Owe the Podium
Well that was fun. The games have wrapped up, but we’re not completely done yet – the Paralympics are up next, so still a chance to partake in some Olympic fun before 2012. Hopefully everyone out there had a good couple of weeks, whether you stayed in town or skipped out to some holiday destination.
Despite a bad start to the games, we had some unseasonably beautiful weather and wrapped up with a nice amount of Gold for Canada. Overall a positive experience with an upbeat ending.
So now what? We’ll find out what bills are due soon, but what will be the long term economic result of hosting the games? Are there people out there that have just discovered Vancouver and now must move here and buy at any price?
A recent UBC study found that host cities see no measurable boom or bust in real estate values due to the Olympics, but maybe it’s different here. Do you think the next few years will see an economic boom or bust in BC?
March 3rd, 2010 at 1:32 pm
I believe one of the major problems here lies in the reason or motivation behind buying real estate. Those in the business of flipping RE will soon be flipping burgers. Unfortunately, the innocent victims who are searching for a place to settle down will get sucked in and likely get into trouble. As long as people are willing to pay the price there will be no end….But…I wish to share my personal caution or warning to anyone thinking about this market. Look at the fundamentals (price per square foot, location, age of place,mtce fees, etc) and then seriously look at what you can afford in a worst case scenario. Make sure you do not drain all your liquid assets for a purchase (cash,stocks,etc). Shop around for the best rate, do not buy on impulse, compare what the previous owner paid and ask yourself. Do I really want to hand over that kind of profit in such a short timeframe?
At the end of the day its your call. I am of the opinion its better to wait it out for awhile. I believe we will have a double dip when interest rates rise HST comes into effect.
In this economic climate the KET is to position yourself for the worst case scenario. If you cannot handle this scenario then continue to save your money and wait until that opportunity arises.
March 2nd, 2010 at 11:08 pm
Supraboy(stupid name) what kind of a self respecting human being would worship a rice wagon like that.
Do you have a coffee can on the back of your rice machine. I am not a bitter renter at all. I just happen to believe that this and all other booms end in an equal bust and so will this boom. Believe me when I say that there are a lot more bulls that are suffering from nightsweats because they may have bought at the top than bears waiting for the pop.
March 2nd, 2010 at 12:54 pm
@Dave:
http://www.guardian.co.uk/commentisfree/cifameric…
but since you don't like the guardian…
http://sports.yahoo.com/olympics/news?slug=ap-sta…
March 2nd, 2010 at 10:00 am
@LordHuggington:
You might want to take a look at BC's 2009 export stats before you get all exited about our resources (which the world so desperately wants) leading us out of this depression.
http://www.bcstats.gov.bc.ca/pubs/exp/expdata.pdf
March 2nd, 2010 at 9:33 am
113 – correct. Prepare for slash and burn with public service today and Thursday. And it still won't be enough.
March 2nd, 2010 at 8:55 am
@rp:
Virtually impossible, because the bond markets will not stand for it. It's one thing for Greece, which represents maybe a few % of the economy of the Euro zone, to live beyond its means. It's quite another for 100% of the CAD zone to do so. There is simply nobody out there to enable it.
March 2nd, 2010 at 8:38 am
@rp:
Things will not turn out as badly in Canada as in the US because we are much more export oriented than them. The loss of domestic demand will not matter as much.
Export in what?
Canada, like Australia, are resource dependent. The US is not. The US provides a consumer and knowledge based driven industry which can easily be exported just as well. There was a time that Mr. Garth Turner recommended on his Turner Report that we should all buy US denominated dollars and that we should buy all US investments, just because they were popular then. There was a time in the Toronto Exchange that only 2 stocks (JDS Uniphase and Nortel) were the major lifters and mining stocks were in the doldrums. You think then they are not exporting anything? Perhaps more so as the Canadian dollar then was weaker and today, our dollar is much stronger. How can we export more with a higher dollar compared to the lower US dollar?
Today, Canada and Australia are good plays; but come tomorrow, something else is better.
March 2nd, 2010 at 8:24 am
Judging from Supra Boy's previous statements seemed to suggest he's never been a landlord. Or if he is, he seemed to think that as long as the rent covers the mortgage, then he is breaking even and he waits for capital gain appreciation.
Unfortunately, landlords that think this way is not working for him or herself, but they are working "FOR" the tenants! Why, simply the fact that your time (which is aggregated in a salary) is not factored into the rental equation. Expenses are not totally factored in. You provide free labor, so really the tenants are not throwing money away, but rather money goes to employ you to ensure the rental property is habitable and utilities are functioning properly!
