Vancouver and the Supply Side Argument
Much has been made of the availability of credit promoting asset price bubbles. If the availability of credit is loose and an asset is seen as scarce, asset prices tend to rise. But what if there was an ability to quickly supply new product onto the market, such that an asset cannot be seen as scarce for long periods? This is the argument of Demographia and their annual house price survey. This survey is famous for marking Vancouver as one of the most unaffordable metropolitan markets in the English speaking world. The authors of the survey argue that while loose credit conditions lead to bubbles, the inability for a market to quickly react to changes in investor and owner demand can exacerbate bubbles:
Higher land prices have been the principal contributor to rapidly increasing housing prices in unaffordable markets. These land prices include the cost increasing influence of land supply restrictions (such as urban growth boundaries), excessive infrastructure fees and other overly strict land use regulations. In Australia, 95 percent of the increase in inflation adjusted new house (and land) costs were attributable to land, rather than construction from 1993 to 2006. In more restrictively regulated San Diego, house prices were 250 percent higher than in Dallas-Fort Worth in 2007, yet cost only 15 percent more to build.
It may be easy to quickly discount this report’s arguments as, of course, asset bubbles are not prone to form without the propagation of relaxed lending. Remove the loose lending, remove the bubbles. But I would argue it’s worth a deeper and critical look into what the authors are stating. Unconventional Economist A.K.A. Leith Van Olsen has written dozens of posts on a similar theme, that cities that experienced or are experiencing severe asset bubbles also have severe land use restrictions.
- The Truth about the US Housing Market
- Planning Gone Mad
- The Great Australian Land Racket
- A Developer’s Perspective
- Why not copy Houston?
- Why not copy Houston: A follow-up
The posts are long and the comments are equally as interesting as the posts themselves. An important point in the debate is that Van Olsen and others are arguing about supply responsiveness, not total supply. Indeed we know that supply must at least equal demand, or rents would be increasing significantly. Van Olsen clarifies:
Readers should note that unresponsive housing supply is a different issue to the ‘undersupply’ of homes or ‘housing shortages’ commonly mentioned by mainstream commentators. The former relates to the speed and cost at which new (generally fringe) housing supply is built, whereas the latter refers to the physical quantity of homes available for the population.
In my view, Australia does not have a housing shortage. But housing supply is certainly unresponsive and overly expensive on the urban fringe of Australia’s cities and towns. As a result, the critical ‘inflation vent’ provided by cheap fringe housing in places like Texas and Atlanta (despite very high population growth) is missing from the Australian housing market. As such, there is no supply mechanism available to quickly dampen house price inflation before it turns into a speculative bubble (and later bust).
So, he argues, there is opportunity to maintain price stability by decreasing response time of new and desirable supply becoming available on the market. Faster response times can be accomplished by: reducing permit and planning application times, removing centrally planned blanket zoning restrictions (such as agricultural reserves), and providing more local authority and accountability on land use. Interestingly this approach has been used in bubble-averse Switzerland and Germany, as investigated in Bigger, Better, Faster, More: Why some countries plan better than others by Alan W. Evans & Dr Oliver Marc Hartwich, who, when comparing the plights of the British Isles and Australian housing markets to their European continental brethren, state:
In Ireland and Australia,with planning systems derived from the UK’s, restrictions on the supply of land, densification policies and central planning fail to provide the kind of homes people want, and lead to high real house price inflation. Successful planning systems, as found in Germany and Switzerland, leave planning decisions to local planners and politicians while ensuring that they face the full costs and benefits of their decisions.
Applications to Vancouver
There is some argument that the Vancouver area faces multiple Byzantine tiers of land use policies and restrictions, from the Agricultural Land Reserve, shared utility and resource planning at district and provincial levels, and municipal-level zoning change and permit application processes. While all serve a purpose, from time to time it may be instructive to take a step back and look at the successes and failures in other jurisdictions in avoiding destructive asset price bubbles.
A rational debate around the role of land use planning has been notably absent from BC’s mainstream media. It is unlikely any of us would live to see a significant overhaul of land use policies in the city and province, but studying land use policies and other supply side impedances (such as flexibility of labour markets) in other jurisdictions — and their purported catalytic effects on asset bubbles — does serve to provide some context to Vancouver’s prospects in the coming generations.
March 7th, 2011 at 8:17 pm 1
Real rents in Vancouver are lower than when the ALR was introduced in the 1970's, and that is objective proof that supply of housing has outpaced demand.
The supply of housing for sale at any given time for any given price, and the demand to buy housing at any given time for any given price – which determines the market price – has nothing to do with actual supply and demand for shelter. Rents do.
Loose planning restrictions don't prevent bubbles, they just result in more excess housing being built during a bubble and a bigger bust, as we have seen in Florida, Ireland, and Spain. That is a greater misallocation of capital and thus a bigger damage to the general economy than where less overbuilding took place, e.g. in the UK.
The way to prevent bubbles is to restrict mortgage lending and tax speculation. It works. The reason why most governments don't do this (Germany being the most significant exception) is that they don't want to.
By the way anyone who thinks that the planning process in Ireland works anything like that in the UK needs to read "Ship of Fools".
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March 7th, 2011 at 9:54 pm 2
Big thanks to paulb for his service with the numbers. But, looks like we are in the hands of LarryY for now, unless someone else steps up.
Everyone be nice to Larry!
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March 7th, 2011 at 10:40 pm 3
Land use changes would have to include punitive measures. Developers buy up large tracts and then hold them until the price has been driven up sufficiently to create a nice profit.
During the bubble, California was building building building, it wasn't lack of supply or even lack of responsiveness of supply that drove up prices. It was Tulip mania that drove up prices coupled with speculators taking units out of use (either by design or by demanding too high of rent because they were virgin landlords waiting for a flip), exacerbating a false sense of constrained supply.
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March 7th, 2011 at 11:21 pm 4
@AG Sage:
Again, the most effective way to keep property (developed or undeveloped) from being unused is higher property taxes.
In particular, taxing any land as though it had been developed to its currently allowed zoning would stop speculative holding dead. Principal residences could be exempted, they're not the problem.
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March 7th, 2011 at 11:32 pm 5
@patriotz:
Dumbest idea ever. Wow. Just wow.
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March 8th, 2011 at 12:50 am 6
"Real rents in Vancouver are lower than when the ALR was introduced in the 1970′s, and that is objective proof that supply of housing has outpaced demand."
Could the demand for real estate investment opportunities simply be stronger than that for actual housing?
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March 8th, 2011 at 12:56 am 7
@nonymouse:
Could it be that the metric more closely measures the type of rental housing that has degraded over time and is now the low end of the market?
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March 8th, 2011 at 12:56 am 8
Las Vegas had restrictive land use policies? That city was running out of land? Las Vegas has huge tracts of empty homes for pennies on the original dollar. As does the Inland Empire. Please. If land use policies drove home prices up, how did they fall?
Re: the notion it only happened in '10 markets', in the 2010 Dec Case Shiller Detroit is at 50% and still falling:
http://img848.imageshack.us/img848/6205/201012cs….
Anyone who knows anything about Detroit knows the core is a ghost town, entire blocks of homes gone. Empty tracts of land they can't pay people to live on.
The Comp 10 isn't that much better than the Comp 20 (roughly 10% of the population.) Demographia in infamous for shilling land development, I trust them about as much as I do Phillip Morris medical doctors.
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March 8th, 2011 at 1:00 am 9
I'm a bear, but I visit this blog to gather as much information as I can on both sides of the issue. I'm all for a bull argument if it is supported by fact or theory or even educated opinion. Dave, you obviously are in direct opposition to patriotz' suggestion to tax undeveloped land in order to reduce speculation. Would you care to elaborate as to why?
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March 8th, 2011 at 1:00 am 10
@Dave
Dumbest post ever. Wow. Just Wow.
Look around Vancouver to find how many sites have put up "community gardens" to avoid paying property tax. These are all properties in prime locations.
If you cannot see these you're blind, and dumb.
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March 8th, 2011 at 1:01 am 11
The land use argument is very cute and all, but whatever effects it has on our bubble is still minuscule compared to the effects of rock bottom interest rates and extremely loose lending standards.
These two problems are both correcting as we speak.
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March 8th, 2011 at 1:05 am 12
@fixie guy: "If land use policies drove home prices up, how did they fall?"
The report argues not that prices stay perpetually high, it's that severe price distortions, on the upside and downside, are the result.
Las Vegas and Phoenix actually do have restrictive land use policies due to the way land is allotted for development through central planning commissions.
The people writing these reports aren't idiots, so I would recommend critically drilling into their major arguments with an open mind.
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March 8th, 2011 at 1:12 am 13
@Anonymous:
Because speculation in land is hardly occurring. Taxing vacant land won't get it developed any faster than telling a cancer patient to suck it up will cure them. You would only worsen the situation.
The cost to sit on land or flip land is already quite high. When you sit on vacant land, it generates no income and your money could be used elsewhere (opportunity cost). The cost to transact commercial or industrial land is also quite high.
There are lots of reasons why land can sit vacant. Don't assume that all vacant land is due to speculation.
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March 8th, 2011 at 1:14 am 14
@taylor192:
Sigh… you assume much.
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March 8th, 2011 at 1:14 am 15
@patriotz: "he most effective way to keep property (developed or undeveloped) from being unused is higher property taxes."
That's something I should have highlighted more in the post, but yes tax regimes that facilitate efficient utility have been a large part of the success of certain regions avoiding asset bubbles. Policies can include tax policies: moving to a land tax away from stamp duty was one proposal I read about recently.
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March 8th, 2011 at 1:17 am 16
@Dave: "Don’t assume that all vacant land is due to speculation."
So Dave, why is there vacant land at all? By your argument vacant landowners would like nothing better than to develop it and start producing revenue from it. What are the holdups? Are they not getting their price, or are there restrictions preventing them from building?
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March 8th, 2011 at 1:18 am 17
@taylor192:
Name a few and I will tell you the reason why each one of those is vacant.
