Friday Free-for-all!

It’s time for our traditional end of the week Friday free-for-all post where we round up the weeks news and have our open topic economic discussion for the weekend. Here are a few stories I’ve noticed lately:

Businessweek: Vancouvers Bubble Trouble
11 Olympic Village buyers want out
Reading the mortgage fine print
Royal and TD trim some rates
Big bank growth offsets office vacancies
Economist muses on comparisons to 1930s
g20 leaders face worries about rising deficits

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

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VancouverGuy
Guest

The key item that the Businessweek article misses is the absolute importance of CMHC to the market. The Canadian market is one built on CMHC and nothing else. Without understanding that, it is difficult to understand this bubble and the general price trend in the Canadian market.

Government intervention in markets that can operate efficiently without their assistance always distorts incentives and screws over one person or another. In this case the intervention created a mass of paper wealth for one generation and committed another to near-permanent indebted servitude.

patriotz
Member

Talk about not seeing the elephant in the living room:

http://news.bbc.co.uk/2/hi/business/10409354.stm

"The Canadian character is relatively fiscally conservative. Canadians themselves are relatively prudent, I think, in terms of how much they are prepared to borrow and the risks they are prepared to take."

Certainly, fewer risks are allowed in the housing market.

Canadian home values have held fairly steady according to Pierre de Varennes, a real estate broker in Ottawa, with 350 employees.

He says stricter standards for homebuyers meant no housing boom and bust in Canada:

"In Canada, you cannot over-mortgage your property. In fact if you are financing more than 75% of the value, you have to get insurance. Not for you but for the bank"

Hear that folks? No overvalued or overmortgaged properties in Canada because the mortgages are insured!

Gack.

chip
Guest
chip

" "I'd say over half our high-end listings go to China buyers," says Connell. "Yesterday we did an open house for a $3.5 million home, and six groups came through. They were all Chinese."

Broker Andrew Hasman sees 70 to 80 percent of his high-end listings go to mainland Chinese. He oversaw an open house recently for a $1.8 million home. Of 100 visitors, 91 were from China. "

I wonder what impact the recent Australian restrictions on foreign buying will have on the Vancouver market. Interesting too that you have to read an American magazine to get an idea of the extent of foreign purchases here.

chip
Guest
chip

And just for fun. Searched 'New Price' on Craigslist and one screen was filled with just two days of listings, June 23 and 24.

Scrolled back to May and one screen covered all listings from May 11 to 30.

It's a bubble in New Prices!

patriotz
Member

@chip:

Really objective sources there. They would say that, wouldn't they?

Anonymous
Guest
Anonymous

@chip: Relatively few buyers are truly "foreign." Besides there are more than enough properties for sale for everyone!

registereduser
Member
registereduser
If you believe the "wealthy mainland Chinese buyers" meme now being advanced by realtors, I have a bridge to sell you. While there are a handful of mainland Chinese buyers of Vancouver real estate (if we are talking about the wealthy ones, they buy mainly in the Arbutus, Quilchena, South Granville and Shaughnessy neighbourhoods) they are vastly outnumbered by locals who have lost all sense of what the rest of the world pays for real estate and who take for granted, whether they realize it or not, that "real estate can only go up". It is not wealthy mainland Chinese who have been engaging in bidding wars to pay $1m for bungalows or rotting "character homes" on 33' lots in working class neighbourhoods on the implicit assumption that they will be worth $1.1m next year. I think the "mainland Chinese"… Read more »
Leading Story?!?
Guest
Leading Story?!?

I'm surprised this blog hasn't been on fire with this news I woke up to this morning on CBC Radio!

http://www.cbc.ca/canada/british-columbia/story/2

Hearing Rennie stutter on about "waterfront living" & "Sub-Zero fridges" as well as the quiver in his voice when he said he's "not worried about re-selling the units" …

Coup de grâce, anyone?!?

900kCrackHouse
Guest
900kCrackHouse

@registereduser: Only a handfull of mainland Chinese buyers you say? I personally know a Chinese family that owns a 1.5 million dollar house in Fraser heights – only the Grandma and 18 year old daughter lives there. Another family that purchased a 1.5 million dollar house in Burnaby. Guess who lives there? Their 18 year old son. Friend just built two 1.2 million dollar houses and sold both of them in Steveston area – guess who bought them? Mainland chinese buyers. Obviously this is just anecdotal evidence, but I really believe anyone who thinks that mainland chinese buyers are not driving up prices in many parts of the lower mainland are on deceiving themselves.