Unless you are in a positive cash flow situation; gross revenue from rental deducted expenses equal positive net revenue and that pays your wages for the upkeep of the property, most of the people are pretty much in a negative cash flow position. There are times that you can be in positive cash flow if you had bought the property in 3 separate years, after 82, mid-90s and early 2000s that you could truly justify being a home owner rather than a renter. Or a renter wanting to gain extra income by purchasing rental properties to diversify the asset portfolio. Those times were good for prudent investors.
In the absence of any other viable high yield investment alternatives, it is quite normal for homes to fully appreciate and keep appreciating until other factors come into play to deflate the bubble, because everybody is parking their money waiting to be deployed. The treasuries are in bubble territory too; also waiting to be deployed as well. As soon as a viable investment alternative presents itself, and it will as the signs of economy growth is surfacing, these monies will be deployed to chase the new trend. As soon as that happens, the RE bubble from the remaining countries of Australia and Canada will soon deflate and dumb money make the mass exodus towards greener pastures. The exodus will be quick perhaps for the first year or two and will afterward begin a slow and agonizing death reminiscent of the Nasdaq deflation for a decade or more.
Most of you blogger, with the fine exceptions of a few old wise veterans here (you know who you are), are young and had not experienced past bubble bursts, with exception of the dot-com bubble.
However in the end, most of the homeowners NEVER actually own their homes forever because most of you will have had socked away almost everything you have into it. Eventually, however, you can not retire without adequate cash flow even if you own your own home. You need the extract wealth out of your own home to fund your retirement and you do this with a financial institution. When you start doing that, that's no longer your home! You are then no different than a renter rich with a sizable cash flow, but he or she may have had invested it in a growing asset that could provided excellent income yield and has the option to live in any neighborhood! You, the homeowner, are stuck.
March 2nd, 2010 at 8:13 am
@rp:
Things will not turn out as badly in Canada as in the US because we are much more export oriented than them. The loss of domestic demand will not matter as much.
The exception, of course, is BC. Shockingly, the % of provincial GDP represented by merchandise exports in BC is half that of Ontario. This province is just running on debt.
March 2nd, 2010 at 7:42 am
Ah supra's obsession continues unabated.
Since you asked, I'm not hibernating. You're so dim Supra the only way you can think to get wealthy is to do what almost everyone else does, which is rent money at an artificially low wate, purchase an asset at the height o a price bubble then rent that asset put at half the carrying cost.
Honest to God, don't the bulls seem especially dim when you put it that way?
I came out east to pursue opportunities creating wealth for myself through work. I have 2 jobs out here: I'm an IT consultant to an American bank and I'm a personal chef. American banks have near shored whole chunks of their infrastructure to the Maritimes because we are close geographically, we've had better networking infrastructure for quite come time, we speak the language natively, commercial real estate rental is dirt cheap, we have 9 universiies cranking out recent grads and the cost of living is extremely affordable.
Working as a consultant leaves me free to pursue cooking part time. This also allows me to work only on contracts that pay what I want. Instead of managing a coffee shop on pender for 11 bucks an hour I'm cooking out of my own kithen for 30 bucks an hour.
THAT is why I moved. If you can't save money bcause of circumstances, the next best thing is to diversify and protect your income streams.
Dumbass.
March 2nd, 2010 at 7:24 am
@Anonymous: Crazy Time article, thanks for the link. Apparently no other host city comes close when it comes to public intoication.
Believe me, I'm no prude. But all the yelling and screaming and woo-wooing becomes grating. These are the fourth Olympics I've covered, and Vancouver drinks Athens, Torino and Beijing under the table. I asked a few journalists who have covered more Games than I have to rate Vancouver on the intoxication scale. Vahe Gregorian of the St. Louis Post-Dispatch, who has covered eight Olympics, dating back to Atlanta in 1996, agreed with my chart-topping assessment. In reference to downtown Vancouver's main strip of nightclubs, he said, "Granville Street itself is unlike anything I've seen at an Olympics." And he noted that all the drinking has led to a lot of public urinating. "I've personally witnessed about 8 to 10 guys whizzing at once along a fence half a block off the main street," he said. "It's like the infield at the Kentucky Derby."
Bonnie D. Ford, who is covering the Games for ESPN.com, has been to every Winter Olympics since 1998 in Nagano, Japan. "There's no second place," she said when asked where Vancouver ranks on the booze barometer. (In fairness, you can pretty much strike from the debate Salt Lake City, the abstemious host of the 2002 Olympics.) Ford's hotel is near Granville Street, close enough for her to hear the "Can-a-da, Can-a-da" shouts at 3 a.m. "It's been a two-week tailgate," she said. "I've covered a lot of college football, and this is like the Dante's Inferno version of tailgating."
ive been to many places where it's legal to drink beer on the street or have a bottle of wine with your lunch in a park. They seem to be able to hold their liquor better in cities where you can legally consume alchohol on city streets. Maybe if you treat people like children they're more apt to act like children.