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March 8th, 2011 at 1:19 am 18
There is a suite for sale in my building for $310K. 10% down for 30 years @ 4% is $1300/mn plus $150 condo fee and $150 property tax == $1600/mn for 480 sqft without a bedroom. Similar units rent for < $1200/mn.
A 900sqft 2bdrm just rented for $1750/mn.
There was a young couple looking at buying it, I couldn't fathom it. I would probably kill my partner if I had to leave in such a small space, with less money available to do things outside of the space.
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March 8th, 2011 at 1:20 am 19
@jesse:
All of the above. Name a few. Try me.
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March 8th, 2011 at 1:21 am 20
@12 jesse Says: "The report argues not that prices stay perpetually high, it’s that severe price distortions, on the upside and downside, are the result. "
You explain the coherency in that reasoning. What kind of constant market friction, which is what restrictive land use policies and procedures amount to, creates turbulent instability? Show why price fluctuations in all those markets were synchronized. Were changes in land use polices also synchronized? Demographia's reasoning is handwaving, not science. They would have done as well to say 'ta-da!'.
BTW, I questioned their motives, not their intelligence. Nice straw man. Coupling with an argument from authority is cute.
"Las Vegas and Phoenix actually do have restrictive land use policies …"
http://daily.sightline.org/daily_score/archive/20…
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March 8th, 2011 at 1:23 am 21
Remember it!
http://developersdevelopers.com/
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March 8th, 2011 at 2:09 am 22
@Dave:
Corner of 8th and Vine. Used to be an eight unit rental townhouse set-up. It's been vacant for 4-5 years now.
8th and Arbutus. It's been vacant for at least 10 years.
7th and Arbutus. Vacant for 5-7 years.
All three are double lots or larger, suitable for 6-10 units with the current density in the area. They could be developed and sold for approximately a million dollars a unit at the current rates.
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March 8th, 2011 at 2:10 am 23
@jesse:
Note that Texas has among the highest property tax rates in the US.
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March 8th, 2011 at 2:10 am 24
@Dave: Davie and Burrard. How about that one?
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March 8th, 2011 at 2:13 am 25
@Dave:
Yeah I can hear it now.
"I've let this land sit vacant for 5 years paying $5000/year in taxes, and now I'm going to have to pay $50,000/year? Why I'll.. I'll.. just let it sit for 10 more years! That'll show them!"
Bwah ha ha.
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March 8th, 2011 at 2:14 am 26
@Anonymous:
Former Shell service station. My understanding is that the property is heavily contaminated. You can't just develop that type of property overnight. Sometimes it takes years.
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March 8th, 2011 at 2:22 am 27
@Drachen:
8th and Vine – It looks like a development that stalled out. The developer is probably stuck on financing or with rezoning.
8th and Arbutus – Ask the City. They own a lot of property and this is one they are sitting on. The City of Vancouver has a huge land portfolio and they slowly sell and develop them over time.
7th and Arbutus – Same as the 8th and Arbutus.
Taxing these three properties will do nothing to speed up development.
Next…
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March 8th, 2011 at 2:23 am 28
@Drachen:
8th and Vine is going to be a BC Housing project. It will be approximately 40 units and intended for paraplegic residents.
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March 8th, 2011 at 2:25 am 29
I love the idea that the lot at the corner of Davie and Burrard is too contaminated to build on….. so instead they made it into a "community garden".
That's so Vancouver.
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March 8th, 2011 at 2:25 am 30
@Dave: It's ok for it to be heavily contaminated while allowing people to grow vegetables on that land. Excellent.
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March 8th, 2011 at 2:26 am 31
@patriotz:
Sigh…
Great idea. Let's give Municipalities one more reason to slow down development. With your idea they can now make as much tax on a vacant site without having to service it.
If anything we should do the opposite. Property owners should bill city hall for vacant sites. Before you know it, city hall will be coming to you with a plan to rezone and densify.
So far, we are 0 for 4 on Vacant sites where your idea would work.
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March 8th, 2011 at 2:28 am 32
@Anonymous:
Just don't smoke while you are gardening or it might be roast veggies tonight.
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March 8th, 2011 at 2:29 am 33
Dave,
What happens when the development companies want to develop the land that was rezoned to allow for community gardens? Does the city just rezone it on the developer's whim? Is there a time frame that the land has to remain a community garden before they are allowed to apply to have it rezoned back to the original use?
Looks like the city is just screwing the taxpayers out of revenue.
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March 8th, 2011 at 2:30 am 34
@scullboy:
Better than building a subdivision on a Tar Pond you Newfie.
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March 8th, 2011 at 2:30 am 35
@Dave:
Can't read?
Allowing municipalities to tax at value of approved development is an incentive for them to speed up development approvals.
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March 8th, 2011 at 2:35 am 36
@Anonymous:
It's the developers land, so they can switch it over when they plan to build. This is what happened to the community garden at Granville and Pacific.
I don't think there is any rezoning involved with switching to a community garden.
What would people prefer? A fenced property with dirt, or a vegetated garden plot? Developers will do this to save on taxes. Nobody is going to give up their land for free. It's a win-win though because the community gets something back and it frees up money for the developer to actually do something with the property.
And that's what social engineers like Patriotz don't get. They think that you can tax people and generate economic activity. If you really want to see things get developed, then you need to tax less so that owners can invest in money their projects forward. You need to reduce the bureaucracy that guys like Patriotz love.
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March 8th, 2011 at 2:35 am 37
@Dave:
Jeez. Dave is a grade A moron. What a bunch of low level, low intelligence posts.
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March 8th, 2011 at 2:36 am 38
@patriotz:
Why don't we tax cancer patients to help speed along their recovery as well?
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March 8th, 2011 at 2:40 am 39
@Dave: I think given the choice of extra money in the city's coffers versus a plot of dirt…most residents would prefer the money.
Based on that logic, why not reduce the tax of vacant condos and houses???
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March 8th, 2011 at 2:41 am 40
@patriotz:
In case you didn't notice, nobody has given examples of 'speculative holding'. It's actually quite rare and it's hardly the biggest issue for supply of new developments. I could think of ten things to change that would have a greater effect before I would consider taxing 'speculative holding'.
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March 8th, 2011 at 2:44 am 41
@dave,
How about the former indy lands in northeast False Creek? (It's an honest question, since I don't know much about it apart from rumours that the developer is holding out for a sweeter land-use deal from the city.)
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March 8th, 2011 at 2:49 am 42
@Anonymous:
Great idea if you like paying higher rents.
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March 8th, 2011 at 2:51 am 43
@patriotz: Indeed, and as the post today also states:
Rents are NOT increasing significantly, or at all, even as purchase prices are skyrocketing. So this is not due to lack of responsiveness of supply (strict land use planning and constrained supply of land) to increasing demand. If it were, then the unmet demand to buy would spill over into rents, and cause rents to rise.
It's speculation, not demand. You can't speculate in rent. You can speculate on the asset price.
This is a credit bubble, plain and simple. Bubble in China, bubble in Canada, it doesn't matter, both will crash, as they have done everywhere else, and as they always do. That's why HAM, while an interesting diversion, just doesn't matter. China will crash too, and take its HAM back home.
We can hope that one day Canada will see strong anti-speculation regulation, that will keep speculation viable and profitable, but only for those who know what they are doing, not every Tom, Dick and Harry with a LOC.
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March 8th, 2011 at 2:51 am 44
@Dave:
You don't like social engineering? Well then I guess you think we should get rid of all government programs promoting home ownership, then, starting with CMHC?
Right?
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March 8th, 2011 at 2:52 am 45
@Dave: Wouldn't you consider Davie and Burrard speculative? I would. If that corner is costing them money, even on a reduced tax rate, why would they hold it and let people garden there? Why not just turn it over to the city? Sell it so someone else who can develop it.
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March 8th, 2011 at 2:53 am 46
@Dave:
Please tell me you're not that stupid.
I am sure that if cancer patients had a choice, they would choose to not have cancer. Obviously they have no choice in the matter.
Developers have a choice. For the most part, they can develop the land, pretty much whenever they want if they have financing. If they don't have financing taxation forces them to shit or get off the pot.
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March 8th, 2011 at 2:54 am 47
@Dave: Exactly…the taxpayers of the city are paying higher taxes because the developers are able to rezone these properties so they pay a lower rate of tax. Nice circular argument. It works both ways.
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March 8th, 2011 at 2:55 am 48
@patriotz:
Sure. I don't care if we get rid of the CMHC.
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March 8th, 2011 at 3:02 am 49
@Anonymous: #30
>>>It’s ok for it to be heavily contaminated while allowing people to grow vegetables on that land. Excellent.<<<
That contamination is nothing compared to when Dave is having a slow day and comes to visit this board.
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March 8th, 2011 at 3:07 am 50
@Anonymous:
Why? Because you can't just wave a magic wand and clean up the property overnight, especially if it has affected other lands.
It's costing Shell (I assume they still own it) an opportunity cost. They could sell the land to a developer, or turn it back into a gas station. I really don't know what their plans are. For all I know, somebody already purchased it and is working on rezoning. Or maybe selling it would cost Shell more than sitting on it.
What I do know is that Shell is not a property speculator. Shell isn't sitting on that land thinking that they can flip it for a higher price a few years from now.
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March 8th, 2011 at 3:13 am 51
@Drachen:
And not all property owners have a choice in the matter either. There are reasons why developers sit on land. Speculative flipping is very small.
You dummies seem to think this is quite common, but you can't provide a single example. Show me a few cases where somebody purchased Property X, left it vacant for a few years, only to flip it later.
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March 8th, 2011 at 3:13 am 52
@Dave: Proof positive you are the biggest fucking buffoon on these boards:
Thinking Shell Canada owns the land underneath an individual gas station somewhere in Canada. Holy hell, you literally know NOTHING.
http://www.shell.ca/home/content/can-en/aboutshel…
Honestly, no clients today? I thought they were all buying three and their wives buying two, big guy.
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March 8th, 2011 at 3:15 am 53
@dave
Why don’t we tax cancer patients to help speed along their recovery as well?
