Here’s your open-topic post for Friday Dec. 7th:
-Vancouver residents should brace for major tax increase.
-Whistler proposes 6% tax hike.
-Fraser Valley house prices at 8 month low.
-Erosion risk in BC’s economic foundation.
-US foreclosures hit a record high.
-An imperfect solution to prolong the pain.
What are you seeing out there? Post your news, links and anecdotes here!
on Average Vancouver selling price down 9.8%All you need to know about Tsur's opinions on real estate can be found on the list of donors for on Average Vancouver selling price down 9.8%@jumpin in: Should Tsur not have to disclose his interest in RE? When other types of analysts are interviewed, it's on Average Vancouver selling price down 9.8%@frank New OSFI rules will only be in application in the Fall. Lending only starting to tighten. HAM has vanished.
on Average Vancouver selling price down 9.8%Can we please see an updated inventory graph? Have we intercepted the 2010 line? on Average Vancouver selling price down 9.8%@frank: One bad day and your throw in the towel. Would hate to have you on my hockey team 
December 12th, 2007 at 12:44 pm
Drachen,if something does not exist that's not my problem.Because we were dealing with an issue created by k-financial what ever is available that is enough.Drachen,take a coffee break or something cool ice and easy I have moved to forward page you can pay me rant there.Thanx
December 12th, 2007 at 12:01 pm
Not only does it not exist OUTSIDE the article it doesn't exist IN the article. But it's really irrelevant anyhow whether it's 1st or 2nd (only relevant to show your state of mind I suppose). The price of renting commercial real estate in a small district in New Delhi has literally as little relevance as you can get to the price of buying residential real estate in Vancouver while still being in the general "Real Estate" field.As such it and you are completely without merit here.
December 12th, 2007 at 11:43 am
would you like to point out what quotes?before you answer I also like to point out if some thing does not exist beyond article that's not my problem because you can not change the truth.I never tell lie to people,I would be happy being loser than a winner so drachen beleive me there is nothing to change the truth.
December 12th, 2007 at 11:20 am
Thumb:From YOUR article."A survey of global market rents has put Delhi’s CBD in the second place as far as expensive office spaces are concerned."The quotes that you mention not only don't appear anywhere on that page they don't appear ANYWHERE ON THE INTERNET!!!(afaict) I googled them and came up blank.Dementia buddy, get a doctor's appointment. Perhaps you should be checked for Schizophrenia too, you seem to be seeing things that simply aren't there.
December 12th, 2007 at 11:12 am
One more,Fifth you're actually providing a perfect example of what is wrong with Vancouver. Notice in your example the rent/month to purchase cost is 144, this is a nice healthy number. Most places in Vancouver are around 300-350. Why is our purchase cost (in the popular downtown areas) nearly the same while rents are less than half? I'm sure even YOU can spot the inconsistency there.
December 12th, 2007 at 11:05 am
drachen,you are getting brain dead.Go to the first comment does that anyhow says"that they are number one"then find this I goes"Worlds most expensive rental place is Connaught Place -new delhi-India".whats happening drachen cool down every one is looking at you.evidence are in the link so just chill out.
December 12th, 2007 at 10:49 am
Oh man are you stupid. First off even the article you linked to said it's SECOND place not first. Secondly nobody here really refers to commercial space, you have to specify if you're going off on such a tangent.Third it's only a small DISTRICT of ND that's that expensive.Fourth $1,000 per sq foot is what some of the more posh developments HERE charge. By comparison ND actually IS a world class city and it's only natural that the priciest districts there would be expensive.Do I need to go on with this crap? Satv you have a mind like swiss cheese you should really look at getting tested for dementia. I'm not kidding or just being mean, you really have mental capability issues unless you're just faking the whole stupid thing as some have suggested. You remind me a LOT of Alzheimers patients.