Leading Story?!?
Guest
Leading Story?!?

My bad … didn't review yesterday's blog

Rennie Madoff
Guest
Rennie Madoff

Be tolerant … or (default &) move to suburbia!

davers
Guest
davers

@900kCrackHouse: Each and every buyer drive up the market. That buyer was willing to pay more than anyone else who was interested in the place (most of the time).

Sure mainland Chinese buyers drive up the market. The question is by how much?

patriotz
Member

@900kCrackHouse:

Prices are determined by the marginal buyer. That means that if prices were actually being set by Mainland Chinese (or whatever exotic buyers you choose), nobody else would be buying.

I will also note that if Mainland Chinese were capable of setting prices by themselves, the RE industry would not have to bother marketing to anyone else. What do you think they are paying Bob Rennie for?

Nero
Guest
Nero

@900kCrackHouse:

I too think the presence of Chinese, though overrated, is substantial enough. The proof is in the pudding (prices) obviously. It's made a home in every local buyer's head.

But that in itself guarantees the bubble. Chinese are not savvy investors, they are just like the Japanese in the 1980s. People think they're better because their growth rate is apparently higher, but most analysts believe those numbers are exaggerated by the government, and they don't nearly have the economic savvy that the Japanese did back then. They were heads and shoulders ahead of the rest of the world in technology.

Vancouver RE will turn on its own anyways (it's doing that now), but the popping of the Chinese bubble will crush property values here.

asp
Member
asp

@chip, you don't have "to read an American magazine to get an idea of the extent of foreign purchases here." Just look up the stats that Landcor provides.

Eponymous
Guest
Eponymous

@Happy Renting: What is landcor? The article said that stats on foreign buyers are hard to find, I thought no one had them?

vreaa
Member

The BusinessWeek article is good, but it's remarkable that fundamentals such as price/income of 10; price/monthly_rent of >300 (or 400 or 500), are not mentioned. That would have given non-Vancouverite readers immediate perspective that they don't get from the article as it stands.

CH
Guest

"We have buyers going, 'Wow, I love the hardwood floors and the view and the Sub-Zero [fridge],'" said Rennie.

lol, for fuck sakes I HATE salesmen.

anonymous456
Guest
anonymous456

@Nero:

Good point about the Japanese. I still remember when the Japanese-craze hit Canada. I believe there was even a push for "Japanese-immersion" elementary schools (it might have even happened) because according to the media, the Japanese economy was so strong that "one day everyone will have to speak Japanese!" Sound familiar? Is it different this time? I know I'm sure tired of hearing of Chinese dominating the market (and how do the realtors know they're straight from China anyway, I know lots of Asian couples who have been in the country for a decade or more and they're using as much credit to buy houses as non-Asians). It gets tiring, really really tiring.

jesse
Member

@vreaa: LOL the irony that Business Week can't apply basic business concepts is somewhat ironic if it weren't so predictable.

They did shout out VCI though, so they can't be all bad 🙂

jesse
Member

Ironic irony. Next time bear proof read. Rent is due next week so understandable.

Tony Danza
Member
Tony Danza

@chip: I still don't understand why a Chinese gazillionaire is going to use Gwai Lo Hasman as their agent. Maybe he's representing the seller but why would the gazillionaires agent fill Hasman in on the personal details of the buyer?

Anyone?

Recently Bearish
Guest
Recently Bearish

Out of curiousity,why are the numbers at http://www.yattermatters.com for yesterday's sales so different (89) than those posted by paul b? Do they look at a different overall area? Or is one of them wrong?

Tony Danza
Member
Tony Danza

@Tony Danza: Oh right because Gwai Lo Hasman is a d!ck sucking liar.

crashcow
Member

We have talked here about how our housing boom has lead to misplaced values…here's an anecdote from China:

http://globaleconomicanalysis.blogspot.com/2010/0

"I would rather cry in a BMW than smile on the back of my boyfriend's bicycle."

Wow.

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