You have got to be fucking kidding me. Are you really so incredibly obtuse as to equate involuntary contraction of a life threatening disease with the totally voluntary decision to put a backhoe to work? Seriously? You can't see the difference?
You have lost the last shred of whatever credibility you think you deserve.
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March 8th, 2011 at 3:15 am 54
@fixie guy: "BTW, I questioned their motives, not their intelligence. Nice straw man. Coupling with an argument from authority is cute."
Why so mean, fixie? No strawman: do you think the authors are not open to debating their arguments? Please: they are vocal but approachable. They have email addresses and actually answer emails. Their motives are irrelevant if they are willing to debate in good faith, and I think they are.
Why not actually research Las Vegas and Phoenix a bit more? Phoenix auctioned off significant development tracts in bulk parcels, leading to large-name developers producing large developments in areas nobody really wanted. The land commission's policies exacerbated overbuilding and hoarding.
The methods by which areas in Texas and Germany have successfully ameliorated asset bubbles, even in the presence of loose credit, is something worthy of discussion IMO. Patriotz has pointed to tax regimes as a reason why and I think it's valid. Putting more control in the hands of local councils is also something done in these areas and is worthy of some consideration.
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March 8th, 2011 at 3:17 am 55
@Turkey:
What are the 'Indy Lands'?
Are you talking about the vacant piece on the north side of False Creek? If so, that is owned by Concord Pacific and it is the last chunk of the former Expo lands that has yet to be developed. It's just a matter of time before they develop it. You can't say that Concord has been sitting on these lands for speculation. They have owned it since the late 80's and have developed almost the entire area.
Or are you talking about the lands next to the Olympic Village? If so, those lands are owned by the government (the City or Translink) and will eventually be sold (soon). The government wasn't sitting on those lands to speculate on higher prices.
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March 8th, 2011 at 3:21 am 56
@Dave:
Is this reverse psychology day today? Pay people holding vacant land and underused properties, so that they get developed faster? I missed this memo.
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March 8th, 2011 at 3:25 am 57
Here's the plan for that property:
http://www.6717000.com/1157burrard/
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March 8th, 2011 at 3:25 am 58
In the absence of our regular daily numbers:
Total posts: 56
Total Dave posts: 20
Dave/Total ratio: 36%
Dave daily average: 14
Looks like a bullish day for Dave.
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March 8th, 2011 at 3:26 am 59
@data junkie:
Ya, I am an idiot for not knowing what Shell does and does not own. I'm sorry that I don't keep track of the hundreds of thousands of companies that own land in this country. Sigh…
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March 8th, 2011 at 3:28 am 60
@Devore:
Carrots not sticks.
But let's rewind a bit here… This was suggested as a solution to the problem of 'land speculators'. I take exception to this being a problem to begin with. None of you have provided any evidence whatsoever of such land speculation. Let's see it first.
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March 8th, 2011 at 3:32 am 61
@Devore: "If it were, then the unmet demand to buy would spill over into rents, and cause rents to rise."
The argument is that rapidly increasing supply, or even the possibility, will suppress prices. It is true that construction has met demand because rents are not rising.
It's still a worthy question why areas of Texas like Dallas and Houston didn't experience asset bubbles when areas like Phoenix did. Both have large amounts of land on which to expand and rapidly rising populations. For whatever reason all the money sloshing around in the US had little effect on certain markets that ostensibly look similar geographically and demographically.
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March 8th, 2011 at 3:33 am 62
Dave
The land owned by Concord Pacific is indeeed one of the last undeveloped sites on the north-east side of False Creek but there is no pressing need for it to be developed – Concord Pacific had it declared a temporary park many years ago and pays about $4,000 per year in taxes on it – the land is assessed at $440,000. Yes, it is a scam along the lines of the "community garden" scams. The land next to the Olympic Village is already earmarked for development – a school is slated for construction on the grassy plot right in front of the "landmark" Arthur Erikson building at the western edge of the village – bye bye views.
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March 8th, 2011 at 3:34 am 63
@Dave: See, if you had no idea who owned it, asserting that a big company like Shell had no interest in property speculation (when in fact it was owned by a developer whose express purpose is to SPECULATE IN PROPERTY) would normally be construed as the kind of retarded fucking error that would have a normal person, engaging in constructive debate, apologizing profusely.
So given your reaction to this and every other gigantic error of fact that is pointed out to you is to shrug and ignore it, one must reach the conclusion that you are either a troll, or deluded and unable to engage in dialogue like an adult.
Either way, I'm done responding to you. You and Troll can have mutual stimulation parties for all I care.
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March 8th, 2011 at 3:38 am 64
@data junkie:
And you think changing definitions is honest discussion?
You are the dummy if you think speculators are buying up vacant land, sitting on it and hoping to flip it for a development in the future. It's honestly the dumbest and most ignorant thing I have heard this month to date.
Let's see some examples. Can't? Thought so. Run along now.
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March 8th, 2011 at 3:40 am 65
@jesse:
>>>The argument is that rapidly increasing supply, or even the possibility, will suppress prices.<<<
It's possible, but I would counter that in a highly speculative market like Vancouver combined with low interest rates and loose lending standards that increased supply will simply be snapped up by speculators.
In a casino environment such as Vancouver's real estate market it seems that the only thing that will stop it is a change of the herd mentality plus a reversal of low interest rate/loose lending practices.
Texas does not have such a mentality.
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March 8th, 2011 at 3:42 am 66
@data junkie:
And if Shell didn't own it, they probably still owned the problem. Yet, you would tax the property owner who might have little to no control over the solution. Brilliant.
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March 8th, 2011 at 3:44 am 67
@Dave: "one of you have provided any evidence whatsoever of such land speculation"
The evidence cited is price-income ratios being higher in certain markets and the majority of the "price" is in land costs, not construction costs. The behaviour of certain sub-markets is one thing but the entire region has high land prices. The fringes of a city, perhaps, should have lower land costs. That can be accomplished by making underutilized land more taxing for its owners. Developers should be promoting this: higher taxes means lower land costs — for them such a paradigm shift is arguably a wash since they don't own the land for that long anyways.
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March 8th, 2011 at 3:44 am 68
Come on Patriotz. Step up. Let's see those properties. So far, we are 0 for 5.
Surely if you think this is such a problem, you could come up with at least a few example.
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March 8th, 2011 at 3:45 am 69
@Best place on meth: "Texas does not have such a mentality."
But Phoenix did.
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March 8th, 2011 at 3:48 am 70
@Dave:
Taxation, like rebates and subsidies, usually has the opposite of desired effect. Rewarding people for buying and holding underused/vacant land will cause people to want to buy up and hold underused and vacant land, not to develop it. Wouldn't that cause a sort of a mini-bubble in this type of property, because land always goes up (unlike land improvements, which depreciate), and if you're getting paid to hold it… whoa.
Not commenting on supposed existing land speculation, because I don't know of any, and don't know if it's happening. Just interested in your suggestion to combat it.
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March 8th, 2011 at 3:52 am 71
@jesse:
Yes, Phoenix attracts more speculation than Texas and is doing so again as witnessed by the herds of Canadians migrating there to buy distressed properties.
Nobody ever thinks about Texas. Nobody cares about Texas.
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March 8th, 2011 at 3:56 am 72
@jesse:
And as you and patriotz suggest, taxation also plays a part here. High property taxes weigh on investment properties that do not produce sufficient income, making appreciation speculation very costly. In Vancouver, we give a discount to owners-occupiers, but enforcement is very low, because it seems like everyone knows someone who owns an investment property (house, condo) that they rent out, but pretend they, or their wife, or parents, or children, live there. If enforcement was stronger, and investment property taxes higher, would that take a bigger bite out of speculation, and make carrying costs higher?
This would have other undesirable consequences, but would reduce speculation. I still think that restricting credit should be the first line of attack. Can't speculate with 20:1 leverage if you can't get the credit. People speculating with their own money, well, they can do what they like.
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March 8th, 2011 at 4:03 am 73
@Best place on meth:
Lack of movement in rents indicates the demand is not for housing, it is for speculation. Increasing supply even more will not do anything, so long as credit can expand to match.
In any case, if there is no real demand for housing, why should we want to overbuild even more, as a matter of public policy?
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March 8th, 2011 at 4:06 am 74
@Devore:
I'm not suggesting that we should give money to vacant land. That was tongue in cheek.
By carrot, I meant to give developers incentive to develop.
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March 8th, 2011 at 4:11 am 75
@Devore: "it seems like everyone knows someone who owns an investment property (house, condo) that they rent out, but pretend they, or their wife, or parents, or children, live there."
I don't know how common this is. At negative cash flow one's arguably better off claiming it as an investment property with the associated deductions.
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March 8th, 2011 at 4:15 am 76
Dave Says:
Ya, I am an idiot for not knowing what Shell does and does not own. I’m sorry that I don’t keep track of the hundreds of thousands of companies that own land in this country. Sigh…
No, you are displaying a casual mendacity, as per usual, when in reality you are talkiing out of your ass, as per usual.
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March 8th, 2011 at 4:16 am 77
Offtopic…. but on a lighter note, and related to something that we touched on a few days ago. Today's Bruce Allen's reality check is about Lumiere/DB Bistro, I guess it'll be up on his site soon for those who can't catch it.
http://www.cknw.com/Blogs/RealityCheck/home.aspx
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March 8th, 2011 at 4:18 am 78
@jesse: If they are only holding it a few years in a rising market, they would do it to avoid capital gains tax. Rule of thumb, if they piss you off as a tenant or neighbour, report them and let the CRA sort it out.
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March 8th, 2011 at 4:19 am 79
Texas didn't have a bubble in the last few years because after the last big bubble, when Texas was left with empty subdivisions, a law was passed mandating 20% down on house purchases.
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March 8th, 2011 at 4:22 am 80
@jesse:
Maybe. Probably. That's the problem with anecdotes and perceptions.