December 12th, 2007 at 9:14 am
No Drachen,First of all, I goes most expensive did not provide you number.Secondly-Those places are more expensive because of affordability ratio you need a 140 month of income to pay monthly compare to rupee value against$$'s.Third is dust in you guys brain's "A CRASH' does not mean that a homes can be purchased without money"explain that to every one one the board include micheal GOLD.Fourth,I am not intended to disscuss issue that goes beyond Vancouver but just for your satisfaction here is what I got for you.Connaught Place and surrounding locations, office rentals have gone up by 90% to 150% and stand at Rs 284 per sq.ft. The capital values for office space in this area have seen a rise of nearly 145 % as compared to last year and it stands at Rs 40,870 sq.ft. The vacancy rate in this area is a mere 2%.A lesson4MGOLD Drachen,Tony & K-FINANCIALRs 284=C$7.2Rs 40,870 sq.ft=C$1021.75
December 12th, 2007 at 8:36 am
You're a lunatic Thumbs. Do you just make this stuff up whenever you're cornered?I looked it up New Delhi is #73 of the world's most expensive cities.Vancouver is #56New York is #10MoscowTokyoSeuolHong KongLondonAre the top 5 this is for RENTS as you specified.You are so full of crap Thumbs. Why do you even bother.
December 12th, 2007 at 6:26 am
mr: May I recommend French-Kiss FM the best radio station in the world and Discollection-Radio.de from LatviaYou may not.
December 11th, 2007 at 8:27 pm
I think you both are confused between risk and chance. Living a life is risk. You are reinventing financial theory. Check for yourself:http://en.wikipedia.org/wiki/Risk#In_finance"In finance, risk is the probability that an investment's actual return will be different than expected. This includes the possibility of losing some or all of the original investment. It is usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment"More of the same for the rest of your post. You totally fail to grasp that expectations are priced into stocks. Deviations from expectations are a random walk except for those who possess insider info (illegal) or for the blessed few who can "outguess" the market.With all due respect, you are making a mockery of basic financial analysis. So much so, that I don't think we will have any common ground at all. I would have to basically teach you Valuation of Risky Assets 101, and at the end of it you'd make some comment about how its all bunk. But it isn't. Sure, there are sh*t loads of assumptions, but overall it is a logically consistent framework that has been subjected to rigorous empirical studies. I suggest you pick up a book at your local library, or at least google some concepts such as standard deviation, risk (in finance context), Markowits, CAPM, Sharpe Ratio. I assure you that it's not senseless mumbo jumbo.
December 11th, 2007 at 7:59 pm
Thumbsup…….are you repeating the same crap over and over? Why don't you fuck off? When you can explain why Shanghai housing prices crashed 2 years ago even though their population is STILL increasing then you can come back…PLEASE LEAVE
December 11th, 2007 at 7:57 pm
The worst radio stations on EarthOne only has to open Winamp to realize just how utterly culturally and musically deprived Vancouver really is. It's simply disgusting.Thank God for internet music and its thousands and thousands of free stations otherwise I'd slice my wrists having to listen to out crappy radio stations.May I recommend French-Kiss FM the best radio station in the world and Discollection-Radio.de from Latvia
December 11th, 2007 at 7:31 pm
K-Financial,China and India are most expensive real estate in the world,Worlds most expensive rental place is conghout place-new delhi-India,and bollywood-bombay stand equal to new york in housing prices you don't know?..Tony, good work but I don't like to go back and forth again so some other time, till than you can fix ground under your feet.
December 11th, 2007 at 7:17 pm
I think you are misunderstanding Patriotz explanation of "risk". Risk does not mean risk of losses. Risk is symmetrical. If you are expected to earn 12% with high risk, that really means that you could earn a lot LESS or a lot MORE than 12%. If your investment is expected to lose 12%, well then that is just a plain bad investment, risk or no risk.I said:I think you both are confused between risk and chance. Living a life is risk. Stock or Indy car racing are inherently risky. These pro drivers know how easily you can die driving at 150kph! But very few of them die, because they are smart and experienced enough not to take chances. But look at our BC young drivers on the less risky but more dangerous highways of our province. More of them are killed than professional drivers?!? Why?!? Same risks, but these young idiots took MORE chances and that got them killed.Investors must learn how to master risk and not become its slaves. Sounds like both you and Patriotz are. People who measured risks by regulating their chance taking made a fortune during the 1929 and the 1987 crashes. I told you about the Warner Brother Corset company with our 15 million bucks over 30 years even during a depression is no easy task as it WAS RISKY buying a patent for $1500 from Mary Phelps Jacob. Whereas, real estate deals financed prior to the German hyperinflation of the 1923 ended up paying off their properties with pennies on the dollar. Your example is not about risk, it's about taking a chance. Freako said:Markets to inefficient from time to time, and there huge misallocations. But no, due diligence DOES NOT REMOVE RISK FROM EQUITY INVESTMENTS. In finance