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October 6th, 2009 at 8:14 am
The interest rate raise that was heard around the world reverberated through the financial markets this AM like a cannon shot. Auzzie led the way with a quarter point increase. The $CDN leapt over ine full cent. Ottawa must be shitting puppies right about now. The US is sunk in a tar pit of unproductive, non consuming unemployment, zero profit growth and the Canadian government is sitting on trillions of tons of what the world wants and additional multi billions of barrels of oil. Trying to keep the $CDN down below the plunging USD is proving to be near impossible. With exploding inflation in the non CPI consumer discretionary and durables the CDN government is either going to have to raise rates or let the consumer fall ever further in debt as prices rise.
http://www.vancouversun.com/bu.....story.html
This means that the ‘optimism’ as reported in the Vanc Scum article will quickly be dashed. Isn’t it funny how the market will dash the hopes of the majority of the consumers at the precise moment when optimum optimism is achieved. Bwahahahahahahahahaha, wait for it………higher mortgage rates are coming down the pipe in the bond market. This is going to make the BOC’s decision to price the Savings Bond at .04% look like a bunch of chimps picking numbered banana skins. Incompetant fools that they are proving themselves to be.
The CDN dollar will increase globally and if the CDN government wants to contain real inflation in Canada they must raise rates alomg side the G20 countries which have started the campaign today. This can only cause the $CDN to increase even more. Unions take note, job losses are permanent.
http://www.theglobeandmail.com.....le1313354/
October 6th, 2009 at 7:50 am
I know it’s basically been said before and this may be just calling the sky blue but.
The demand for investment real-estate isn’t the same as the demand for housing.
“I buy three my husband buy three”
October 6th, 2009 at 7:25 am
@Realist: People WANT to live in Vancouver and will pay a premium for it.
incredibly, you seem to have missed the entire point of the thread you commented on. According to the stats population growth is low, so how can you say everyone wants to live here?
And the value of living in Vancouver is very clearly reflected in rents. Not “magicpony wish-upon-a-star” craigslist rents, but the actual rents people are paying.
October 6th, 2009 at 7:07 am
There are two main Vancouver myths that work together to drive up real estate prices. The first is the “everyone wants to live here” myth (which is the topic of this thread) and the second is the “low vacancy rates” myth which is based on statistics that doesn’t take into account all of the condos for rent.
I am currently looking to move to a new condo and there are a ton of places to choose from. Even the notoriously overpriced listings on craigslist have started to put into their ads “open to negotiations”.
It is a renters market, bargain hard.
October 6th, 2009 at 2:39 am
@Realist:
For the umpteenth time, what people are willing to pay to live somewhere is the market rent.
The market rent is determined by actual supply of and demand for shelter. The fact is that market rents in Vancouver differ little from Calgary or Toronto. That means the cities all have about the same balance of actual supply and demand.
I will also note that real rents in Calgary have actually increased over this decade from the 80′s and 90′s, opposite to Vancouver and completely counter to your argument, because (surprise) population and incomes have increased substantially:
http://cuer.sauder.ubc.ca/cma/.....algary.pdf
Not only is there no shortage of shelter near downtown Vancouver, there are many empty units as other posters have pointed out.
What someone is willing to pay to own the property, whether they live there or rent it out, is something else entirely. That is an investment decision. If someone is willing to pay much more than the rental value of a property he is expecting to make it up from future capital gains, by selling it to someone who is willing to pay an even greater premium over rental value (the greater fool). That’s called a speculative bubble.
Got that, boys and girls?
October 6th, 2009 at 1:01 am
I think a lot of the bears haven’t lived in other cities or just don’t understand them. They just see numbers. DaBull has it partially right. It is all about location. People WANT to live in Vancouver and will pay a premium for it.
You can’t compare prices/rents and population growth to a city like Calgary, because they have so much available land. The NW is sprawled almost all the way up to Airdrie, the south is stretching past 200th Ave, and the west has gone way past Springbank. All with room to spare. People want to live near Vancouver’s downtown core are willing to pay for the lifestyle.
October 5th, 2009 at 11:35 pm
39 X Anonymous Says:
October 5th, 2009 at 10:31 pm
Greed greed greed
http://vancouver.en.craigslist…..49721.html
————–
14k? WTF? That’s a student hovel from the furnishings. Hell, I’ll rent my place in the West end of 1/4 of that if anyone is stupid enoough to pay that.