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March 8th, 2011 at 4:24 am 81
@Dave:
Here are some plots of land where the developers that owns the lots have converted them to nonprofit uses to avoid taxation. The article's from two years ago. It includes the Prima property at Burrard and Davie, among several others.
http://www.6717000.com/blog/2009/02/vancouver-pro…
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March 8th, 2011 at 4:26 am 82
@Patiently Waiting: "they would do it to avoid capital gains tax"
Maybe but they're also taking a risk doing this, as an audit carries penalties. Who knows, but my bet is most prefer cash in hand in the form of a rebate, and a pleasant sleep at night.
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March 8th, 2011 at 4:27 am 83
@ M-
Shhhhhh don't tell Dave about that article, he prefers to be blind and dumb.
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March 8th, 2011 at 4:28 am 84
Texas is a subject near and dear to my heart
I lived in Houston for 5 years (left about 6 years ago), and it is indeed amazing what you can buy there compared to pretty much anywhere in Canada.
I agree with patriotz regarding property tax keeping a lid on prices. It's roughly 3.25% a year. There does exist million dollar houses there, but it's rare. You would pay almost $3K a month in taxes on it.
I think it's a better system. The high (percentage wise) property tax rates help keep prices stable. You can get a nice house there for $150K, and pay about the same taxes (in dollar amounts) as here in Vancouver. You can get a very liveable small older house for $70 to $80K. Oh, and you could rent out that house for $1200 to $1500 a month.
Having said this, I guess nothing can completely fix stupid. During the early 80's, even Texas had a property bubble because "we have oil" (sound familiar??). If I remember correct, real prices still haven't recovered.
KK
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March 8th, 2011 at 4:35 am 85
There are already tax incentives to do something with vacant land, as I understand it. If you sell the land at a profit in the future, you pay Capital Gains Tax, unless you were renting it out to somebody or providing some other kind of service that would make it a business expense.
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March 8th, 2011 at 4:39 am 86
@taylor192:
The article didn't mention speculation. It looks like most of the plots are about to be developed.
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March 8th, 2011 at 4:41 am 87
@M-: Hmm, what about that lot on corner of Kingsway and Broadway that burned down last year? It's some foofoo community spot now. Who owns that, and what's up with it?
And, in all fairness Dave, we're still waiting for those wonderful cashflow positive, high cap rate residential properties you have for us to buy. Or is that a low blow?
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March 8th, 2011 at 5:14 am 88
http://www.cbc.ca/news/business/story/2011/03/08/…
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March 8th, 2011 at 5:16 am 89
Another factor for Germany not developing a property bubble was the sting of the last bubble during re-unification when lots of people lost their shirts.
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March 8th, 2011 at 5:27 am 90
Who will be left holding the bag, in order of importance:
1 – Boomers who cannot conceive reducing their $ hemorrhage?
2 – Youngsters who never witnessed a housing collapse?
3 – New immigrants who never witnessed a housing collapse (or any of the capitalist former crises)?
4 – HAM who would rather take a hair cut here than leave their money in China?
5 – Addicted greedy gamblers who want to believe its is different here?
6 – Savers afraid of hyperinflation trying to shelter their money by all means?
IMHO: 5,1,2,3,4
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March 8th, 2011 at 5:27 am 91
@painted turtle:
Great for Canada except for:
"British Columbia's new housing sector slid by five per cent in the month."
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March 8th, 2011 at 5:29 am 92
@Amomynouse:
They WERE about to be developed, but,
Hmm, "carry property"… that does not sound like development to me. Maybe there would turn up another developer who WOULD develop the property profitably, instead of letting it sit as a vacant lot, SPECULATING they will be able to get more money in the future, or scrapping their busted plans and building another profitable development in its place. Developed property is worth far more to the city than undeveloped land. If they were paying proper taxes to the city, there wouldn't be as much of an issue, and local residents could enjoy a mini-park or a parking lot.
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March 8th, 2011 at 5:42 am 93
@Devore:
There is already a dissincentive to sitting because developers make money by selling condos not carrots.
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March 8th, 2011 at 5:42 am 94
You can't have a bubble form, unless their is excess profit being made by land developers, builders and speculators. The rise in incomes all the way down this food chain allows people to bid higher prices – which makes more profit and leads to more housing being built or renovated. Initially there may be a shortage of homes or land. And/or pent up demand from harsher mortgage regulations or higher interest rates but that is only temporarily. Eventually all bubbles cause a glut of housing and a sharp drop in demand. You can re-vamp the cycle with government intervention, but it always has to end the same way. Land will be cheaper, houses will cost less to build and you can have your bathroom renovated for under $3,000.
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March 8th, 2011 at 5:57 am 95
The city of Vancouver did miss the chance to tax the real estate bubble away. The city could have raised property taxes to keep home price appreciation down to single digits and not spark a price bubble. Perhaps Vancouver could go to a monthly billing of property taxes and thereby start to raise taxes slowly. The better option is to increase the utility bills, this would hit both owner and renter equally. House prices could be a third of what they are now if property taxes and utility rates were a $1,000 or $2,000 a month for the average home.
CC City of Vancouver Manager
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March 8th, 2011 at 6:19 am 96
@Devore:
http://mtpleasantrealestate.ca/2010/11/mount-plea…
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March 8th, 2011 at 6:23 am 97
@taylor192:
Huh? Your comment makes no sense. Changing the use has nothing to do with property speculation and everything to do with saving money.
Patriotz, you out there? Let's see some examples. Come on. We are 0 for 7 now. Let's get a few in before we go 0 for 10.
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March 8th, 2011 at 6:31 am 98
@painted turtle: This recent sales boom is unlike what we observed in 2004 – 2008. In those years, everybody I knew was buying or looking to buy.
I can honestly tell you that most of the people I know have already bought or plan on renting for several years.
There are no public sources to verify this information, but make no mistake about it, this market is 100% fueled by Mainland Chinese investment as well as a minority rushing to beat the March 18, 2011 deadline.
I know many developers and real estate agents who tell me that sales are piping hot – this we can verify by the numbers – and nearly all of the buying is from Mainland China.
The Mainland Chinese are dominating the mid to high end of the market and they have recently discovered White Rock and West Van. One very well known realtor told me said, "who knows how long this will last but we will ride it as long as it does".
We can all pretend that Hot Asian Money is a myth. It is driven by the following:
(1) Inflation and corruption in China is worrying the upper middle class. Many Chinese are rushing to get thier money out of China.
(2) China has recently allowed its citizens to invest more money overseas. Many Chinese are worried that they will close overseas investment and are using this opportunity to invest now, while they believe they still can.
(3) Vancouver is the cheapest on the list of attractive locations to buy. Hong Kong is out of control, Singapore too. Sydney is more expensive than Vancouver as well.
(4) The Chinese are scared of America. They are worried about America as a place to invest, they don't trust the US housing market and they don't trust the US Dollar.
(5) Canada is percieved to be as good as Gold. The Chinese believe that we have clean air, water, a peaceful population and a sound banking system. We also already have a large Chinese population which makes investors and newcomers feel more comfortable.
Just like the Hong Kong influx, this will soon end. I'm not sure when or how but the market will remain firm as long as the Chinese are lining up to buy single family homes at any price. They are not buying in the interior or Eastern Suburbs which explains the stagnation in those areas.
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March 8th, 2011 at 6:34 am 99
@whydoItry:
Are you trolling? You can't possibly be serious.
Real estate is expensive because of the size of government. More government isn't going to make anything more affordable.
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March 8th, 2011 at 6:49 am 100
For anyone interested about HAM, here's a great article on the possible hard landing of China:
http://www.canadianbusiness.com/managing/strategy…
Here's a snippet from page 3:
"Meanwhile, China's boom has spilled into Canada's real estate market. In Vancouver, according to condo marketer Bob Rennie, between 60% and 80% of all real estate sales in the city's West Side are now to mainland Chinese, while markets like Calgary and Saskatoon have soared thanks to all the new oil and potash wealth.
In plain terms, should China's economic miracle turn out to be a mirage, all of that would be at risk. "If China fails, or even if this fixed investment model fails, countries like Australia and Canada are in deep trouble," says John Lee, a foreign–policy expert at the Hudson Institute who is also a research fellow at the Centre for Independent Studies in Sydney, Australia. For one thing, commodity prices are likely to plunge. That could throw a wrench in plans for the oilsands, which require high oil prices to remain profitable, and crimp much of the manic exploration activity in mining. Canada's resource sector was one of the primary drivers for employment over the past decade, according to Statistics Canada, so a correction in China would also rob this country of a key engine for job growth. It would also sap provincial and federal governments of needed tax and royalty revenue, hurting their balance sheets."
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March 8th, 2011 at 6:53 am 101
@Dave: Saving who money? Not the taxpayer! All it does is put more burdon on the residents in order to subsidize the developer. If they are wanting to keep those vacant lots as community gardens, that's one thing, but just changing the zoning while they are waiting to develop so they can pay less tax is another. Nice developer welfare system.
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March 8th, 2011 at 7:06 am 102
@Mike:
After the horde of locusts from the far east devour Vancouver and Richmond, do your sources know where they will land next?
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March 8th, 2011 at 7:11 am 103
@Anonymous:
Who is the one collecting welfare in this case? If a property is vacant, it isn't drawing upon municipal services. The taxes should be zero.
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March 8th, 2011 at 7:15 am 104
@Dave: Doesn't the property have value? Isn't that what taxes are based on? My house uses less services than the house next door, yet I'm paying the same tax rate. Imagine how the city would assess taxes based on use of municipal services.
Sorry to use the word welfare, call it a subsidy paid for by the taxpayer so the developer can maximize profit. Oh wait…that's called corporate welfare.
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March 8th, 2011 at 7:17 am 105
@Dave: Actually Dave, that property is using municipal services. The roads are there and maintained in order for that property to be accessed. How about sewer and water lines that are installed and ready to go? So yes, there are municipal services that the lot is using.
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March 8th, 2011 at 7:18 am 106
@Dave: One more thought…if I go on holiday, do I get a discount on my taxes since I'm not using any municipal services?
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March 8th, 2011 at 7:26 am 107
@Anonymous:
Corporate welfare? More like corporate provided welfare. And then you have to pay all the DCC's during the development.