theory, it is assumed that we know expected return AND risk with absolute certainty (much as casino odds are known). Thus, even if you are a maven with the financial calculator, you will do no better than reaching this point. There will be an expected return and the variance of this return is your risk.I said:Markets can be risky if you don't really know what you're buying into . Warren Buffett wrote in his Berkshire Hathaway operation manual that the 1st thing an investor must do is to KNOW the company you are investing in. A stock is just a piece of paper. A company is real.When you buy a used car, don't you do a lot of research trying to find out as much as you can about its blue book value, any recalls, any common problems and pitfalls and reading up reviews written by other owners.Last but not least, don't you take it to your own mechanic to get it checked before handing over your hard earned cash?!?Strangely enough, most people do that. But, most people when it comes to buying a stock don't even bother to attend the AGM, vote or even phone their PR people to ask them what the company actually does. All they did was, click buy on Etrade because they got a tip, or the 50-200 moving day averages tell them to buy or their own trading software told them so. Sorry, but this is buying with chance, not from a measured risk stand point. Freako said:You totally ignore the fact that expectations are PRICED INTO the stock price. What makes a stock appreciate? Three things: Inflation, risk discount, unexpected events (which could be negative). The last one would be expected to net itself out, so it is really the first two.I said:What is expectation?!? Did anyone expect Apple Inc to make an iPhone or an iPod that are now in such high demand? Not too long ago, people were already writing obituaries of Apple Computer because they pulled out of the mac clone market. Price was $19 US.What stopped people buying $100,000 worth of those shares at $19 and sell it now?!?Because, some of us didn't expect Apple to do so well. Even Sony who dominated the portable audio market for so long with its Walkman now had to bow to Apple, which in itself was a computer computer when it first started.Expectation is something Wall Street people made up. You probably read too much of those magazines anyways. The reason why a company can increase earnings is that, it can increase the price of the product it sells. This is what economists call "Cost Push Inflation". An iPod and iPhone are two unique products that weren't available in the past. When demand of them increase, we call this "Demand Pull Inflation".That's how an efficient market system works. It favors those that make products that are unique and command a high price tag. Not the Fed version of artificial supply and demand by driving price of money down. This way, it simply foster too much overproduction of unneeded products. I mean, how many televisions do Americans really really need to buy with their credit cards. What 5 or 10 or 20?!? So please tell me, how does a 20 year old house that has a leaking roof be so unique compared to a brand new iPhone?Freako said:I think you are preaching to the converted. I also think you missed Patriotz point. As I described above, returns are a function of risk. Patriotz point was that the risk for real estate is low (rents are stable), so returns OUGHT to be low as well. He is not defending real estate prices.I said:While rents are stable, occupancy rate is not. Right now, condos are a big thing. During a market downtown and into a recession, can these condos become rentals? And if so, if the supply of rentals increase in the core downtown area, what will happen to the rent themselves. Will they track inflation?!?The problem I see with both of your analysis is that, I have a feeling that both of you never rented houses to people before?? Most landlords don't like raising rent. As long as rent can cover the cost of the mortgage and some, it's good enough for the landlords. Why? Because, it's better to keep good tenants rather than the bad. This is because of our BC laws that are in total favor of renters period. Renters have a lot of rights for which a lot of new landlords are shocked to learn about as they rent their condos to people.So I really don't accept the notion of real estate being a low risk investment by the following reasons.1, Unlike stocks, RE is illiquid. 2, Tenants have lots of rights. If you happen to get stuck with a bad one, then you're SOL. That's why so many people use management companies that do absolute crap, not too mention eating into your already measly inflation adjusted rent.3, Landlords are responsible for ALL THE REPAIRS of their rental buildings. Now, if it's your own home, you can delay some repairs because you live in it. No one complains, except yourself or your wife and kids. But if a fridge breaks down or if a hot water tank explodes in the middle of the night, you have to fix it now. Where's the money when you're already tight on your $500,000 plus mortgage and the market just went down the toilet?!?
December 11th, 2007 at 5:06 pm
Thumbs Up, take an intro economics course. Population increase does not drive up real estate. If that's the case, China and India should have the highest real estate prices.
December 11th, 2007 at 11:57 am
that bravia 5500 now cost 2000 and I am going for brand new model series 5 but still less almost 1500
i’d suggest you fore go the bling TV and save your pennies. in any case there are no cable outlets under the Whalley off ramp, where you could end if you don’t cover your assets.