March 2nd, 2010 at 5:33 am
@observer:
The value of RE is the present value of its future income, i.e. market rent. This is the economic return from RE to all of its owners collectively. Thus for the price to fall to this value is not a "devaluation", but a correction – the price represents the correct value.
Home owners (as a group) do not lose out by a fall in RE prices. Owners collectively cannot gain from high RE prices, because there is nobody for them to sell their houses to as a group. Individual homeowners can only sell to other homeowners, in limited numbers. The gains of the seller are at the expense of the buyer. The only thing that is lost is the illusion of wealth. Homeowners keep paying the same monthly costs and receive the same shelter regardless of what the sale price would be if they sold.
Contract this to, for example, oil. Oil producing countries really do gain from high oil prices, because they sell oil to oil consuming countries, not to each other.
March 2nd, 2010 at 1:33 am
" Vancouver appeared to have more morons per square foot than the Jersey Shore house. "
From an article from the Times titled: ' The Vancouver Games: A Gold in Drinking '
http://www.time.com/time/world/article/0,8599,196…
Olympic Visitor, Foreign Buyer? Part 5: “Aspac Developments says it sold $31.8 million in high-end units to people visiting Vancouver for the two-week duration of the Games.” « Vancouver Real Estate Anecdote Archive Says:
March 2nd, 2010 at 1:22 am
[...] pertinent comment from Anonymous at vancouvercondo.info 1 Mar 2010 at 5:12 pm – “Friends and fellow citizens, that article is bullshit. The suites downtown in Coal [...]
March 2nd, 2010 at 1:19 am
#102 @observer: Devalue RE? Dream on. There is no political support for such a move. The baby boomers need house millions to retire. The current generation needs to know they didn't just piss away a lifetime of income to buy a tiny condo or townhouse. As for the next generations – screw them. They can move to Borneo or something.
We have already inflated RE beyond the anyones wildest dreams with the biggest credit bubble in 80 years. We had our chance to wind it down. We had many chances. We repeatedly hit the gas instead.
This is going to implode. It will happen shortly, as prices exceed peoples' ability to pay, with or without rising interest rates. There is really nowhere left for house prices to go except down, barring more "free" money for buyers which would in fact be borrowed by our highly indebted government.
We have ignored this problem and done exactly what the US did. Despite how that turned out, we made our bubble even larger than the American one, and in some places more acute. This will blow up, particularly in bubble areas like Vancouver, and there will be very little left of the Canadian economy when it does. This is inevitable. There are no longer any countermeasures that we can take. The consequences of our outrageously irresponsible actions can no longer be mitigated. We are cooked.
If you want to see what the future has in store for BC, have a look at this post by Mish:
http://globaleconomicanalysis.blogspot.com/2010/0…
Does anyone doubt that our provinces and federal government will run deficits on the order of 30% of spending? I see it as likely. And who will they raise taxes on? The baby boomers who are retiring if they're lucky? The highly indebted homeowners who are trapped by negative equity?
March 2nd, 2010 at 1:15 am
@Dave:
Dave, for starters can you please talk to those people and explain how it works. They will appreciate it.
http://www.vancouversun.com/sports/2010wintergame…
March 2nd, 2010 at 12:39 am
@Dave: It was fun but was it because it was Vancouver or was it because of the Olympics. If the latter, one has to realize the Olympics are now over. Just go and walk around tomorrow and you'll see much of the vibe is gone. One should not confuse a two week party atmosphere with long term sustainable economic development.
Many countries would like to devalue their currency in order to make their manufacturing sectors more competitive. I say, devalue RE to make labor costs more competitive in terms of cost of living and to attract investment into BC and Canada. Yes, home owners would lose out, but I think it is a reasonable sacrifice to our next generation and given that much of the wealth in RE was not really earned.
I don't know about you, but if they were to devalue RE by 20-30%, that would be a real cause to celebrate because it would mean RE is no longer draining wealth away from our economy and making debt slaves out of our next generation.
March 2nd, 2010 at 12:35 am
@oneangryslav2:
Exactly right. You can tell he's not from England by the way he writes. He's a dumb canuck, poorly educated in BC schools. That's why he has a glaring typo in his intro and he's too dumb to see it.