All these costs get passed on to buyers. Adding more costs just makes real estate more expensive. That's great if you already own. It's not so great if you believe in affordable housing.
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March 8th, 2011 at 7:28 am 108
@Anonymous:
Who is driving onto a vacant property that is fenced beside the owner once a month? They aren't pumping water into the sanitary that has to get treated.
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March 8th, 2011 at 7:36 am 109
Let's consider the other side of this. Many of you believe that the average wage earner cannot afford to buy a home here. The truer problem is that our economy is not creating sufficient wealth or that there are only a few sectors (think commodities) where a few are making lots. Do we not see that borne out in the buyer category numbers, local or overseas notwithstanding?
The distribution of wealth in the economy (local, global, whatever scale you choose) is not balanced nor equitable. It is so much harder to invest in a career and to know with any certainty that your wages will continue to grow or that the outlook will remain positive throughout your lifespan.
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March 8th, 2011 at 7:38 am 110
Oh boo hoo. Cry me a river. Nobody is forcing them to build. At the end of the day, the developer doesn't give a flying f&%k about the average person. All they care about is profit.
The services are still there and provided by the taxpayer. Pay up…just like the rest of us.
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March 8th, 2011 at 7:39 am 111
@Anonymous:
>>>if I go on holiday, do I get a discount on my taxes since I’m not using any municipal services?<<<
Absolutely, and if you call Shaw and Telus before you go, they'll take 2 weeks off your bill.
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March 8th, 2011 at 7:41 am 112
@Dave: @Dave:
So who should pay if the road that services that lot is paved? Should the owner of the lot not have to pay their fair share? I would think so. All that infrastructure is there and maintained in order to continue to provide value to that lot.
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March 8th, 2011 at 7:43 am 113
@Anonymous:
That's fine. Just don't complain about expensive real estate. It all gets passed on.
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March 8th, 2011 at 7:43 am 114
@Best place on meth: Pay attention…I'm talking municipal taxes. That's the crux of Dave's argument. Nobody is using those services so they shouldn't pay property tax.
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March 8th, 2011 at 7:46 am 115
Without daily numbers from Paul, this blog is toast. Larry isn't as reliable at posting numbers. What happened to Paul, VHB?
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March 8th, 2011 at 7:47 am 116
@Dave: Someone has to pay. Why not those that are buying the property? Otherwise, property taxes just go up for everyone.
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March 8th, 2011 at 7:48 am 117
@Dave:
There are a lot of RE developers in Vegas, Phoenix, Florida, etc. who weren't able to pass on their expenses, big time.
RE sells for what people are able and willing to pay for it. Period.
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March 8th, 2011 at 7:51 am 118
@Dave:
Come on Dave, you know it's going to passed on either way (doesn't matter if you calc. taxes on assessed value or usage of services). The total municipal budget is the same in both instances. Regardless, this is a small factor in the cost of real estate. It's like saying the GST made gold jewellry unaffordable.
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March 8th, 2011 at 7:53 am 119
@vomitingdog: Paul was getting his numbers from a realtor buddy of his. That connection has fallen through. Let us be thankful for Paul's efforts over the last couple of years. He got paid nothing and gave us all a lot of entertainment and pleasure.
Larry posts the numbers on most days, so we'll have to live with that.
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March 8th, 2011 at 7:54 am 120
@vomitingdog: Why don't you ask BPOM to talk to his realtor buddies about the numbers? I hear they're pretty tight.
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March 8th, 2011 at 7:55 am 121
@patriotz:
Really? You should write a paper about this magical market that doesn't follow the basic laws of supply and demand.
Still waiting for those examples.
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March 8th, 2011 at 8:01 am 122
@Dave:
What part of "RE cannot sell for more than someone is willing and able to pay for it, regardless of what it cost the seller" don't you understand?
http://www.realtor.com/realestateandhomes-search/…
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March 8th, 2011 at 8:01 am 123
Hey Best Place on Meth,
I have taken up your call to action, and I am now outlining the pitfalls and dangers of offshore buyers, particularly H.A.M.
Using the socratic method of questioning, I am slowly turning those that have welcomed the offshore buyers to those that are starting to fear the dearth of offshore buyers. I start off with softer points and then get into the more scary points.
The points that I make through my questioning are as follows:
• Offshore buying undermines the livability of the neighbourhoods and communities in which they buy. Offshore buyers are not around to watch neighbour’s houses, participate in block events, or shovel the snow off walkways (on the odd days it snows) If enough HAM comes in, one’s community can essentially become a Mexican resort town.
• Offshore buying limits the ability to locals to live where they were born, raised, and where they would like to be contributing individuals. While a boomer may like a big payout through HAM, it means that their kids will not be able to buy, and will not be around to support them in their old age.
• Offshore buying leads to a complete disregard for a community’s planning processes. While many ostensibly come here for the “space, greenery, and clean air,” trees are often torn down, greenery paved over, and monster homes built to within inches of the next house. And good luck trying to prevent these practices – you face entrenched financial oppostion and the race card is often pulled.
• Offshore buying undermines the local economy, as absentee landowners fail to support the local shops. If enough buyers pour into a neighbourhood, your favourite local restaurant or coffee shop may go under due to an absence of local customers.
• Offshore buying leads to an abuse of Canada’s generous offshore social system, as dependents are often dropped off, while the main breadwinner stays in oversees, failing to declare any income. I like to point out the West Vancouver story of high levels of child poverty when they have the pricest real estate. As the abuse of the system grows, your taxes go up to pay for those services. Those abusing the system grow richer while the ones supporting the system grow poorer.
• Offshore buying stems largely from corrupt, dishonest individuals, who are laundering ill-gotten gains and who are skirting China’s capital controls. Offshore buying brings in networks of organized crime, and all its associated effects – gambling, drug trafficking, gangland executions. Offshore buyers are not the types of neighbours you want.
• If the Chinese miracle collapses, overseas investments are the first to be liquidated. If a neighbourhood has a disproportionate amount of HAM, that means homeowners in the neighbourhood will see even bigger declines in RE prices.
As long as the media and the realtors highlight all the HAM coming in, the points above become all the more relevant, and the more people will eventually get pissed off. I am glad that the media is pumping these stories – it helps people wake up to the dangers of offshore buying.
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March 8th, 2011 at 8:02 am 124
@Troll:
I don't agree. Costs are costs. It's not a small factor. It can be hundreds of thousands of dollars to a developer.
That's the kind of thinking that got us into this big government high taxation system to begin with. Everybody justifies things at the margin and makes a claim that what they want is insignificant to the bigger picture.
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March 8th, 2011 at 8:06 am 125
@Dave: If government banned mortgages larger than 15x comparable rent, that would certainly lower prices. People would be free to spend more of their own money, but that would be the minority. Leverage is the problem.
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March 8th, 2011 at 8:07 am 126
@patriotz:
I understand what you are suggesting and it is simply wrong and falsifiable. Supply and demand is as much of a fact in economics as it gets.
You are basically saying that demand is all that matters, which is truly laughable.
Pricing of a product is arrived at by the interplay of not only demand, but also SUPPLY. The cost of production is what produces the supply curve.
Your Detroit example does not support your assertion in any way. It's consistent with the laws of supply and demand.
Ignore at your own peril.
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March 8th, 2011 at 8:09 am 127
@patriotz:
Still waiting for those examples of speculation in vacant properties.
Just admit that you were wrong and we can move on to the next discussion.
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March 8th, 2011 at 8:10 am 128
@Speaker Box:
Excellent, all very good points and well laid out.
Good job omitting the phrases "yellow hordes" and "locust plague", those are for domestic consumption only on this blog.
Don't forget to mention the constant pumping by Global, and their taunting of the locals with "planeloads of Chinese" coming to take the city over.
Are you writing your MP? Flaherty? CRTC? Who else needs to feel our wrath and outrage?
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March 8th, 2011 at 8:11 am 129
@AG Sage:
Yes it would. Is there something magical about 15x rent?
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March 8th, 2011 at 8:15 am 130
@Dave: You know what would be useful to make your case would be an example of the costs to develop a property say 10 years ago and today. Show the differences in the major cost buckets; land, construction, fees&taxes. I'm sure they've all increased, but I'd bet dollars to donuts that increase in cost of land is by far the largest, followed by construction costs, with fees&taxes a distant third.
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March 8th, 2011 at 8:20 am 131
@Best place on meth: They aren't really sources so much as they are market participants.
They will tell you they are as baffled by this buying wave from China as anybody else. Many won't pretend to know how long it is going to last but they will ride it while it does.
I don't like this anymore than any of you do. It drives up living costs appreciably without adding to the real productivity of our region. It is great for car dealers, real estate agents and developers but bad for the rest of us trying to carve out a living.
You can't deny what you don't like. The market is driven by foreign buyers much the same way Whistler was in the 90s when the loonie was 65 cents.
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March 8th, 2011 at 8:27 am 132
@VHB:
I am thankful.
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March 8th, 2011 at 8:29 am 133
@Dave:
The whole point is that it's NOT being developed! Just sitting there, getting a fat tax discount. Where's the carrot to encourage development? I see the carrot to sit on the property waiting for more money, while carrying costs are being subsidized.
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March 8th, 2011 at 8:32 am 134
Are you writing your MP? Flaherty? CRTC? Who else needs to feel our wrath and outrage?
******
I am in government relations, so my messaging can be brought forward to senior provincial and federal political levels in "social" engagements. Osmosis communication can be very effective. Any letter writing campaigns by others simply reinforce the points that they hear.
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March 8th, 2011 at 8:33 am 135
@Troll:
Absolute increases or percent increases? I think we get a different answer for each of these.
In absolute terms, I would say that building costs have increased more than land costs. In percent terms, I would say that land has increased more.
For example, your land costs might have doubled from $40 /ft2 to $80 /ft2 (this varies considerably of course) and your build costs might have gone up say 50% from $130 to $200 /ft2. In absolute terms, your build costs have added more to the overall cost. Holding and development timelines are also longer than they were ten years ago, but money is also cheap right now.