October 5th, 2009 at 11:12 pm
Latest on Calculated Risk….
http://www.calculatedriskblog......-high.html
The U.S. apartment vacancy rate rose to 7.8 percent in the third quarter, its highest since 1986, … according to Reis.
October 5th, 2009 at 11:08 pm
Rents all over the place? That’s what you get with amateur (accidental) landlords… that feeling they’re going to get is the invisible hand of the market smacking them in the face.
Is it just me or do a lot of these “luxury” listings look really, really gaudy? Guess money can’t buy good taste.
October 5th, 2009 at 10:50 pm
@Thomas:
If you’re a person with good credit and a decent job, there’s no reason why you can’t score a 1BR+DEN in a newer building in Yaletown/Coal Harbour for $1500 or less.
October 5th, 2009 at 10:34 pm
Greed greed greed pt2
http://vancouver.en.craigslist.....47636.html
It’s gonna be interesting in the coming months as more and more of these people come out of the wood works to ‘cash’ in the the games.
October 5th, 2009 at 10:31 pm
Greed greed greed
http://vancouver.en.craigslist.....49721.html
October 5th, 2009 at 9:24 pm
a side note:
If they wanted to get rid of some of the gangs, why not allow people to grow one pot bush for their own use (no..I dont..I dont like inhaling smoke, I appreciate the delicate structures of my lungs)
But, if they did that.. then the grow operations would go bust, a good chunk of the “economy” would disappear, which would affect the housing market. Why buy a house for a grow op, if nobody will buy the pot if they can grown their own.
Maybe it is in the real estate markets interest to make sure that it is illegal for people to grow their own pot, the grow ops would go bust. And is the real estate connected to the “news papers” and the government?
What regular working person can afford to buy a house these days? But those that make a living off grow ops can…
October 5th, 2009 at 7:04 pm
patriotz says:
Complete nonsense. If an owner-occupier sells and becomes a renter, that adds one more renter to the demand side, and one more rental dwelling to the supply side (because one more house is now rented out).
The only thing that matters is total dwellings versus total households.
Oh BTW, if you would like some evidence, rents are falling in many US markets which are also seeing a decline in the ownership rate (which the whole US is seeing):
sounds good again, but of course if breaks down locally because there are not enough dwellings for the households here. you could make the argument for suburban condos but with that type of dwelling the ownership cost isn’t far out of line with it’s earning power.
October 5th, 2009 at 6:54 pm
Rental asking prices are hilarious right now.
There are units in ten year old buildings going for a $500 differences in price.
The last two weeks I checked out one bedrooms in coal harbour and the west end.
I started at the Venus because there were so many listings in that building (single building)
There is a 2 bedroom for $1,725 and then people asking $1350 for studios! Meanwhile walk across the street and the Residences on Georgia (two buildings) has a similar story and then move along to the Palisades (two buildings) and again lots of rentals with a huge variance in price. Go slightly east to the lesser “Lions” (two buildings) buildings and asking rents go from $1200-$1500 for the same layout and then walk across the street to the “Pointe”(single building) which is the worst of the bunch with outdated appliances and odd floorplans and you can get a sub penthouse for $1380 or a crappy mid level unit asking $1650.
I noticed the same thing with Avila the other day and bayshore gardens goes from $1.5 to $3.5 per sq ft asking rent but didn’t actually view them because I’m only looking at one bedrooms and one bedrooms with den.
Despite the disparity the same listings are still up there meaning they aren’t renting even at the lowest price.
The other funny thing is some landlords honestly believe they have a superior suite because they’ve either cleaned the carpets or put in low end laminate floors and therefore should charge the entire flooring cost every month?
How else can you explain a $1700 one bedroom in a shitty building like the Pointe?
The Landlord didn’t know what to say when I told him that a 30th floor unit with a balcony, view and better condition was available for $1,380.
Next week I’ll check the slightly older yaletown buildings like mondrian, 501, pinnacle,miro, yaletown park and see what they are asking and then compare them to the newer buildings such as Elan, Donovan etc.
These landlords were gouging as much as possible the last time I was looking so I won’t feel bad offering $1100 on units were the asking rent is $1600. Especially the Mondrian (two buildings) the asking rents are higher in that old building than they are in the new ones.
October 5th, 2009 at 6:52 pm
Thanks for the answer to my “real rents” question, patriotz. I have one more: do you know if the statscan data for rents (I assume it’s average or median) is somehow normalized for quality, as with a benchmark? I have no idea if the average person’s living space has gotten smaller or larger since the 70′s, but that would seem a necessary thing to control for.
