The Village Selling Well

This blog has highlighted many of the stories surrounding the Vancouver housing market with a bearish tinge. But often I find myself cheering for the other side, most notably with the sad state of affairs over at the Millennium Water Village at False Creek development, where thaumaturgist Bob Rennie and a maniple of marketeers have been tasked with selling the remaining units to recoup some of the money the City borrowed to complete the project. I provided some estimates of projected losses a few months ago, based on average price per square foot. Hoodsurf provides the quicksheet of the approximate pricing.

Well wonder of wonders, it looks like the opening weekend was a stupendous success. The BC forum/Gong Show Realestatetalks has filled in some anecdotes from the front lines. Apparently over 70% sold over the weekend with an additional waiting list of 100.

Is this a bullish sign for Vancouver? Well I don’t know about that. A look across the water from the development yields well over 1000 condo units for sale. Here’s a map search of a small smidgen of the downtown core courtesy MLS map search:

Why aren’t these units selling? Was the Village at False Creek well-priced, or was it simply the red “30% off” stickers on the unit doors? What we do know is that there are now over 100 fewer people who will be available to buy these units already for sale. The weekend was marvelous for showing, a crisp sunny weekend, and that couldn’t have hurt.

It’s useful to pay attention to the tactics employed by Mr. Rennie, including

  • Withholding specific price information, only ranges
  • Pre-selling certain units to “insiders”, giving the pricing some semblance of acceptability
  • Blitzing the print and TV media in the week leading up to the event
  • Telling City Hall to go into a room and talk to nobody

Heavens knows what went on behind closed doors…

I commend Bob Rennie for ostensibly pulling this matzo ball out of the fire, at least in part. The discounts were significant and apparently “aggressively priced” compared to comps. That certainly helped, along with his ability to tap into the local media and his many years of experience punting real estate. In my view, based on cap rates alone, even at current price the development is significantly overpriced, as are most if not all condos in Vancouver these days.

This development was facing off the taxpayers of Vancouver — and the public services it offers — versus individuals who can afford to buy expensive real estate. In speculative bubbles like this one, for me it’s not about who wins and who loses, it’s the depraved entertainment of seeing wild animals fight over scraps of meat. But on this specific occasion, I was rooting for Bob from day one and, for today, to him I tip my hat. Well done.

Sincerely,

A bearish blogger

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other ted
Guest
other ted

"the village" sort of appropriate. First thing comes to mind is the cult tv show the prisoner. The prisoner was imprisoned in "the village" if he tried to leave a giant bubble captured him. This show is a good metaphor for the madness of the Vancouver bubble. It seems like the prisoner we can't escape this madness and there is no answer to it.

Junius
Guest
Junius

All I can say is "Go Bob Go." Sell, sell, sell.

Eddie
Guest
Eddie

Either way the taxpayer will be bailing. Now we get to do it in a few years through the CMHC when these people walk.

WBC
Guest
WBC

Here's your source of all that "investment" money from China. You think he is the only one?

http://www.vancouversun.com/news/Chinese+governme

vreaa
Member
Frances Bula, Vancouver Globe and Mail commentator, on CBC – “This is a city where we’ve built our economy, and many of us have built our personal lives, on speculating on real estate. Even our own houses, we pay crazy prices for them, in the expectation that prices are going to rise, not because our incomes can in any way cover them.” http://wp.me/pcq1o-1RK Comment: Almost every Vancouver RE purchase has a speculative component, even if it is most often coated in a veneer of wholesome innocence. The willingness of locals to borrow vast sums of money, and to use that money to bid up RE prices, has driven our bubble. As Bula implies (and as we have long argued) stratospheric prices would not have been paid by people who didn’t expect ongoing limitless price appreciation. This speculation, by all buyers,… Read more »
Many Franks
Guest
Many Franks

#2: True, Eddie, but there's a big difference between being on the hook as a taxpayer on Vancouver's behalf and being on the hook federally. All things being equal, I'd rather the OV debt was "transferred" to federal rather than having it hobble the city.

sj
Guest
sj

Between the Burnaby development selling out, and the OV, it seems this was quite the bullish weekend.

Just insanity…going to be an interesting year..

raggedyrenter
Guest
raggedyrenter
Anonymous
Guest
Anonymous

@sj: It does look bullish. But when you look at the Sovereign, why are there so many people that want to buy pre-sales? Speculation perhaps…easy flip?

As for OV, it probably comes down to consumer psychology in that the buyer is getting a "great deal". Look, it's 30% off. It's cheap.