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March 8th, 2011 at 8:36 am 136
@Devore:
Do you think a vacant property generates income? The opportunity cost of doing nothing is costly. The carrot is getting the profit of development. It's better to plant those seeds than leave them in the cupboard.
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March 8th, 2011 at 8:42 am 137
@Dave: That's the carrot for the developer. It's pretty plain which side you sit on. Why should I as a taxpayer subsidize a business while they sit and wait for the most opportune time to maximize profit? Explain that to me.
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March 8th, 2011 at 8:49 am 138
@Dave:
Holly crap! The opportunity cost of developing must be much higher than letting it sit vacant. Otherwise, it would not be sitting vacant.
Obviously the property will sit vacant if the developer can rip off taxpayers by gaming the system when that is a better business decision than developing.
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March 8th, 2011 at 9:19 am 139
@Aaron Chipman:
Aaron, do you have an uncle named "Dave"?
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March 8th, 2011 at 9:20 am 140
@aragonzo:
Thanks. You get it.
It blows me away how much difficulty some people have in accepting reality because it doesn't match what they want it to be.
Back to my original point… developers make money by developing, not sitting or flipping.
http://youtu.be/8To-6VIJZRE
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March 8th, 2011 at 9:27 am 141
@Speaker Box:
You raise some good points, but many (most?) of them apply mainly to wealthy immigrants, not offshore buyers. An offshore buyer is just that – someone with no residential status in Canada for themselves or their dependents. And as the figures show, there aren't many of them.
Frankly I think that "investor" immigration should be scrapped altogether – the financial benefits are dubious at best and the social drawbacks are substantial, not the least being a backlash against all immigrants.
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March 8th, 2011 at 9:32 am 142
@aragonzo: "When he says that there is no speculative flipping of land by developers, he probably is correct."
Why do you think developers hold onto land? In many cases the architecture/development proposals are complicated and can take years to sort out. Just witness how long the SE Marine Drive/Kerr St. development is taking. That's for a complicated multifaceted development. It's not like a developer buys the land and has a bulldozer there the next day.
So sure a developer holds onto a piece of vacant land, and we can call it speculation or whatever but developments take time to approve. Luckily for developers land costs have generally increased. Witness what happens when land costs sink like an anchor.
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March 8th, 2011 at 9:34 am 143
@Dave:
It is meaningless to talk about land versus building costs without specifying the building type. A SFH is going to have a completely different breakdown than a high rise, obviously. And land costs are far and away the largest contributor to changes in total cost for SFH's.
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March 8th, 2011 at 9:43 am 144
@patriotz:
Thanks Captain O. Obviously I am talking about density. And obviously, you weren't complaining about developers sitting on an East Van SFH lot.
Had a chance to dig up those examples yet? I think we are 0 for 8 right now. Not looking good for your little tax scheme is it?
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March 8th, 2011 at 10:01 am 145
FYI, listings must be sky high, with low sales, it seems evertime this occurs ol Larry at Yattermatters skips these days, he only posts when sales are high, all i know is that if you search new listings on MLS they are rapidly increasing.
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March 8th, 2011 at 10:01 am 146
FYI, listings must be sky high, with low sales, it seems everytime this occurs ol Larry at Yattermatters skips these days, he only posts when sales are high, all i know is that if you search new listings on MLS they are rapidly increasing.
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March 8th, 2011 at 10:08 am 147
patriotz says: Frankly I think that “investor” immigration should be scrapped altogether – the financial benefits are dubious at best and the social drawbacks are substantial, not the least being a backlash against all immigrants.
that doesn't make much sense, anytime you can get new money into the country (even if it's somewhat inefficiently), in theory it's a benefit to the country. there are some downsides (higher real estate prices), but canada's immigration policy is deliberate- a combo of money, cheap labour, and future votes. and no, investor immigrants are tolerated/welcomed more than other immigrants.
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March 8th, 2011 at 10:13 am 148
Ultra-green 610-foot Vancouver laneway home draws crowds
http://www.theprovince.com/Ultra+green+foot+Vanco…
280 to 300k for that??
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March 8th, 2011 at 10:34 am 149
"RE sells for what people are able and willing to pay for it. Period."
vancouver says different. it sells for whatever sized mortgage they can get, thank you taxpayers. can they afford it? well, we're going to find out now, aren't we?
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March 8th, 2011 at 11:17 am 150
@54 jesse Says: "Why so mean, fixie?"
Why so evasive and emotionally manipulative, jesse? Ignore substantive counterpoints and launch into yet another string of straw man arguments, double-good nice. What's your game here?
"Why not actually research Las Vegas and Phoenix a bit more?"
You're begging the question, discounting you ignore I already indicated the effectiveness of any land use restrictions on development in LV was minimal-to-none. Google 'Las Vegas sprawl' if you need more. The author claims land use restriction drove property asset bubbles in general. He starts by claiming only the top 20 US markets saw asset bubbles, using the CS vs. FHFA for proof. You accept this? That the 100% appreciation over 10 years for the FHFA is normal? His argument falls apart at that point, anything resting on such a ridiculous premise is drivel in principle.
Again, reasons it's not worth pursuing:
- he flatly misrepresents lesser but still unprecedented price movements in non-Comp 20 cities as 'normal'
- he doesn't account for timing by showing changes in land use restrictions correlated across all US markets that saw simultaneous appreciation
- he doesn't couple the biggest, near-simultaneous real estate bust across the globe in centuries with data showing corresponding land use similarities either
- he cherry picks examples of boom/bust cities with tight controls yet shows no indication of having examined and compared them against controls in non-boom/bust cities
- he shows no indication of examining boom/bust cities without tight controls
- he doesn't explain the mechanism by which land use restriction causes price turbulence beyond 'ta-da'.
Land use restriction causing some element of higher prices is obvious to the point of triviality. But that's NOT Unconventional Economist's claim. He claims they cause asset bubbles. Don't even get me started on the massive price swings in Swiss real estate a few years before his graphs start, or why Houston's available land for growth is better than bubbly Calgary's or Winnipeg's. His claims are cherry-topped crap. E-mail Robert Shiller for an explanation why.
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March 8th, 2011 at 11:40 am 151
Australian housing bubble in search of a prick
http://www.unconventionaleconomist.com/2010/09/au…
They can have our prick….Bob Rennie
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March 8th, 2011 at 12:08 pm 152
@fixie guy: "But that’s NOT Unconventional Economist’s claim. He claims they cause asset bubbles"
That's not what he claims. He claims that what is required for asset bubbles is a combination of loose credit conditions and an inability of asset supply to quickly quench demand spikes.
"That the 100% appreciation over 10 years for the FHFA is normal? His argument falls apart at that point, anything resting on such a ridiculous premise is drivel in principle."
Prices in Texas did experience asset appreciation along with most other regions of the country, save a few blighted areas like Detroit. I don't think there is any argument that loose credit via federally-underwritten loans played a role in increasing asset prices across the country. But we're talking about significant deviations between cities that ostensibly have the same demographics and economic growth trends.
LV suffers from "urban sprawl" as do Phoenix, San Antonio, Atlanta, Dallas, Houston etc. Some saw prices increase and decrease significantly, others did not. Even the areas with "affordable" (Demographia's price-income definition) housing actually DID observe asset price appreciation in sub-markets: areas of Dallas have seen 30% drops in prices from their peak mid-last decade. Dallas, however, remained "affordable" for the average family through the 2000s.
"Land use restriction causing some element of higher prices is obvious to the point of triviality."
I think the question should be not whether it's a "smoking gun" ex any other changes, it's whether relaxing land use restrictions — and/or changing taxation as was previously mentioned — can be successfully used as one of the methods to ameliorate violent asset price fluctuations in markets, like Vancouver's, that are chronically prone to speculative fervor.
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March 8th, 2011 at 12:24 pm 153
@Aaron Chipman:
I don't get your point. Are you saying Rob Chipman posts on this blog? Under a pseudonym? I doubt it.
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March 8th, 2011 at 12:30 pm 154
"Dave" blames the bears for the demise of his blog. He is determined to mess up this blog.
Don't feed the troll.
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March 8th, 2011 at 12:33 pm 155
I stated in previous replies over the last year that I believe the Vancouver RE market closely tracks the HK RE market. Attached is a link that attempts to explain the HK RE market. Maybe the same forces are at work here.
http://www.alsosprachanalyst.com/real-estate/hong…
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March 8th, 2011 at 12:45 pm 156
There are a couple of reasons developers hald onto land.
1. To increase density / change zoning. Vancouver will negotiate density and zoning when the developer adds community amenities to the project. This is a long negotiation process. It then has to go through public consultations, etc. It is not speculation of property values rising but speculation you can get more out of the property even with flat prices.
2. The developer may be waiting for some other project to finish first. Examples are the land around new skytrain stations or the olympic oval.
3. Often the developers don't have the resources to develop. Everything from financing to managing construction. There may be soil contamination to deal with. All these things take time and resources. Often the developers will have many other projects on the go.
The bubble is due to cheap credit and lax lending standards. We have seen tons of development over the past 8 years during this bubble. Still prices rise due to demand of speculators. When the bubble pops and prices decline we will see less development as the speculators exit and developers can't get financing. As interest rates rise holding costs of vacant land will increase and vacant land values will plummet further.
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March 8th, 2011 at 12:45 pm 157
wow, renters must be sitting on a giant pile of money waiting to swoop in and cash in on the upcoming crash. cash is king, right? i'm going to sell and follow this blog searching for the right indicators to buy again!
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March 8th, 2011 at 12:47 pm 158
Home prices approaching bubble territory
Home prices are approaching bubble territory, although a cool-off is expected.
Canada's housing market is reaching the limits of sustainability and could tumble if there is no moderation, the Bank of Montreal says.
http://money.ca.msn.com/banking/homebuyersguide/a…
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March 8th, 2011 at 12:51 pm 159
@Dave: You're still 0/0 with your cashflow positive properties.
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March 8th, 2011 at 1:59 pm 160
@Renting: "To increase density / change zoning."
