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Friday Free-for-all!

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160 Comments

It’s the end of another work week and that means it’s open topic news round-up time!  Here are a few stories to kick off the chat:

–Vancouver crime among worst in North America
–BC economy not so bad, but #1 in poverty
–TD: We’ll stop taking free money when everyone else does
–VREAA on CBC: we hope we didn’t scare you.
–Investment advice possibly written by broken robots
–Our housing market will sidestep US style bubble.
–Will our market sidestep US style bubble?
–Get your zero down mortgages!
–Beware fine print on ETFs
–Bond investors receive coal in their stocking
–The ghost cities of China
–

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

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patriotz

@jesse:

Housing has to return better than bonds long term. If it didn't it would be in a perpetual bubble, which is impossible.

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jesse

@Yalie: "This is why history shows that housing is a piss-poor investment compared to stocks or bonds"

Stocks, yes, bonds I'm not so sure. Do you have data to show this? I guess it depends on the bond and its terms.

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patriotz

@fixie guy:

Flip it around, how are these recent run-ups in any way historically proportional to changes in pop density?

All US metros have substantially decreased in population density over the last century, although of course some pockets have increased, so I don't think it's very useful to try draw any correlation between a metro index like CS and density. The decline in density is a result both of inner cities losing population and of suburbs increasing their percentage of metro population.

That's also true to a lesser extent for metro Vancouver. Note that CoV population declined for a couple of decades starting in the 60's and didn't turn around until the big projects on former industrial land got going after Expo.

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jesse

@fixie guy: "I believe the city CS curves show pretty much the same thing as far back as they go. Flip it around, how are these recent run-ups in any way historically proportional to changes in pop density?" I can't find city-specific data before 1987. To answer your question, the recent historically high price changes are not in and of themselves supported by the long term increase in density, which has been going on in Vancouver since its inception. The density premium has always been there. As a background effect, as density comes closer to reality, values will increase simply due to future value discounting. That train stops when density increases slow down It gets a bit confusing because neighbourhood income changes brought on by general density increases can support real price inflation as well, either in the form of… Read more »

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Yalie

@patriotz: I agree with you that some people can get rich by buying and renting out real estate, since it does produce a known return over time (in fact, housing is essentially a perpetuity, and should be fundamentally priced as such). As you also pointed out (and I agree), whether you actually get rich or not depends on the price you pay. If you pay less than the property's net present value (taking into account all taxes, fees, interest, maintanance, etc), then you will eventually make money. In practice, however, property is rarely a "good investment" on an NPV basis, precisely for the reason I gave – unlike other investment, in particular stocks, the money you put in goes to paying for an asset that will never produce increasing real returns. No extra value is created beyond the known (admittedly,… Read more »

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gladimnotyou

@troll "@fixie guy: Hey, grab a clue. Posting a list of cities with high pop. densities and saying that cities in India have lower prices than NYC doesn’t prove shit about the effect of densification on land prices. I know it’s hard to concentrate, but try and stay on topic. Either you’re being disingenuous or you are just plain stupid. Judging by the quality of your posts I’d say the latter. But please, prove us wrong with some stunning insight on anything at all, you don’t even have to limit it to real estate. But no using Wikipedia." Well, i suppose the worst thing that will happen to me is that I will be wrong about the direction of real estate. You have the misfortune of being a turd. I fear no amount of chinese immigration or population growth will… Read more »

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fixie guy

: There's no question rapid changes in pop density have an impact on prices but I'm cautious of spinning that into permanance. It might only be transitory. As was pointed out using the late Nineties, once they figured out repatriation wasn't the death of Hong Kong and immigration cooled Vancouver prices waned even though population and density continued to grow.

The 'eternal external pop pressure pushing prices' crap being advanced by some clowns is little more than BPoE, everyone-wants-to-live-here in disguise. Rennienomics.