December 11th, 2007 at 11:41 am
In case anyone here doesn’t realize what a complete waste of bandwidth ThumbsUp is Trotter has taken his rich immigrants bullshlt:
(ThumbsUp please respond with some more of your warehouse workers wit and insight to this revelation assuming you can make heads or tails of it.)
From July 1, 2006 to June 30, 2007
Canada’s population increased by 326,500 persons.
By July 1, 2007, the Canadian population had reached 32,976,000
During this period, Canada welcomed 238,100 immigrants
16,200 fewer than the previous year
48.5% chose to reside in Ontario
The increase in the number of deaths
Offsets births of 352,800
Chart 1
Components of annual demographic growth, 1972/1973 to 2006/2007, Canada
http://tinyurl.com/ywmy9c
BC’s population grew at a rate (13.8 per 1,000) similar to the previous year.
Since 2002/2003, the province has consistently grown faster than the national average.
BC posted its strongest net interprovincial migration (+ 10,600) since 1995/1996 (+ 22,000).
These gains OFFSET the decrease in
BC number of immigrants,
which dropped by 6k compared to 2005/2006
and reached 37,800
Chart 2
Population growth rates, 2005/2006 and 2006/2007, Canada, provinces and territor
http://tinyurl.com/ytzu6p
source: http://tinyurl.com/2agfzg
December 11th, 2007 at 11:30 am
It always reminds me of 2 lane traffic in a traffic jam. The guy who’s always switching to the faster lane inevitably falls behind the person who chooses 1 lane and sticks with it.
Actually there are studies that show that you will end up marginally ahead of the “stay in one lane car” by always switching to the fastest moving lane. Same is generally true for momentum traders but much more difficult to put into practice.
December 11th, 2007 at 10:26 am
well said drachen…….Wg2c,short on time only want to say welcome back dude.wg2c that bravia 5500 now cost 2000 and I am going for brand new model series 5 but still less almost 1500 Remember!chow…..
December 11th, 2007 at 9:51 am
.There are more than 100k people arrived in Vancouver so far this year and 45,000 of them have bought a place for them self.my chinese realtor and friend told me that most incoming chinese buy a house for themselves and a condo for investment. these of course are only the buyers that he sees and may not be representative of all chinese let alone all immigrants. what do you think, thumbsup?
December 11th, 2007 at 9:06 am
I think that the reason most investors who go short don't do very well is that to REALLY make money you have to buy when it's still going down and sell when it's still going up. That's VERY hard to do. Look at Thumbs, his investment is going up so he's in total denial that it's peaked. If he were realistic he'd be selling now, but it's human nature to hold on to an appreciating asset and sell a depreciating one, even if that means you're always late to the party.It always reminds me of 2 lane traffic in a traffic jam. The guy who's always switching to the faster lane inevitably falls behind the person who chooses 1 lane and sticks with it.
December 11th, 2007 at 12:05 am
Thumpsup said…
“There is lots to lose in stock market and nothing to lose in real estate”.
Not really; you can lose everything in both, including your teeth (remember that story?)
Freako said…
Fact is that there are only a handful of people in the world who can beat the equities market in the long run.
…The risk lies in investor’s laziness and trust of the corporate entity.
Here’s strong support for Freako in this interesting article on the random movements of stocks and the con artistes of Wall Street:
evolution of an investor
Sure turns upside down the popular theory about support and resistance levels in stock (or property) price movements. Self-fulfilling prophecy seem more pertinent!
Maybe johnnyrent is correct…
…the only thing that has to change is psychology, being as this is the primary driver of extremes in prices and buyer exuberance.
December 10th, 2007 at 10:46 pm
Vanman,
Somehow you forget to mention population growth,demand for more housing.
Issue is to decide how many more houses can be built and in what area,
people who drive luxuary cars in what area they would like to park.
lets talk about airplane,what does that cost to own and what it takes to travel in it.
if the airline does not find sufficient passenger to run their company airplane cost won’t come down.
I mean when there is sky rocketing construction cost is in the making of houses or airplane, prices won’t be down.
the least can happen is developer can stop construction unless the buyer shows up again,which simply means price won’t come down that easly.
when there is a limted space and more people are coming in to dewell.
considering the fact that mortgage rates then and now,employement rates then and now,and rates of pay then and now makes it more affordable
Vancouver 2007 is not a Vancouver of 70 or 80.There are lots of strong joint in the chain which sowing the cycle a way to go up,and that is a van r.e. and the vanman should know all this.