Thanks for all your thorough analysis.
October 5th, 2009 at 6:51 pm
@stagnate:
The value of the land under the dwelling is determined by what someone is willing to pay to live on it. In other words, the market rent. Note I said value, not market price – the latter can be inflated by speculation (Florida swampland, etc.).
All asset values depend on earnings. It really is that simple.
Complete nonsense. If an owner-occupier sells and becomes a renter, that adds one more renter to the demand side, and one more rental dwelling to the supply side (because one more house is now rented out).
The only thing that matters is total dwellings versus total households.
Oh BTW, if you would like some evidence, rents are falling in many US markets which are also seeing a decline in the ownership rate (which the whole US is seeing):
Mish – Rents falling everywhere
October 5th, 2009 at 6:29 pm
patriotz says:
Please take a look at the first post on this thread. Rents are indicative of actual supply of and demand for shelter.
sounds good but of course it’s not quite that simple. the land under the dwelling is increasing in value due to the supply and demand dynamic. if a shift occurs from ownership capital to rental shelter rents would rise a proportionate amount. basically demand and supply dynamics dictate the portion of moneys allocated to shelter, only macroeconomic shocks will change the overall percentage.
October 5th, 2009 at 6:07 pm
@mk-kids: Do you mind me asking what neighbourhood that is?
October 5th, 2009 at 6:03 pm
@DaBull:
What?
Please take a look at the first post on this thread. Rents are indicative of actual supply of and demand for shelter.
You are right that rents currently have nothing to do with Vancouver prices. The latter are being driven by speculation rather than fundamentals. That situation is called a “bubble”.
Next canard, please.
October 5th, 2009 at 5:51 pm
Don’t you poeple know it’s almost impossible to get new development land in the Fraser Valley Region due to Agricultural Land Reserve (ALR). Here is the ALR in Fraser Valley.
http://www.alc.gov.bc.ca/Commi....._Coast.htm
Rents have nothing to do with Vancouver prices, supply and demand does, there is a lack of land due to ALR restrictions on development.
October 5th, 2009 at 5:40 pm
real scenario – in my experience, it is best to do the opposite of whatever your mother-in-law suggests…. after all, she never wanted her daughter to marry you in the first place, and you went against that, didn’t you…
October 5th, 2009 at 5:34 pm
@skiff:
That’s what it means. Of course you have to use some accepted metric for inflation and we use CPI to calculate real prices (=nominal price/CPI). That’s just a convention but you have to use some convention.
Note also that price/rent and price/income are quotients of two nominals, and are thus real without having to use any metric of inflation. So arguments about the accuracy of CPI do not apply to them.
October 5th, 2009 at 5:32 pm
hang in there real scenario. You seem like you have a good head on your shoulder. Worst case you end up like me, moving. Once you define success on your own terms, not others which tends to be you must own in vancouver. You will find happiness and success. Save money and you will be able to buy a house for that money. Hell in coquitlam its sick to think that a house will cost that much.
October 5th, 2009 at 5:07 pm
My girlfriend and I are in our mid to late 20′s living at home mainly cause we don’t want to buy anything in this market. Combine income of 110k/year. Recently her mom is insisting that she buys something.
Her reasons:
1. start building equity
2. with our incomes and help with the downpayment, we can get a nice townhouse 400-450k range (burnaby, coq area) and be comfortable even when rates do go up.
3. if you decide you need something more, you can always rent it out and buy again. Even though the rent may not cover the mortgage, at least most of it is going towards something you own.
4. rent is like throwing your money away.
my counter argument.
1. Although we can technically afford a place like that, I look at value more than affordability.
2. prices are so far from fundamentals and avg incomes, its just not sustainable. Would bother me if 450k can buy me a house instead!
3. paying interest is also throwing money away
4. I can rent and live in a neighborhood I actually like and still save up for an even bigger downpayment.
5. vancouver is due for a crash. the gov’t keeps making provisions to keep that from happening.
6. we have lowered our standards so much in the past 10 years, why the sudden change? I think its hype and psychological, both of which can be turned in an instant
I’m thinking a majority of people my age just do what our parents say. Think about it, 2 sets of baby boomer parents, both paid off their mortgages, kids out of university and now left with excess cash. Why not buy if affordability is not in question? Not to mention the pressures from family and relatives. We’re both canadian born chinese if people are wondering.
RE is like religion. Each side is blowing smoke and not making sense according to the other party. If it wasn’t for this blog, there would only be one party.