Best place on meth
Member
Best place on meth

@WBC:

Harper and his government will likely welcome corrupt Chinese party officials with open arms as long as they bring cash when they should be hunting him down like a dog and sending him back to face execution.

Troll
Guest
Troll

The weekend's events do not bode well for bear dreams of changing buyer sentiment to commence a correction. Joe6P sees a hot market and an improving economic picture and will continue to buy. Crazy stats this month too, highest listings by far in the past decade but also the highest sales, even though we were told there were no more buyers left. On the interest rate front, inflation looks tame so no VRM increases anytime soon. This market is going to remain stagnant and uninteresting for a few more months yet bears, pushing us to a greater than 1 year flat market, making bears impossibilities possible.

Time's A Changi
Guest
Time's A Changi
Face it bears, you will be wrong AGAIN this year! I already start to hear "this should be an interesting year" which means "shit, this is more bullish than I expected," soon to turn into "Fall 2011 is when prices will decline", which really means, "shit, I am wrong again for 2011 so I will push it back to fall and then revise my prediction for the crash of 2012." What don't you get after banging your heads against the wall for years? Geez, economic fundamentals have been flushed out the pipeline for years. You always fail to account for immigration and cultural shifts, where the ethnic majority of vancouver residents now pool their resources for RE and whose kids live at home for years and then paying huge down payments. The "living on one's own" and "renting before buying"… Read more »
patriotz
Member

@sj:

Between the Burnaby development selling out, and the OV, it seems this was quite the bullish weekend.

Buyers are bullish by definition. Someone is always buying, so someone is always bullish.

Doesn't mean prices are going to go up does it?

southseacompany
Member
southseacompany

Another Sovereign flipper on Craigslist:

http://vancouver.en.craigslist.ca/bnc/reo/2225739

Just Curious
Guest
Just Curious

@Time's A Changin', "Maybe you all should have listened to Dave since he has been the ONLY poster that has been right for YEARS!"

In the interests of full disclosure and so that we might understand your post in all of its complexities, I am compelled to ask< "Are you and Dave in a relationship"?

patriotz
Member
@raggedyrenter: Gotta love this: Condo marketer Bob Rennie acknowledged when he kicked off the new sales campaign last Thursday that, although prices for the 230 units he was offering for sale had been discounted by 30 per cent on average, he and the receivers did not want to have a fire sale because they worried about the impact on previous buyers’ equity. As if they gave a rat's ass about the previous buyers. Both the receivers and Rennie have a fiduciary duty to the city and Millenium to get as much money as they can from the property. That's all. The term "fire sale" really means nothing in objective terms as properties always sell for market price if the seller is putting in a reasonable sales effort. I think Rennie was really directing his words to present and future buyers… Read more »
vreaa
Member

@southseacompany: That's the same guy who posted the other craigslist flip attempt (PostingID: 2224133573).

vreaa
Member

Troll; Times A Changin'; other breathless pumpers:

Frantic speculative activity is not predictive of future price action.

Speculator Cry Babie
Guest
Speculator Cry Babie

#9

Investor bloodbath:

http://www.theglobeandmail.com…..le1914780/
****

Hmmmm – look at the names of those trying to get out of their OV pre-sales….

I guess the Chinese gambling and speculating mentality only works if prices go up…

When prices go down, well. then its time to bail eh?

Given the significant impact of Chinese buyers on the Metro market, things could get very interesting once the worm turns…

Perhaps they should just claim they need to get out of the contract because of the presence of ghosts and dying people and the cultural affront these impose on them…

Then maybe the PC City would let them out…

Too bad that one has been used up…

southseacompany
Member
southseacompany

This bear market is only occurring in Vancouver, Burnaby, and Richmond. The rest of metro has seen slight to moderate reductions in prices over the last year. So, to some extent, the correction IS happening, just not in three places. This video seems to sum things up well:

http://www.youtube.com/watch?v=q3qK1AI5bmo

Then there's the rest of BC….

Dave
Member

@patriotz:

If developments are selling out in February, it shows there is still strong demand and a high level of confidence in the market.

I guess your bear case requires that buyers just run out at some point. The problem with that theory is that demand remains high and we will see feel the lack of new inventory due to the construction slowdown a couple years ago.

Dave
Member

In other news, Vancouver is once again ranked the most livable city in the World.

data junkie
Guest
data junkie

@Dave: But I'm sure somehow it's magically less livable for renters who enjoy those lovely 2% cap rate condos for half the price of the mortgage…

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