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April 22nd, 2008 at 9:04 am
Drachen, if you limit links to one per post it should go through the spam filter. I know it’s frustrating, but believe me if the filter wasn’t there the comment section would be unreadable.
April 22nd, 2008 at 9:00 am
Regarding arbitrages question about visitor stats: traffic is growing, but no big spike in visitors. Most visitors are of course coming from the big ISP’s, telus, shaw, rogers, novus, etc.
The fifth highest number of visitors are coming from UBC and then we get a lot from the banks, TSE, Cannacord, law firms, VGH, the BC government and corporations (EA, Radical, eBay, Kodak, etc)
April 22nd, 2008 at 8:45 am
Anti Pesto
“So we agree that by logic Toronto should be more expensive then Vancouver. Yet it isn’t, hasn’t been in decades, and probably won’t be anytime soon. Why is that?”
I had a moment to look it up. You’re wrong.
I was pretty certain your statement was hokey, I was living in Ontario in the early ’90s and I knew a guy living in Toronto so I had some idea of the market. Turns out Toronto was nearly twice as expensive as Vancouver in 1989 (just to pick one data point).
http://tinyurl.com/623vg6
Toronto Graph
http://tinyurl.com/6mtl5d
Vancouver Graph
(by the way I hate how you can’t post links here without the message getting held for approval)
April 22nd, 2008 at 8:45 am
Re: Artibrage’s 40% drop calculations.
Wouldn’t it be worse? The rent of $1200 includes major costs (strata fee and taxes, say $300) that are not included on the mortgage side of equation. Take that into account and the equivalent monthly payment ($900) to the mortgage gets you something closer to $146,000. That’s a 56% drop.
Am I so wrong?
April 22nd, 2008 at 8:40 am
“- Does the 500 sqft owner get as big a say as the 1500 sqft penthouse owner?”
I think your condo unit means that you have a percentage or a ratio of shared ownership of the common area and then the title to whatever percentage your unit counts for towards the entire building and there is also a percentage of ownership at demolition in the paperwork that you get when you hold the title. It’s also used to calculate your strata fees. Just like the penthouse unit pays more in strata fees. So if the building was sold for it’s land value only the penthouse would get more.
But if the penthouse was sold as one unit new, then it would just be one vote at the strata council meetings whereas if you owned two units that’d been converted into one you’ll see a unit with 4 parking stalls, two strata lot numbers, double the parking passes etc.
In order to demolish the building they’d need a big majority in a vote and umpteen engineers reports stating the building was useless.
Good luck getting a strata to agree on anything though, except maybe to unlawfully ban something.
I’m surprised a strata hasn’t tried to put weight restrictions on occupants yet!
April 22nd, 2008 at 8:38 am
Andrea,No Name
you did not read his response to your post he want to assist 33 million people with different occopations.
April 22nd, 2008 at 8:27 am
re: increased bullish sentiment – perhaps the Pope can help us with this – based on ip stats and stuff – has there been a spike in new visitors? I would think the van mag article would have driven some traffic this way.
I’m actually kinda curious about the corporation ip background – who’s visiting from 9-5? The bankers? The accountants? The engineers? The realtors? The university?
A much more balanced (balanced in the sense of number of bears and bulls seems to be the realestatetalks forum). Mostly still bears here. I’m a lurker bear.
April 22nd, 2008 at 8:25 am
Arbitrage
Yep, believe it or not people, in a NORMAL market condos actually fall in price every year. It’s like a used car, the land value is essentially nothing and the building gets older and less desirable. Anyone calculating the value/rent of a condo should take that into consideration.
I am not sure what would happen if the building collapsed, I imagine the place would be insured and each owner would be paid the amount of their last assessment. The insurance company would then own the land.
In your last case if the building were to be torn down I believe each owner would have to sell their place to the developer, so each would negotiate their own price.
April 22nd, 2008 at 8:11 am
I enjoy the increased bullish sentiment on this site.
It means that some visitors (even with some bullish tendencies) are being inquisitive and it’s a definite shift in the psychology.
The wheels are slowly starting to turn backwards.
On Rob’s site I pointed to Satv/Krrrsh’s vocalness and his anxious desperation is being felt across all blogs.