@ jesse: I believe the city CS curves show pretty much the same thing as far back as they go. Flip it around, how are these recent run-ups in any way historically proportional to changes in pop density?

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fixie guy

"147

Troll Says:

December 20th, 2010 at 1:02 pm

@fixie guy: Hey, grab a clue. Posting a list of cities with high pop. densities and saying that cities in India have lower prices than NYC doesn’t prove shit about the effect of densification on land prices. I know it’s hard to concentrate, but try and stay on topic. Either you’re being disingenuous or you are just plain stupid. Judging by the quality of your posts I’d say the latter. But please, prove us wrong with some stunning insight on anything at all, you don’t even have to limit it to real estate. But no using Wikipedia."

Oh my, who from RET does that sound like? Try making a counterpoint with more mental meat behind it than 'no way d00d, no way'. Keep typing.

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vreaa

Somewhere in all the banter there has been good discussion, thanks for that. The relationship between population growth, density, and RE prices is clearly complex and, as fixie says, 'obvious' conclusions may not be correct. It's intriguing that fundamental values of properties may rise at just the rate of inflation, even with densification. Westside density has increased over the last 10 years via steady increase in number of basement suites, and now too via lane-way units. So, theoretically, cash yield per unit of land has increased and thus underlying fundamental value of that land should also have increased. And that 'step-up' may (or may not) be greater than inflation (intuitively we'd guess it'd be greater). However this doesn't justify higher prices. It would probably justify higher prices if we were in an environment where properties were fairly valued based on… Read more »

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Best place on meth

Population density as an excuse for outrageous prices in Vancouver is simply a non-starter, but the worthless cheerleaders will keep trying to trot out this myth among others.

Vancouver is #123 in world for population density.

There are many cities ranked higher that have seen horrific real estate busts such as Dublin, Dubai, Vegas, LA & Miami.

Yet another extremely stupid theory put forth by extremely desperate people that has no basis in reality.

http://www.citymayors.com/statistics/largest-citi…

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Move On

To the three or four posters debating density/inflation/popultion, etc:

Check your egos at the door before you muddy this blog any further with your "I am right" pissing match. You are engaging in anonymous one up manship.

Get a real job and stop posting every five minutes. It is getting pretty pathetic

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jesse

@fixie guy: "Still needs demonstration. Shiller’s curve shows exactly the opposite"

Shiller's famous curve is for the entire US. Certain pockets will have land values increase above inflation because the future capital they are expected produce and facilitate increases. But yes the US is nowhere near built out. New developments are all over the place, meaning density increases fueling price appreciation is significantly curtailed. Slap in a layer of depreciation and you've got flat real prices.

It's also worth remembering that Vancouver's population has been growing since its inception. Future density increases have been priced in to some degree ever since. The only appreciation that is happening as a direct result is the removal of uncertainty and holding risk as the density increases near fruition. Think growth stock.

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Troll

@Best place on meth:

Anyone else want to address this who is more capable of a reasoned argument?

Not up to the task eh? Not surprising.

The topic again is the REAL reason why all forms of real estate in all locations (not just highly dense Vancouver) has skyrocketed in price since 2002.

That's not the topic of this discussion dimwit. Try and stay on topic.

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Troll

@fixie guy: Hey, grab a clue. Posting a list of cities with high pop. densities and saying that cities in India have lower prices than NYC doesn't prove shit about the effect of densification on land prices. I know it's hard to concentrate, but try and stay on topic. Either you're being disingenuous or you are just plain stupid. Judging by the quality of your posts I'd say the latter. But please, prove us wrong with some stunning insight on anything at all, you don't even have to limit it to real estate. But no using Wikipedia.

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fixie guy

@ 133 Troll Says: "Seriously, you still don’t get it? What does comparing a city in India to NYC show us? Nothing."

My apologies. I mistook you for just dim but you're apparently the special breed who believes global economic principles end at Vancouver's border. What do the examples of other city's have with respect to ours? Nothing apparently. Others might be able to draw a connection between wages in New York vs India to explain a large part of the difference. Don't let it confuse you though.