There's a property I remember seeing on Dewdney Trunk Road in Port Moody that was "supposed" to be rezoned for townhouses. The developer bought the land (I think it was low income housing or something similar), razed it, and waited for city approval for some zoning changes to start his build. Well guess what… the city refused to rezone and the land sits vacant, a case of a land/zoning speculator losing his bet. Now there's a blue 1800-rent-a-fence around a pile 'o dirt that is prime for a townhouse complex. I'm pretty sure it's taxed.
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March 8th, 2011 at 2:05 pm 161
@jesse:
That's exactly what happened at 8th and Vine.
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March 8th, 2011 at 2:09 pm 162
Has anyone else noticed how angry and prolific Dave has been lately?
He only gets this way when the market looks shaky, and I've never seen him this angry and prolific. I suspect he's wetting his pants right about now.
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March 8th, 2011 at 2:51 pm 163
Has anyone else noticed how angry and prolific Dave has been lately?
He only gets this way when the market looks shaky, and I’ve never seen him this angry and prolific. I suspect he’s wetting his pants right about now.
***********
hey grad school boy, go back to marking papers…
for years you guys have said that whenever a bull posts more or explains the market more the market is shaky..
well, guess what, you have been wrong for years, so whenever bulls post more I know that there will be RE price increase in the future
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March 8th, 2011 at 3:46 pm 164
Gold Coast leaps into abyss
China Airlines has direct flights from Taipei to Australia's Gold Coast. Another one bites the dust…
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March 8th, 2011 at 4:45 pm 165
@jesse:
Gold Coast is ground zero for the Oz property market. As it was in the 90s when the Japanese market crashed and the Japanese were forced to sell off their Gold Coast holiday flats.
But wait, we have prudent banks. Check out this gem:
"Last week this country’s largest home lender, the Commonwealth Bank, announced that it would allow mortgage customers to borrow up to 95 per cent of the 'value' of a property, up from 90 per cent."
http://www.smh.com.au/opinion/society-and-culture…
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March 8th, 2011 at 4:51 pm 166
Sometimes, I really hate to agree with Dave. When he says that there is no speculative flipping of land by developers, he probably is correct. Developers make more money off of adding value to the land, not off turning land over for a profit. There may be some isolated cases of developers sitting on land and flipping it for a profit a few years down the road but they are more likely not developing the land because they have failed to get permits or raised the necessary capital to develop the land.
The land costs are a small part of overall development. The profit from selling an entire building dwarfs what could have been made by selling the land. The same rules apply to developers as everyone else. If they flip the land, what will they build on? Unless they are getting out of the business, they need to have land to build.
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March 8th, 2011 at 5:08 pm 167
“Without daily numbers from Paul, this blog is toast. Larry isn’t as reliable at posting numbers. What happened to Paul, VHB?”
@vomitingdog:
I don’t think so, the numbers are great to have, but not essential to the success of this blog.
The nut bar/realtor/blogger/philosopher/ you follow is a perfect example of how the numbers don’t guarantee success.
Why is the nut case constantly and obsessively commenting here?
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March 8th, 2011 at 5:10 pm 168
@Dave:
“The carrot is getting the profit of development.”
Not when you have the expectation that prices will rise. Sure you could do *something* and generate *more* profit, or you could do *nothing* and still generate *some* profit.
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March 8th, 2011 at 5:16 pm 169
@Anonymous:
How is that a subsidy? It’s just a vacant chunk of land that isn’t being used. As long as they are paying something, it’s a subsidy to the municipality. They are taking money either way.
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March 8th, 2011 at 7:21 pm 170
@jesse:
But the second condition is tendentious and moot. Simply because of the physical constraints associated with developing RE – regardless of any restrictions imposed by government – growth of RE stock can never keep up with surges in demand to buy resulting from loose credit, in the short run. Anywhere.
That's why the argument is fundamentally flawed. He's claiming something that is true everywhere is a cause of something that doesn't happen everywhere.
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March 8th, 2011 at 7:31 pm 171
Don't confuse high prices AND high rents with high prices WITHOUT high rents, i.e. a bubble.
Cities which have restricted amounts of land available for development – whether due to geography or government policy – have high prices AND high rents relative to incomes.
I'll point out again that flat or declining real rents, as we have in Vancouver, are objective evidence that RE supply is not being restricted relative to demand.
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March 8th, 2011 at 8:27 pm 172
@patriotz: That is true with any good — production time is nonzero — however the time to market for new developments can vary by many months and that could be enough difference to affect demand buildup. I see a basic argument for faster response time leading to better price control; I have seen little indicating how much an effect it would have.
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March 8th, 2011 at 9:09 pm 173
#161 @lol cats: "wow, renters must be sitting on a giant pile of money waiting to swoop in and cash in"
Given up on that. Age 31, married with two kids under 3. Family finances coming under pressure. Expenses rising steadily, no wage improvement, job change imminent. We could be moving. Savings are a huge buffer but they're losing value. We're changing our plan and switching to active investment. Long term investment returns are priority #1, careers are #2, and Canadian real estate is off the radar.
Renting something acceptable is less than 30% of the cost of buying somebody's fucked up reno here in the Fraser Valley. Buying my current rental with cash would yield under 4%, a poor return for an asset that depreciates. Like it or not, houses are an investment and at these prices they are a poor one. They are also illiquid and the risk is extreme given our obscene levels of mortgage debt and leverage:
http://financialinsights.wordpress.com/2011/02/27…
No real problems here, but maximum uncertainty. It really shouldn't be this way, but people here are just house crazy. I've got a relative with multiple properties holding out for a return to peak prices in the interior, others nearing retirement and 500k in debt, and a young family with 3 properties. They paid off their residence and then bought two in a year.
So yeah, the market is hot. Buy and hold
People are playing monopoly with free debt. Thanks BoC!
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March 8th, 2011 at 11:08 pm 174
@jesse:The Gold Coast perfectly demonstrates the hazard of having a highly reactive supply of new buildings. Speculative demand (artificial demand, really, for a model that defines houses as imperative shelter to the degree that it can provoke massive price increases) directly caused massive over-construction. Patriotz has it right. And I think the proponents of paving the world (I believe that is their underlying mission) are ignoring inconveniently conflicting factors in constructing their model.
Beanie babies are a better model for an asset class in a bubble. Intentional shortage of a handful of designs feeds hysteria for the entire market. For reasons that must have to do with human psychology.
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March 9th, 2011 at 12:00 am 175
<<<<<I>>>>>>>>>>
@vomitingdog:
See what happens Vomitingdog, when you fall victim to a fast talking, snake oil pusher- you dumb down.
The point was, that some low lives have the daily numbers, but it doesn't attract much participation on their blog.
Why?
But if the numbers are that important to you:
Yesterday’s numbers:
New Listings 298
Price Changes 110
Sold Listings 168
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March 9th, 2011 at 12:48 am 176
@170 patriotz: Beat me to it. Another point is these effects have been relatively constant, already long priced into the market and hardly unique. Labour and safety regs, building codes, the permitting process; all factor into the the "inability of asset supply to quickly quench demand spikes." The parties behind this push are either dimwitted or have an agenda, I credited them with the latter.
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March 9th, 2011 at 2:11 am 177
i come here often just for the sanity check. most of you all…are the sanest people i know. thank you.
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March 9th, 2011 at 2:11 am 178
http://forum.skyscraperpage.com/showthread.php?t=…
Oh lawdy… keep your eyes peeled for news later today.
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March 9th, 2011 at 2:14 am 179
179 – From the article…
"The downtown Vancouver peninsula – which appeared headed for resort-town status, crowded only with residential condos…"
Finally, someone acknowledges that we are becoming a bloody Mexican resort town!
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March 9th, 2011 at 2:26 am 180
@Speaker Box: "someone acknowledges that we are becoming a bloody Mexican resort town!"
Maybe Spain's coastal resort cities is a better parallel. But sssssh, don't mention what happened to their prices.
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March 9th, 2011 at 2:35 am 181
Wow, almost all of Dave's comments have been voted off the island. I wonder why he bothers.
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March 9th, 2011 at 2:36 am 182
@jesse:
"But sssssh, don’t mention what happened to their prices."
Got any data? Here's what I found, for Malaga :
http://www.kyero.com/house_prices_per_beds/29-mal…
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March 9th, 2011 at 2:40 am 183
Good news, we aren't one of the 12 most over-priced RE market in the world according to The Economist, so everyone can take a breather and relax…..
http://www.vancouversun.com/business/business/440…
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March 9th, 2011 at 2:52 am 184
@Anonymouse: I guess figures lie and liars figure:
Spanish House Price Index – November 2010. I love the quote:
lol
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March 9th, 2011 at 2:53 am 185
27% of Canadians admit they are not well positioned to weather a housing crash.
http://www.cbc.ca/news/canada/british-columbia/st…
http://www.cnw.ca/en/releases/archive/March2011/0…
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March 9th, 2011 at 2:58 am 186
@Patiently Waiting:
I see you negated the headline of the article…
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March 9th, 2011 at 3:08 am 187
@Anonymouse:
I fail to see the point of your link.
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March 9th, 2011 at 3:13 am 188
@Patiently Waiting: What a stupid article. You know what, we also have the safest roads in the world because, when asked, 95% of people said they are above average drivers.
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March 9th, 2011 at 3:14 am 189
@Best place on meth:
That's a surprise.
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March 9th, 2011 at 3:17 am 190
@taylor192:
"Wow, almost all of Dave’s comments have been voted off the island. I wonder why he bothers."
Because he is a nut, with an obsessive compulsive disorder.
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March 9th, 2011 at 3:17 am 191
@Troll:
Also no surprise that dimwit #2 can't help out dimwit #1 with some clarification, just an idiotic and pointless retort.
Here, I'll help both of you dimwits out a little.
http://www.propertywire.com/news/europe/spain-ave…
Costa Del Sol prices down 27% from peak.
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March 9th, 2011 at 3:47 am 192
Its interesting that one of the main things the reporter did was look up the ownership of the crime scene when the owners weren't the victim or the accused:
According to land title documents, the house was purchased in 2005 by Henson, a teacher's assistant, and Donald Frank Frewing, a school administrator.