December 10th, 2007 at 10:39 pm
Risk is everywhere. There is no such thing as a guarantee that you won't loose money. Even a loonie right now sitting on top of my table is loosing its value as we speak! It's called inflation.I think you are misunderstanding Patriotz explanation of "risk". Risk does not mean risk of losses. Risk is symmetrical. If you are expected to earn 12% with high risk, that really means that you could earn a lot LESS or a lot MORE than 12%. If your investment is expected to lose 12%, well then that is just a plain bad investment, risk or no risk.Anyone with an grade 8 algebra or lower can reach a balance sheet!!! I mean, it's all add and subtraction for crying out loud.You seem to think very little of market efficiency. Fact is that there are only a handful of people in the world who can beat the equities market in the long run. Do you really think reading a balance sheet will put you ahead of professional investors. When you invest in the market, you will earn the market return. Trying to beat that is a zero sum game, and very very hard.The risk lies in investor's laziness and trust of the corporate entity. Markets to inefficient from time to time, and there huge misallocations. But no, due diligence DOES NOT REMOVE RISK FROM EQUITY INVESTMENTS. In finance theory, it is assumed that we know expected return AND risk with absolute certainty (much as casino odds are known). Thus, even if you are a maven with the financial calculator, you will do no better than reaching this point. There will be an expected return and the variance of this return is your risk.The reason is simple. A 3000sqft house 20 to 30 years later is still a 3000 sqft house. There's no added value to it that would make it grow faster than a stock.You totally ignore the fact that expectations are PRICED INTO the stock price. What makes a stock appreciate? Three things: Inflation, risk discount, unexpected events (which could be negative). The last one would be expected to net itself out, so it is really the first two.Do you agree that this insane action will continue forever?I think you are preaching to the converted. I also think you missed Patriotz point. As I described above, returns are a function of risk. Patriotz point was that the risk for real estate is low (rents are stable), so returns OUGHT to be low as well. He is not defending real estate prices.if you are willing to buy now, it means that you get a big kick from housing! In fact you get the same (or more) utility that you would get if you didn't buy and used the spare money to splash on whatever else makes you happy Yes, that is exactly what it means. And yes I got it the first time. Your "I strongly disagree" comment didn't seem to put much faith in the personal preferences argument. My personal opinion: The people who enter the market knowing that may well be a bubble can be counted on your fingers and toes. Most buy because they think it is going up forever. It is those 20 or so people who I don't necessarily consider irrational.
December 10th, 2007 at 10:27 pm
Freako said:Feds inflated the money supply no thanks to Alan Greenspan!The money supply has inflated in all years except the Great Depression. If the money supply stopped growing, we'd fall into deflationary spiral toute de suite. All different Fed's accomplish is different rates of increase. And demand for money does change over time, it is not an independent variable.I said:But what about the case with Japan?Aren't you forgetting that they suffered a decade long deflationary period and it still going as we speak today, even with their zero interest rate policy? Remember the Japanese Yen carry trade?Even keep money supply low in Japan, deflation still happens anyways.And here is what I disagree with you. Since 1914, the Federal Reserve is formed to decide what supply and demand is. Basically, the Fed is playing god and distorts the supply chain. During the great depression, there are a number of small industries that actually thrive. One of them is a company that make women's bra. Yeap, believe or not, that was hot then. Instead, the government of the time and now the government of Japan produce make work public projects that artificially provide a supply for an artificial demand. Would I care if my street is paved with nice asphalt every year? Was this the Japanese Citizen's demand? Or was this the action of a government of Japan that make them believe that they need it.Back to the bra business of the early 30s. It was a new product. It makes women look sexy. There is a need for them. The demand is real, because when Mary Phelps Jacob sold her patent to the Warner Brothers Corset company for $1500, over the next 30 years, the company made over $15 million bucks. It wasn't artificially supplied by the Fed nor by the government. When the Fed and the government meddle in the business of trying to keep alive supplies of unneeded widgets by keeping the money supply low while controlling supply and demand, it will undoubtedly create an overabundance of the same widgets that people don't want.Sadly in Japan, the same unwanted widgets are still being preserved because they don't want to see a super deflationary spiral ever to happen. It's happening there regardless. The question is, how long it's gonna take to end it? But if the widget is already worthless from the day it was made, artificially propping up isn't going to pave the way for new progress to happen too. Inflation goes up because demand pull inflation and cost push inflation. In the case of the bra industry of the early 30s, it meets these 2 principles. It's a new design, so with increased demand for goods and services, prices will be pulled up.And if the cost of making a bra goes up and so does the prices so makers can make a profit. Over $15 million for the Warner Brothers Corset is good.Of course, a bra right now is just a commodity, so you can buy it cheap.