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fixie guy

135 jesse Says:" For a single family dwelling in an area with increasing population density, it will increase faster than inflation."

Still needs demonstration. Shiller's curve shows exactly the opposite, that inflation adjusted, matched pair long term property values are flat across the board for a period over which the US population more than doubled.

Sometimes the 'obviously true' isn't correct.

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jesse

@Troll: "If that densification stops, then the increase stops, even if it’s a bunch of SFH’s sitting amidst a sea of glass towers."

This is what happened in the peripheral and affluent boroughs of New York, interestingly at lower density than Hong Kong or Tokyo. If we're going to use density increases as a reason for inflation, we should consider the "steady-state" may not be a 40 story highrise.

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jesse

@patriotz: "If west side rents were 50% higher in the 80′s and are still 50% higher, that’s not gentrification really."

That's true but there are not a lot of westside rentals to compare directly to owner-occupied dwellings of newer vintage. Of the rentals I see advertised, the most common the seem to be in older dwellings.

I agree we can take a stab at imputed rent based on a limited data set for these properties and by that measure prices are overvalued. I've tried to concentrate on condos because there are much more data and a more even renter-owner split. The sentiment of investors is therefore easy to track and, if the US is any guide, will lead price drops.

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patriotz

@jesse:

What’s been happening on the west side of Vancouver for well over a generation is no accident. Neighbourhoods once decidedly middle class are being gentrified.

But has the growth in rents outpaced the rest of the metro? That's the true indication of demand for shelter.

If west side rents were 50% higher in the 80's and are still 50% higher, that's not gentrification really.

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Best place on meth

@Troll:

You sound defeated and that's understandable.

Anyone else want to address this who is more capable of a reasoned argument?

The topic again is the REAL reason why all forms of real estate in all locations (not just highly dense Vancouver) has skyrocketed in price since 2002.

That includes Calgary, Moose Jaw, Saskatoon, Spuzzum, etc…

I'm all ears.

Troll, you can take a seat.

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Troll

@Best place on meth: "What about floating homes? They've also shot up in price during this 8 year bubble." Just stop. Give it up.

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Troll

@jesse: Best post by far on this topic.

There are no more density increases in that neighbourhood. Will the land under that lone detached property continue to appreciate above inflation?

I think you answered your own question no? The increase in value undergoes a step change each time it can be re-purposed for higher value. If that densification stops, then the increase stops, even if it's a bunch of SFH's sitting amidst a sea of glass towers.

Looking at incomes, however, is another argument why certain neighbourhoods can increase faster than inflation.

Of course, and this is also correlated to densification since areas typically densify as incomes and populations increase and transportation does not improve quickly enough. Urbanisation.

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Best place on meth

@Troll:

>>>Disagree that this forum is not about buying land, since all dwellings are attached to land, so the value of the land should be considered.<<<

What about floating homes? They've also shot up in price during this 8 year bubble.

That wouldn't have anything to do with speculation, ultra-low interest rates and bottom line monthly payments, would it?

Or is that a land value issue as well?

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jesse

@Troll: "This was the crux of the poster “N” argument, which everybody disagreed with."

I didn't. Quit the strawmen and defeatist comments and your points will be heard and debated properly, by at least a few commenters here anyways.

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Troll

@patriotz:

But this forum is not about buying raw land, it’s about buying dwellings, and the evidence is that rising population or density does not in general bring about an increase in the real price of dwellings. Do you agree or disagree with that?

Agree and Disagree. Agree that the real price of dwellings doesn't necessarily increase with density since the dwellings themselves can depreciate. Disagree that this forum is not about buying land, since all dwellings are attached to land, so the value of the land should be considered. Is it speculative in that you might be wrong about where densification takes place? Sure, but the effect is real. This was the crux of the poster "N" argument, which everybody disagreed with.

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