There’s now talk of her mom buying, and we rent from her. At the end of the day, it’s one more blind sale to boast. You’d be surprised how many ppl out there read the Sun and Province for RE advice, think renting is garbage, believes the olympics (now HST) is driving RE prices and RE goes up forever.
October 5th, 2009 at 4:52 pm
patriotz (or anyone who knows), does “real rents” simply mean adjusted for inflation or is there more to it?
October 5th, 2009 at 4:47 pm
Looked at a place today listed at $1875. Its been vacant a month or more, the property manager said he is trying to get the offshore owner to reduce the price (the last tenant paid $1850 so naturally the next one should pay $1875 according to the owner). He said the owner just doesn’t get that its a whole new ballgame, lots of inventory out there & renters in the drivers seat. He encouraged us if we were interested to make an offer and request new flooring. We saw a better laid-out suite in the same building with a huge storage locker go for about $400 p/mo less recently so I figure this one should rent about $600 p/mo less than current asking given the poor layout and lack of storage.
October 5th, 2009 at 3:48 pm
“Miners and their families in Zambia and across the border into Congo’s mineral-rich southeastern province of Katanga have rioted over the appalling safety and slave-labour working conditions in Chinese-run mines.
People on the streets in Zimbabwe, who are not short justifiable complaints, rail at the takeover of locally owned retail businesses by Chinese entrepreneurs.”
Heh. They must be a bunch of racists.
October 5th, 2009 at 3:15 pm
Anon – no need. Just rent here cheaply and enjoy life until things return to reality.
It’s all good.
October 5th, 2009 at 3:13 pm
The party’s over for Chinese in Africa
http://www.vancouversun.com/sp.....story.html
October 5th, 2009 at 1:42 pm
It is time to stop analyzing what is going on in Vancouver. There is no logic to it, it is unpredictable and it is best to just get as far away from this crazy place as possible.
October 5th, 2009 at 1:11 pm
@Wreckonomics:
Also there are other places in the world where there is a lot of drug selling and money laundering – and undocumented population.
Like Miami, for example – now down 47% from peak.
http://www.calculatedriskblog......se-in.html
I have no doubt that people there were making the same argument a few years ago.
October 5th, 2009 at 1:05 pm
@neighbour: there’s another problem with your reasoning: ill-gotten gains are not new, so how would they explain prices shooting up over the five years with low population growth? Werent people selling drugs and laundering money before then?
October 5th, 2009 at 12:52 pm
Drove home last nite about 7PM and lookd up at some Hi-Rises.
My guesstimate is about 80% had no lights on, completely dark.
I recall BC Hydro claiming that if a given unit uses X amount of power,basically the monthly amount of power a fridge uses, its not deemed vacant. Well, I think many of these units are actually vacant, the owners too lazy or dumb to unplug the fridge and prop it open to vent .
If Vancouver has only had 6 % growth rate in 5 years…the conclusion I draw is , as patriotz said, simply specuvesting. There were far more units built than necessary to accomodate this growth.
Rents stayed high for a time because no one was renting them…but that will change as the greater fools ( including ex renters)this unsustainable market drew in now panic for revenue to prop up their bad investment.
October 5th, 2009 at 12:09 pm
neighbour – where did you come from? Somalia? Sicily?
October 5th, 2009 at 11:33 am
@neighbour:
No bad feelings neighbour, I just want to know, if there are all those hidden people and/or all that hidden income, why rents aren’t higher?
Cities that actually have high populations of undocumented residents and/or high amounts of unreported income have high rents. Places like Moscow, for example.
October 5th, 2009 at 11:29 am
Well… I might went a bit over the edge with my statement in order to bold out all those anomalies that we all know about like loaded folks with no real jobs, drug lords, family run crystal labs, export-import prostitution, gangs, money laundry, etc so I apologize if I caused some bad feelings around.
It worked from where I came in a way where gangsters would remain in the shadow and just use miserable and poor ppl as a facade, provide basics for them in return for silence and loyalty so at the and everyone would get a peace be ok.
October 5th, 2009 at 11:09 am
yup, in East Van you can. just don’t look on craigslist, as most landlords there have unreal expectations.
October 5th, 2009 at 10:46 am
Again, I am not sure where anyone gets the idea that rents have fallen in the city of Vancouver. When I was in University about 4- 6 years ago, I shared many an $800 two bedroom suite in East Van. Try to find anything close to that today.