Also, the media is turning more bearish by the day except for the advertorials grasping at straws looking for the last suckers.
It’s interesting and amusing to see how all this shift is unfolding exactly as in the US so it’s no surprise that many of the delusional bulls will hang on till the end.
Noname
April 22nd, 2008 at 7:59 am
- Is there value left after the building collapses? Do all the owners have to agree on what to do with the land?
There’s a few condo developments in Florida where buyers are being forced to sell their condos for market value (around 40% less than they paid) as the majority owner of the building wants to revert to rental units. Not sure how the laws work in BC but if some vulture fund comes in after a crash and buys the majority of the units in your building could they force the minority owners to sell in order to revert to rentals? Strataman, Freako?
April 22nd, 2008 at 7:49 am
no body can answer your mislenious question that does not exist dummer why don’t you post this on refered dead site,one thing is for sure a financial planner can not help you to buy house they are mostly agent for various banks to invest in gic or bonds.
April 22nd, 2008 at 7:34 am
Re: multiples – well, a 100x rent valuation would make buying a lot easier. But isn’t that quite a bit lower than historical? Going on the price to rent ratio chart from financial planning – it looks more like 16-20x Annual(?) rent. Though, it only shows from 1992.
Anyone want to help me with some further questions:
- What is the design/expected life of a high rise condo building? Wouldnt we use this as a multiple? (plus various other factors like discount for holding something that’s slowly falling apart, but is still on a small chunk of land that is appreciating)
- Is there value left after the building collapses? Do all the owners have to agree on what to do with the land?
- Does the 500 sqft owner get as big a say as the 1500 sqft penthouse owner?
April 22nd, 2008 at 7:33 am
I’ll buy a house when I see Krissh2 hanging from the debtors gallows.
April 22nd, 2008 at 7:31 am
Great comment. We have survived more drops so we will survive also this one. You can read many articles like this one in newspapers now. I think that effect is exactly opposite. If they say “don’t panic” and after some not really trustworthy arguments it just boosts people to panic. I am working as a Toronto realtor and I am following my experiences it is exactly like this.
April 22nd, 2008 at 6:36 am
One thing to say. We should not make fun of poor english skills here. Poor math, no knowledge of history, lack of critical thinking, lack of research, lack of credible sources for their “facts”, mindlessly parroting slogans, etc are all fair game. Plenty of targets there.
“World class city”? “The best place on earth”? If you live for camping, hiking and other outdoor activities this is pretty good place. You don’t need a city involved for that part, but when I’m out I don’t see many others. Other than that aspect, if you have actually been to a world class city………Vancouver isn’t! It’s an overgrown small town. No notable architecture, public spaces and events are pathetic, restaurants (with a few exceptions) are very ordinary. Don’t get me wrong, it’s far from the worst place on earth, but NOT world class. I’ve been to world class cities. If I wasn’t so outdoorsy I don’t think I’d be here.
April 22nd, 2008 at 1:07 am
Going rent is say… $1200 (I wouldnt pay that, but lets just say 1 bdrms in better locations for $1400 are are some kinda benchmark) – using the same terms for mortgage, and to get a similar monthly payment the place would have to go for $200000.
No condo, except something like a condo townhouse that has appreciable land value, is worth more than 100x rent. They have next to no land value, and a host of unpredictable expenses beyond the owner’s control. The property will eventually become worthless or require large capital infusions, which amounts to the same thing. Condo prices dropped to this level – or even lower – in the previous busts and I see no reason why this can’t happen again.
So it’s really worth around 120K, which is a 60% drop from the current asking price. That’s assuming rents hold up which is another big if given the current rate of building and the coming recession.
April 21st, 2008 at 11:26 pm
I am sick and tired of morons with “feelings” about the market who haven’t done any research walking around cocksure and arrogant like they invented the mortgage or something.
There’s this wonderful tool called the Internet. Perhaps you’ve heard of it. Use it. Report back here after you’ve educated yourself and I’ll be happy to share some of my data. Better yet you don’t even need to go anywhere, you can just read through the posts on THIS BLOG and learn what you need to know. Stop being a lazy bastard, get off your ass and learn something before shooting your mouth (fingers?) off.
