,and si.fu for their comments on riverview that was really good to know insite and history of dtes.before I use to think how come this cluster is located close to police station ,and court I have never seen anything like that before ,but now they have open my eyes.(awake on dtes site).
July 31st, 2007 at 7:13 pm
I agree with freako that 12 months is a rather arbitrary number. Considering that some places are 12 months behind on their original completion estimates its a little crazy. If you pre-buy something 2-3 years ahead of completion, there’s no doubt that many life circumstances could change in that time period and you end up selling for reasons other than RE speculation.
July 31st, 2007 at 7:24 pm
robsnumber
shhhi shiii robs number not retirees (stock sitters man)they are all visiting here too often to see their young kids(dock sitters) hiking-snow boarding-bike riding-ski etc.etc and claping their both hands to appreciate their discovery,worlds best vancouver.
July 31st, 2007 at 8:09 pm
He then record, from Rob blog, and BC real estate talk, who big shots. Then he investigate.
I no magic, I just suspect this story.
July 31st, 2007 at 8:53 pm
thanx to bring that forward.anybody should have been ask me frankly. I work for westfair,loblaw,and pc.for bc’s number one billionaire galen weston(canadian)number 2.I get my pay cheque after tax so no scam.
July 31st, 2007 at 9:00 pm
http://www.youtube.com/watch?v=c7e9H4zTqk4
July 31st, 2007 at 9:10 pm
July 31st, 2007 at 9:32 pm
I have purchased 4 properties since 97-98-2006-2007.
but so far did not sell anything. I have plan to sell just one next year after july.all other are to keep to adjust big family.
August 1st, 2007 at 5:32 am
Why would you sell?
August 1st, 2007 at 5:56 am
thanx but that would be regardless up or down to make adjustment or ,to prepare some ground to buy house in 2010 regardless too. that house would be my final purchase @40.I will work 8 hour shift after,and relex little bit if I can manage.so far almost 100% spending and tough to neck life.
I won’t be avialable for comment till aug2.
August 1st, 2007 at 6:39 am
August 1st, 2007 at 6:58 am
I have moved my prediction for a correction to the end of 2009/2010 and I will probably get more risk adverse at that time.
August 1st, 2007 at 7:33 am
Specifically, my comparison between Vancouver and Miami related to patterns of depreciation. Not climate, access to ski hills, demographics etc.
August 1st, 2007 at 7:36 am
August 1st, 2007 at 7:40 am
Like you I’ve been predicting a correction for a while now and put my money where my mouth is. I sold in late 2005 - probably 18 months too soon however despite the recent market melt down I’m no further behind.
I don’t think we’ll be waiting until late 2009. Most large infrastructure projects will have to be complete or virtually complete at least a year before the Olympics. As they move towards completion, they use exponentially fewer workers so you’ll start seeing less infrastructure employement in late 2007/early 2008.
Also, I believe we’re either approaching or have already equalled the longest bull run for RE in our history. Buyer fatigue, dwindling demand, the effects of the US market etc. will likely kick in sooner rather than later.
August 1st, 2007 at 7:44 am
Never ever deny the business cycle…I’ve sat through 3 cycles in 2 different markets. RE is a cyclical asset. What goes up will eventually go down and the professional large developers knows this!
SATV, i’m glad that you are able to hold…keep in mind that most of your purchases were either near/at the trough of the last cycle’s bottom to the beginning of this cycle. This cycle started showing an upward momentum in late 2000 and is the longest cycle yet. RE cycle is about 10 years peak to peak. So, expect a down period to be as pronounced. Again this is from a macro perspective.
From a micro perspective, pundits and analysts are as proned to following the herd as anyone else. Remember those of the tech cycle … “Oh, we are of new metrics…things are different this time as we’re dealing with electronics” Oops! Remember the discussion of a separation between analysis and investment banking?! Well, try calling the market speculative and therefore, BEWARE! when all your client’s are from the BUY side of the market.
Again from a micro/daily perspective, it is extremely difficult to pinpoint the exact factors and time when the market says, “i’m heading down”. That’s why most peaks and troughs are pointed out months after it happened. This explains why there is such strong debate between the Bulls and the Bears.
That said, factors making for a downtrend is in the works…
August 1st, 2007 at 7:50 am
Similarly, as the market upcycle gets drawn out, it will do the same … look for a reason to change the psychology.
Surf the trend, my friends!
Ahken
August 1st, 2007 at 7:51 am
As I posted on Mohican’s blog, could the slowing sales in FV be a result of exhaustion of the pool of buyers? I suspect that FV has a lot less speculative buying, and should be the first place where we notice exhausted fundamental demand. The GV market could still be tight due to speculative buying, or perhaps catering to a different demographic that is not quite exhausted yet.
August 1st, 2007 at 7:58 am
In any case, it would seem that MPC Intelligence only reads with BuySide intelligence. Forget their interpretations, show me their data.
August 1st, 2007 at 8:04 am
Its always easier to spot the problem in hindsight.
August 1st, 2007 at 8:28 am
My gauge is fairly simple: The gap between rents and ownership costs. A lot less arbitrary than say percentage of resells over 12 months.
August 1st, 2007 at 8:30 am
I don’t know if its a “market”, but world population is rising steadily, and at an accelerated rate for the last 50 years. Perhaps a comet or two or could reverse *that* trend.
August 1st, 2007 at 8:35 am
August 1st, 2007 at 9:34 am
August 1st, 2007 at 9:38 am
No, that is definitely not a market. Markets are forward looking, and if efficient incorporate accurate probabilities of future events. If the probabilities are accurately set, “surprises” are symmetric, which is why prices are as likely to go up as down. Adjusted for risk, of course. Population growth just is.