October 5th, 2009 at 10:04 am
@neighbour:
I see we have moved from the “hidden income” rationalization to the “hidden population” rationalization.
And my reply is the same: Why are real rents falling?
BTW, if the actual population had gotten out of whack with census figures don’t you think someone would have picked up a discrepancy in hydro hookups, telephones, car registrations, school enrollments, MSP, etc.?
October 5th, 2009 at 9:58 am
@neighbour said: I think population growth is considerably higher in Van but not necessarily recorded due to fact that all kind of criminals and “business” folks need to keep low profile therefore they don’t add up to statistics.
Well, since the “everyone wants to move to BC” is trotted out as a large demand that pushes up prices, that doesn’t make sense: they can only push up demand by buying property, and if they buy property, they’re counted in the population growth numbers. You can’t buy property here without creating a footprint that would get you counted as living here.
Are you saying that while the population looks to have grown anemically over the past five years, there is actually a “shadow” population of migrants (be it international or domestic) and criminals who are nonetheless pushing up real estate values?
All the people in Canada have to live somewhere, which means there will be a record. If what you say is true, there are a large number of people here that do not pay utilities or taxes; have bank accounts; receive benefits; have driver’s licenses or otherwise interact with the (local, provincial or federal) government in any way. Where are they? Remember, they have to own homes to have the effect that is claimed of them.
October 5th, 2009 at 9:50 am
Silly bears with your logic, reasoning and facts you’ll never learn to fly like me.
-Icarus
October 5th, 2009 at 9:44 am
I think population growth is considerably higher in Van but not necessarily recorded due to fact that all kind of criminals and “business” folks need to keep low profile therefore they don’t add up to statistics.
October 5th, 2009 at 9:42 am
Pretty much sums it up right here.
Simply state, everyone decided that piling on more debt was a good idea.
From housinganalysis blog:
The positive correlation
between consumption and house prices may be related to housing’s role as collateral. Between
2000 and 2007 the real price of existing homes increased by 52 per cent. At the same time,
the ratio of household debt to GDP rose dramatically from 58 per cent in 2000 to 76 percent
in 2007.
October 5th, 2009 at 9:19 am
@ No Brain:
My mistake. Thank you for being so patient and polite in helping me realise it.
For the record, I am as full of Schadenfreude and gloating as you are every time I hear that Vancouver RE is not doing as well as it is reported in the mainstream media.
October 5th, 2009 at 9:08 am
Re: Landmark National Bank v. Kesler,
There’s a good write-up regarding this ruling on Calculated Risk.
In this case the borrower was paid the funds which normally would have gone to the holder of the second mortgage.
I do not think this ruling means what you think it means.
October 5th, 2009 at 9:03 am
Untitled:
Please read the links. That is the 5-year total growth. The annual rate is about 1.27% for Vancouver from 2001-2006. At 1.27% per year growth it would take about 55 years to double the population.
Someone posted the same misinterpreted conclusion (11 years to double) on crabman’s post in the other thread. I bet you are just perpetuating the “population growth” myth about Vancouver real estate. Go piss off.
October 5th, 2009 at 8:21 am
6.5% may not look stellar beside other numbers, but its doubling time is still 11 years. Which seems faster than GVRD can handle anyway.
October 5th, 2009 at 8:11 am
Signifigant court ruling spells big trouble for US Banks in the mortgage debacle
“Waking up to discover the mortgage market was a giant criminal enterprise
A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose – on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.
via Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks.
This is a potentially gigantic story. It seems that a court has ruled that about half of the mortgage market has been run as a criminal enterprise for years, which would invalidate any potential forelosure proceedings for about, oh, 60 million mortgages”
October 5th, 2009 at 5:21 am
The indicator of actual supply of shelter versus actual demand is real rents:
http://cuer.sauder.ubc.ca/cma/.....couver.pdf
Note that real rents stayed almost constant through the 80′s and 90′s, and then started declining after 2000. Why? Because the sale price of housing rose far above rental value, which means that the supply of new housing (which increases with sale price) grew more than actual demand for shelter.
Falling real rents mean excess supply.
Excess growth of supply of an asset is characteristic of bubbles and the end result is the “ghost towns” now found in Ireland (1 in 7 dwellings vacant), US (1 in 8), Spain, etc.
The reason prices of Vancouver RE are so high is that buyers are willing to pay far above rental value for a property in expectation of future capital gains. In other words, it is a classic speculative bubble, just like in the US, UK, Ireland, Spain, etc, and it will end in the same way, i.e. a bust.