Are you for real??? Get a hobby man.
April 21st, 2008 at 10:53 pm
I don’t know where prices will head next year. I do know, however, that there was a household designer furniture store advertisement served up together with the web version of the editorial.
April 21st, 2008 at 10:39 pm
hmm… for a cash flow positive investment (or when buy is cheaper than rent), assuming no appreciation, and no down payment (or assuming we’ve found a much better and safer investment than real estate – like ABCP haha), or we only want to talk about the cost of shelter… just looking at one downtown condo example:
Cheapest condo on spectrumcondos.ca
$329,000 (dinky 510 sqft, 19th floor studio)
5 yr fixed (we like to play it safe), 25 yr amort, 5.59%, monthly payment (ingdirect) – the payment is $1988!
Going rent is say… $1200 (I wouldnt pay that, but lets just say 1 bdrms in better locations for $1400 are are some kinda benchmark) – using the same terms for mortgage, and to get a similar monthly payment the place would have to go for $200000.
About a 40% drop in asking price is required. Alright, lots of assumptions and simplifications, but haven’t seen a calculation on here for awhile. Pick away at it if you want. I think the calculation for fair price over at the financial planning blog gives us a similar number.
April 21st, 2008 at 10:27 pm
BDK,
Yes I can help you find a place you want downtown? ok buy any place would you like to rent it?why? do you hold multiple properties?just buy a place and live in it that’s for you.
Oh only 75 k in pocket and scared?then why are you looking for property over value why don’t you change your target area go to surrey or east vancouver oh sorry you don’t like east side maybe? then shut up you will never be able to buy property unless you get entery point do you understand entery point?
April 21st, 2008 at 10:15 pm
You’re right, I’m going to buy a few more condos tomorrow!
Best Place on Earth!
Can you help me find a place downtown?
This is an investment so I need a place that I can buy which I can rent out for the full mortgage or at the best a $50 loss. Everyone wants to live downtown! I can charge unlimited rent right?
Do decent looking homeless people usually pay their rent on time? I’m hoping to find a few!
April 21st, 2008 at 9:47 pm
Type of market where bats are sitting on every single branch of the tree looking for option.
April 21st, 2008 at 9:43 pm
sitting out after sell and sitting out but not buying despite supportive income does not creat fundamental crisis, in that case there are lots of people around to take care of the market only some properties can change hands and the market is up.
only silly people would like to sell their option in this type of environment.
April 21st, 2008 at 9:06 pm
oh man, this fill in any name thing for comments can get pretty confusing – i (arbitrage @ 16:48) am not the same arbitrage @ 19:26 – though i would like a 65-75% drop (to make my future mortgage smaller or non-existant), it might be good to actually bring numbers and calculations to the table when making such bold statements.
April 21st, 2008 at 8:48 pm
Building Granville Island, the new convention centre, or filling in a chuck of Victoria Habour in HK was surely enough to reduce land prices.
Thanks for bringing up Hong Kong. It saw a 50% bust in the late 90′s, in spite of a shortage of land that makes Vancouver look like Edmonton.
Manhatten had a huge RE bust in the 70′s. London also saw a bust around the same time.
Even if there is not one square inch of land left, prices will still go down – a lot – if not justified by fundamentals.
April 21st, 2008 at 8:38 pm
its worth $100,000 to stay in Vancouver even if I am a homeless person.
severe disconnect in the logic k
a shopping cart is for free as you will
soon find out!
April 21st, 2008 at 8:34 pm
And the looters will take your stuff worth $100,000 so the base start from there, its worth $100,000 to stay in Vancouver even if I am a homeless person.
April 21st, 2008 at 8:28 pm
I just don’t think prices will drop by 50%, no offence to my more ardent bear comrades.
all baby bulls are sooo cute at that age
April 21st, 2008 at 8:27 pm
krssh2.3:
checkout some inner city areas of Newark NJ and Detroit ….. buy a SFH for $800.00
April 21st, 2008 at 8:26 pm
haha I’m a bear dammit I’m a bear! I think we will see price decreases for the next few years, starting as we speak! I think this fall the Vancouver Sun will eventually have to put a big headline saying HOUSING PRICES CRASHING. I think it will be a decade or more before real prices reach what they are today.