December 10th, 2007 at 10:05 pm
Freak sid:"The point is that you can only speak for yourself. Preferences are individual, and IMHO somebody who acts to maximize his utility based on preferences."Maybe I did not make myself clear enough. Here is another crack at it: Of course I speak for myself, but I can still put a monetary-equivalent measure to the idisyncratic utility of homes for different people. What I am saying is: if you are willing to buy now, it means that you get a big kick from housing! In fact you get the same (or more) utility that you would get if you didn't buy and used the spare money to splash on whatever else makes you happy (holiday, cars, studying, children, whatever)……in other words, your valuation of housing is high in terms of money. The valuation, of course, is individual. But that is a bit like stating the obvious.
December 10th, 2007 at 9:58 pm
Preferences are individual, good point freako!intangibles are subjective
December 10th, 2007 at 9:33 pm
Patriotz said:
Actually if there’s pretty much a guarantee that you’ll lose money, an investment isn’t risky at all. It’s just a very bad investment. Risk means uncertainty.
I said:
Risk is everywhere. There is no such thing as a guarantee that you won’t loose money. Even a loonie right now sitting on top of my table is loosing its value as we speak! It’s called inflation.
Patriotz said:
Stocks are risky because earnings are risky. You never know whether a company is going to lose money due to bad management or competition. It’s very hard to pick winners.
I said:
Which stock do you mean? Common stock or preferred stock?
A stock is a share of a public company. When you buy a stock, you are in effect lending money to the company in exchange for some ownership of it. In return of this, you are entitled for a stockholder’s meeting. You are allowed to vote (common only) and you are entitled to a copy of the company’s balance sheet and statement of income where it will list things like assets it owns and liabilities it owes. Anyone with an grade 8 algebra or lower can reach a balance sheet!!! I mean, it’s all add and subtraction for crying out loud.
Case in point, problems with voodoo accounting has already surfaced starting in 1997 for Nortel, JDS Uniphase and Global Crossings. Remember those 3 internet companies. All people have to do is read and grab a calculator to verify the numbers. I did and they did not jive. Where’s the risk?!? It is there for everyone to see. Most people elect to throw these yearly reports done into the recycling bin.
The risk lies in investor’s laziness and trust of the corporate entity.
Investing in stocks require a certain amount of work. In fact, the accounting part of any public company is much stricter now. Thanks to the internet bust, accounting regulation has since tightened up a lot. I trust what’s on the statement of income on these public companies rather than what’s being pushed by our credit issuance companies like DBRS, Standards & Poor and Moodys. They are now like the Arther Anderson’s of the past.
Just watch..
Patriotz said:
In the years 1970-2000 this probably averaged out at around 8% of the market price, lower since then of course.
RE is a much less risky investment than stocks. That’s in the fundamental sense of risk – variability of earnings, i.e. the market rent. If the yield on RE is better than for fixed income at the time you buy, it’s a pretty sure thing.
I said:
Really?!? 8%? I hope you factor in the expense portion of the equation and the British Columbia rental cap increase, which is 4%.
Now, how can you get an 8% return of your rental propery when the cap is at 4%, which is actually just below inflation?!? I really like you to produce those numbers for me.
To me, you are confusing a house and a company. A stock is basically “PAPER”, which reflects a share of the public company..
Here is what you are confused about. A company makes or offer widgets to the consuming public. A house does not make anything. It provides shelter and a nice garage.
A small company can start of from a small garage. A good example would be Microsoft and Apple Inc. As the company makes good products, it redeploy its capital into hiring more smart people and buying more modern machinery. As it makes more widgets, it hires more people. A garage Apple Inc operation of the 1970s has now become a multi-national cooperation making iPods and iPhones! What about the house next door to where Steve Jobs made his first Apple I computer? Probably never appreciate to the same level as Apple Inc itself.
The reason is simple. A 3000sqft house 20 to 30 years later is still a 3000 sqft house. There’s no added value to it that would make it grow faster than a stock.
The only reason a house appreciates is because of its rental opportunity. Which means, if you are a home owner, the rent that you would otherwise paid to the landlord is plowed into the asset value of your home, which is like stable sure, but no more than the rate of inflation. At least no more than 4%, because that’s the cap we have here in BC..
Anyone charging 8% or more is breaking the law.
So really, house value tracks the rate of inflation.
But here’s the problem that Patriotz does not seem to realize.
Being a landlord is not fun in BC.
Tenants have a lot of rights. You simply can’t evict tenants unless he or she isn’t pay any rent. Anything else, you’re pretty much SOL.
Patriotz said:
Actually in its true meaning even RE pricing isn’t very risky. It follows regular cycles which, although unpredictable in terms of timing, are quite predictable in terms of P/E at market bottoms at least. And that’s the time to buy.
I said:
In the past, I can believe this because in past cycles, we have job growth in manufacturing and in past recessions, people actually curtail spending and save. Which in turn fuels the next boom phase. That’s what you’re talking about.
Unfortunately, this boom isn’t the same as the past, simply because in the last recession, people didn’t stop spending, they KEPT spending.
A recession should be the time people save, and this savings will then be used to deploy the next boom phase. This did not happen.
In fact, Canadians and Americans WENT INTO a negative savings rate.
This means, people don’t actually have money to spend, but spent it anyways. Do you agree that this insane action will continue forever? If the recession hits, loans won’t be forgiven just because the economy slows down. If they walk off from their loans, they won’t be able to borrow money for awhile. And if they don’t walk off their loans, their piggy bank were already dry from years of spending, how could be boom in real estate continue? Borrow more money?!?
Even if Bank Of Canada wants to, I don’t think the banks will.
December 10th, 2007 at 9:22 pm
white bear…….here's how it worksGo to Spanish Banks and sit there for 12 hours and watch the tide go in then out and watch a tanker gradually turn. It has no choice in the matter as it can't resist the power of the change in tides. So you need to be patient, it's changing now. We are in the 8th year of a not so typical 5 year cycle so think of it as like an EXTREMELY high tide soon to be followed by an EXTREMELY low tide.A change is in the wind. Speaking of wind…..REMEMBER…….VANCOUVER IS VAN-TASTIC
December 10th, 2007 at 9:20 pm
Or, let me phrase this better: the intangibles you talk about must be pretty darn high to warrant the attribute of rational for any buyers right now.
The point is that you can only speak for yourself. Preferences are individual, and IMHO somebody who acts to maximize his utility based on preferences. For example, if some dude gets his jollies wearing women’s underwear, I wouldn’t think him irrational. I’d think he is one weird dude, but given his personal preferences, he is buying what HE wants.
The same with housing. If some guy can afford a given house, knows that it is likely a bubble, but really really wants that home for family reasons, than I have no beef with that. We are all free to decide how to spend/lose our money. The people who buy because they think they will be gazillionaires, well that is a different story.
Unless we have an exploding inventory, a dismal sales/list and the disappearance of rampant bidding, you can put to the rest your wishful thinking that real estate in GVRD
Well, it is clear that the train wreck hasn’t reached us yet. No argument there. The question is whether it will. Make your bets.
There is no subprime in China. And people with cash are lending money to corporations via the purchasing of stocks! The valuations of Petro China is totally insane!
That does not preclude a money. A bubble can be created in any economy, be it fiat, gold or barter. If money is flowing in beyond what is fundamentally justifiable, it is a bubble. Can China efficiently absorb the money and resulting infrastructure buildout? Time will tell, but it looks shaky. And high valuations don’t, as you probably know, justify anything.
Feds inflated the money supply no thanks to Alan Greenspan!
The money supply has inflated in all years except the Great Depression. If the money supply stopped growing, we’d fall into deflationary spiral toute de suite. All different Fed’s accomplish is different rates of increase. And demand for money does change over time, it is not an independent variable.
Expensive brands in itself is a bubble supported by the wealth of these rich people! Without rich people, do you think that brands like Ferrari, Porsche, LV, Rolls Royce are going to continue making those luxury items?
Well not exactly. There will always be uneven distribution of incomes, so there will always be luxuary good. In any case, not sure if the term bubble even should be applied to non-investment assets. Luxuary cars don’t go up in value because people expect increasing returns from them. There is no feedback loop.