I just don’t think prices will drop by 50%, no offence to my more ardent bear comrades.
April 21st, 2008 at 8:18 pm
punface,
why don’t we find one and fit all the bears in that,wanna do it?
April 21st, 2008 at 8:18 pm
people are willing to pay you to take the place.
good point!
when you can pick up property for tax owing that is exactly what you are doing…..
April 21st, 2008 at 8:16 pm
Prices can drop by more than 100% if people are willing to pay you to take the place.
April 21st, 2008 at 8:05 pm
why did you prefer to drop only upto 50%,65%,70 percent?
did you forget to say 100 percent?
April 21st, 2008 at 7:53 pm
I feel that the market will drop 65% to 70%. Never mind 50%.
anti-pesto, dosh et al:
asset values including RE could fall 100% to
ZERO value if you can’t sell, something is only valued by what someone is willing to pay for it ……
April 21st, 2008 at 7:39 pm
Well 70% drop is the boldest prediction I’ve seen to date.
I’m now officially a bull since I believe prices will only drop by 20%!
April 21st, 2008 at 7:35 pm
“inventory at a 9 year peak.”
those numbers are for canada not for vancouver,in vancouver we have usual inventory that did not even crossed the last year peak as yet.
Anti Pesto,
Thanks for taking the time out your views are outstanding preety much fit on the scenes,please don’t mind what DRACHEN got to say he is very depressed personality he was almost gone last year as WG2C recomend last year he don’t need a pills, he is looking for direct stroke,his desire change like four weathers in a day some time 30% some time 50% some time 70% than back to 40% if there is any quick method to collect those comments I can post them here.so basically he is not agree with the less numbers than his desire.
Drachen,
you should feel happy about pesto’s recomendation about 10-15% if it was me,i would say ZERO because there is NO CRASH IN VANCOUVER.
USA is not crashing all the way there are 152 markets those are up and further going up it’s depend on the place you live in.
This article actually found stuff used by us on the blogs same as vancouver magazine so they like it the just want to repeat our way.
City is special.
Everyone wants to live here.
Wealthy immigrants will protect us from a housing correction.
They’re not making any more land.
Vancouver is a world-class city.
It’s different here.
the best place on earth
April 21st, 2008 at 7:26 pm
Anti-Pesto,
You are somewhat correct that people buy on feeling. But the feeling now is that the market is crashing. I feel and everyone feels that real estate is a bad investment right now. I feel that the market will drop 65% to 70%. Never mind 50%.
April 21st, 2008 at 6:43 pm
Anti-Pesto, you made the comment, “I hope no one is basing their investments soley on this blog or others like it”.
If it weren’t for the likes of Calculated Risk and the Big Picture, I would have missed on all the Puts and short sales I had on home builders and the financials.
So while the cognoscenti pass around and sign the thank-you card we have for you, please take my heart-felt thanks for taking time out of your profitable, busy schedule to come and save the unwashed masses.
April 21st, 2008 at 6:38 pm
What part is crap? The part that Toronto hasn’t been more expensive then Vancouver for decades or that it isn’t now?
I think it’s pretty obvious I don’t have a source that shows Toronto will remain cheaper then Vancouver for all points into the future.
April 21st, 2008 at 6:21 pm
Anti Pesto
“Lets try a new topic, last year when interest rates were beginning to raise some people called for the end of the boom and the bust was upon us.”
I don’t actually recall that many people saying that a rise in interest rates would be the end. It was mentioned but most of the more educated users here pointed to past boom bust cycles which had little (if any) correlation with interest rates.
“So we agree that by logic Toronto should be more expensive then Vancouver. Yet it isn’t, hasn’t been in decades, and probably won’t be anytime soon.”
Source this, don’t make crap up. IF it’s true provide a source for your data, otherwise you’re just pulling it out of your rectum.
April 21st, 2008 at 5:36 pm
Well, at current prices I think there is an oversupply, but I also think that we will always be an expensive city compared to Toronto. I don’t expect our affordability ratios to ever be as low as theirs.
April 21st, 2008 at 5:30 pm
Careful, you’ll get attacked by those that state there is an oversupply.
April 21st, 2008 at 5:26 pm
I don’t agree that prices are determined by the income of locals.
If tomorrow half of the homes in Vancouver disappeared and were never allowed to be rebuilt, the prices of the remaining homes would go up as those who really wanted to and could afford to would pay more of their income for housing, and the rest of us would get roommates. It is a function of supply and demand and what people are willing to give up to have a home/room/etc. more than it is a function of income.
Now while Vancouver has plenty of land to build houses on, we’ve made a lot of decisions to prevent this land from being used and this housing from being created. This history goes back long before the current environmental movement or housing bubble. In my opinion, the biggest is that we simply lack the highways to bring distant areas into the commutable Vancouver sphere.
Now this is in many ways a good thing, it is one of the things that make Vancouver unique. But because of this (and other) choices, we need to accept that those of us who earn less than $200k or so a year are never going to comfortably own a single family home. That’s life.
None of this would be a problem for most of us if enough condos/townhomes were being built, but that isn’t happening either because of old-fashioned NIMBYism and government policy that is simultaneously pushing for greater density while also charging developers extra money when they try to build extra density.
So, in my opinion, we are always going to be an expensive real estate city because we have chosen to limit the supply of real estate. This will be just as true after the impending price crash as it is now.
Sorry for the long post.
April 21st, 2008 at 5:13 pm
So we agree that by logic Toronto should be more expensive then Vancouver. Yet it isn’t, hasn’t been in decades, and probably won’t be anytime soon. Why is that?
Is someone going to tell me to use the internet? All that ever tells me is to buy gold.
April 21st, 2008 at 5:08 pm
I’m glad there are some reasonable bears here, as the unreasonable ones seem to have shooed away most of the bulls (both the reasonable bull as well as the unreasonable ones) This place would be better with a more balanced discussion.
Lets try a new topic, last year when interest rates were beginning to raise some people called for the end of the boom and the bust was upon us. In hindsight that didn’t play out, would those who argued that point now argue that with interest rates dropping it must push up prices? If we are talking strictly numbers then it would make sense but I have a feeling those people would still be bearish.
April 21st, 2008 at 5:00 pm
Behind the scenes, price/rent is what I use to get my 20% estimate. At 50%, most places I’ve looked at buying would be radically cash-flow positive, probably returning 10%/year before price appreciation.
I’m only really in the market for a condo near Downtown though, so I admit that is the only area I’m basing my calculations on.
April 21st, 2008 at 5:00 pm
Comment by Anti-Pesto
2008-04-21 15:13:14
The reason I beleive a 50% correction isn’t in the cards is because the market (people) won’t allow it, if prices were to get down 30% somehow, the amount of new buyers entering the market would stop the bleeding really fast, their are examples of certain cities in the US that have dropped more, sure, but there are countless more where the bleeding has stopped at a certain level as buyers see a reason to get back in.
Vancouver has been the most expensive city in Canada for years for no logical reason. Is anyone suggesting we will be passed by Toronto because the salaries are higher there and they could afford to pay more?
The US is still dropping, none of their markets have bottomed.
Sure, there’ll be some buyers on the way down but not enough to slow the descent (simple supply demand at that point).
Yes, why shouldn’t Toronto pass Vancouver as our prices drop? It’s another world class city, and property prices logically will be determined by the income of locals (the consumers of RE).
April 21st, 2008 at 4:58 pm
I have a brother who truly believes and has for 10 years(maybe more) that prices will return to 1985. When you could have bought a house in the valley for $60,000. That kind of thinking is more about dreaming than reality.
But this is ridiculous overinflated and thus will have to return to earth. I truly would bank on about 30% overall and in some areas like DT 40-45%. The shills have been pumping this market for too long and is bound to burst. People with cash know it and they are in my opinion of the highest intellect. Watch and see..
April 21st, 2008 at 4:57 pm
in my case, i’m willing to pay a bit more for “pride of ownership” etc… long term i see value in owning the place you live in – sorry, that’s from the gut.
I’m not willing to pay a 50% premium on rent however (i dont have the real numbers in front of me, just pulling them out of my ass).