However, the house, which is assessed at $534,000, is now in foreclosure. Henson and Frewing appear to be having financial troubles — they owe more than $600,000, according to court documents.
Read more: http://www.timescolonist.com/still+shaking+distra…
Reading between the lines, though, it appears the house may have had a lot of criminal activity, and there is no way the owners couldn't know as they lived there.
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March 9th, 2011 at 4:14 am 193
@Patiently Waiting:
And 90% of the same respondents said that buying a house was a good investment, when in fact never before in Canadian history has buying a house been a worse investment, with the possible exception of the late 1920's.
These people simply don't know what they're talking about. The only people who are truly vulnerable to a housing crash per se are those employed in RE or who are RE investors. I think 27% is in the ballpark here in BC, but Canada wide it sounds too high.
And I don't expect a RE bust in Canada to have the same macro impact as in the US because our economy is much less dependent on domestic demand. Note I said Canada, not BC.
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March 9th, 2011 at 4:16 am 194
@Best place on meth:
"Here, I’ll help both of you dimwits out a little. Costa Del Sol prices down 27% from peak."
So if Vancouver is being compared to a coastal Spanish town, and coastal Spanish towns are down 27% from peak on average, where's Vancouver's 50-70% crash going to come from? Or is it different here?
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March 9th, 2011 at 4:23 am 195
@Anonymouse: No, it is NOT different here. Right now Van RE is just like Australia. If it drops 10-20% then it will be just like Seattle. If it drops 20-30% it will be just Spanish coastal towns. If it drops 50-70% it will be just like Phoenix or Vegas. If it drop 99% it will be just like Detroit. See? It really IS the same everywhere!
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March 9th, 2011 at 4:24 am 196
@patriotz:
That's my point. It's an opinion poll, nothing more.
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March 9th, 2011 at 4:27 am 197
@Anonymouse:
The bust in coastal Spain is far from over, the first reason being that the whole Spanish economy is still teetering on the brink, and the second being that the RE bust in the UK, where most of the money has been coming from, is far from over.
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March 9th, 2011 at 4:30 am 198
@Troll:
I guess you really meant "just like Seattle a year or two ago", since Seattle is now 27% off peak. And continuing to fall.
http://www.calculatedriskblog.com/2011/02/case-sh…
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March 9th, 2011 at 4:34 am 199
@Anonymouse:
Perhaps Vancouver's decline may never hit 50 to 70 percent, but
people forget that a 33% decline effectively wipes out 50% increase.
So even a 33% cut will hurt badly.
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March 9th, 2011 at 4:42 am 200
@kansai92: 70% down is a disaster. Wiping out a 50% gain though, is not at all unrealistic. The short lived 2008 "dip" alone was how much?
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March 9th, 2011 at 4:56 am 201
@Devore:
The 2008 dip was down 16%.
For the pair of dimwits, Spain, Phoenix, Seattle AND Spain are still falling.
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March 9th, 2011 at 4:59 am 202
@196 Troll Says:"If it drop 99% it will be just like Detroit."
Detroit dropped ~50%, no literacy points for you.
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March 9th, 2011 at 5:19 am 203
@Best place on meth:
"For the pair of dimwits, Spain, Phoenix, Seattle AND Spain are still falling."
Except your own link shows positive YoY growth in the Balearics markets.
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March 9th, 2011 at 5:22 am 204
To slide back on topic for a bit, there's a bit of information out there that vitiates the supply side argument, or at least as anyone might want to apply it to Vancouver. The data to follow isn't perfect as I suspect that the C.M.H.C. data represents Greater Vancouver and the B.T.A. Works research paper focuses on the downtown core. However, the two together give us a snapshot of the condo market here.
According to the C.M.H.C., Vancouver's rental vacancy rate rose from 1.9% in 2009 to 2.2% in 2010. That puts us below the national average of 2.9% but well above the lowest vacancy rates in places like Quebec City and Regina, 0.4% and 0.8% respectively. http://www.cmhc-schl.gc.ca/en/corp/nero/nere/2010…
In 2009, Bing Thom Architects created a research paper to assess the idea that a huge chunk of condos in the downtown core are sitting empty. They used data from a number of sources, including Hydro and BC Assessment to conduct a survey of about 10% of downtown condos. Their numbers are interesting, to say the least. http://www.btaworks.com/?p=148
First, they found that "only 5.5 to 8 percent of study condos were unoccupied.” They see this as low, despite their numbers running at least double the Vancouver vacancy rate. Even if the total unoccupied units sits at their low end of their assessment, Vancouver's downtown area is in the Abbotsford range (according to C.M.H.C. data), which sits at the high end of the vacancy spectrum in this country.
The most interesting part of the B.T.A. study comes from the bullet points part way down. "The majority of downtown condos are not owner occupied. The majority of non-owner occupied condos are owned by BC residents, with a scattering of foreign owners, predominately from the western US states such as California, Washington, and Arizona." What this says to me is that, at the time of this study, the average DOWNTOWN condo owner is local and a speculator. By no means do I suggest that this inference should be applied to detached homes. However, I would love to see a study on Vancouver detached to get a clearer picture of that part of the market.
What this information does for me is support the cheap debt hypothesis of Vancouver’s housing bubble. Tied in with Patriotz contention that real rents have remained flat, and one can only dismiss the argument from supply as it pertains to Vancouver.
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March 9th, 2011 at 5:45 am 205
@Urbain: It's interesting to look at Georgia as an example of what happens when lending goes awry. Krugman wrote on this:
Paul Krugman: Georgia on My Mind
It should be obvious the elephant in the room is debt, but in the case of Georgia prices never inflated state-wide. Nonetheless the fallout to their economy due to bad debts has been significant.
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March 9th, 2011 at 5:56 am 206
@jesse: The elephant is obvious to many, but there are still those who wish to stick their heads in the sand.
While I don't know much about Georgia, would I be correct to assume that Atlanta is the only city in the state where people would run up RE with cheap debt?
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March 9th, 2011 at 6:02 am 207
@Urbain: I don't know a lot about Georgia, but here's another city in Georgia:
Savannah Home Prices – Appreciation Rate
Looks bubbly to me… Atlanta is down 12% from its peak.
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March 9th, 2011 at 6:13 am 208
@jesse: Thanks for that info. I wonder how much of that is cheap debt and how much is the supply argument. I need to read more on the Texas situation to see how the tax setup there helped to avoid the bubble. It seems that Texas learned its lesson from previous experience. What's the definition of insanity… doing the same thing and expecting a different result. I guess Texas isn't insane with respect to RE bubbles.
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March 9th, 2011 at 6:36 am 209
@Urbain: Be sure to read the entirety of the comments here critical of the "supply side" argument. Much of Texas's so-called success in prices stability was arguably demand-side credit controls.
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March 9th, 2011 at 6:37 am 210
About the "Economist" article "12 most overpriced market in the world", a search leads me to the Vancouver Sun and other local Canadian newspapers, but not to the Economist. Any clue why?
About the video "Joe's Debt": Is that how the elite sees the average Canadian? Hopefully, we are not that dumb…
But, hey, who knows?
http://www.youtube.com/watch?v=djwp_PLt2nY&fe…
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March 9th, 2011 at 6:43 am 211
Fixie Guy says "Detroit dropped ~50%, no literacy points for you."
BPOM says "For the pair of dimwits, Spain, Phoenix, Seattle AND Spain are still falling."
Wow, talk about totally missing the point…..again. 0 for 50.
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March 9th, 2011 at 7:25 am 212
@jesse: wow, wow!!!! I'm just speechless after reading that. I honestly don't know what's appropriate response to that claim…..wow….
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March 9th, 2011 at 7:27 am 213
@Trollette:
"About the “Economist” article “12 most overpriced market in the world”, a search leads me to the Vancouver Sun and other local Canadian newspapers, but not to the Economist. Any clue why?"
http://www.economist.com/node/18285595?story_id=1…
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March 9th, 2011 at 8:44 am 214
[...] at vancouvercondo.info March 9th, 2011 at 5:09 am- [in response to a comment “wow, renters must be sitting on a giant pile of money waiting to [...]
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March 9th, 2011 at 9:01 am 215
@214 Anonymouse Says: The "Hong Kong phew-whee" article?
http://www.economist.com/node/18285595?story_id=1…
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March 9th, 2011 at 9:06 am 216
"A cautionary tale: How to go from billionaire to broke
Just because a bank will lend you the money, it doesn t mean you should take it"
http://ca.finance.yahoo.com/news/A-cautionary-tal…
Ms. Kluge spent her fortune grandly: on real estate, antique furnishings, spectacular jewels, foxes and hounds, the yoozh (that would be 'the usual' for those of you less refined).
This is the story of Rich Vancouver Homeowners in the developing stage.
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March 9th, 2011 at 9:10 am 217
@fixie guy:
"The “Hong Kong phew-whee” article?"
Yes. Hong Kong is top of the list, but the others get a mention to. You can even see Canada's position in the table.
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March 9th, 2011 at 9:14 am 218
I don't buy the argument made by demographia. A city they are big on is Calgary. But Calgary being a city that is open to development and less regulation is a myth. Just a couple of years ago huge swaths of land were bought by the city and sold to developers. the next 40 years of development will be on this land and individual buyers will be out unless they can convince one of the developers to let go of the land. How it works in Calgary is a new neighborhood is born and you have to buy a plot from a developer and pick one of a hand full of develoopers allowed to develop there. This does not sound unrestricted to me.
Meanwhile in Vancouver I am shocked with all the space found in the middle of the city. Land that for years was nothing but a small plot of trees is now developed, this is all over the greater vancouver area. It seems like every piece of land is fair game.
I think demographia has an agenda. It is simple loose credit drove this and psychology. Vancouver had both before every other market and the bubble just fed on itself.
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March 9th, 2011 at 9:18 am 219
About the Economist article:
To me that study does not make much sense when talking about France. There are many rules there to protect renters, like a cap on the rent increase. I know an older lady who rents a 2500 sqft apartment downtown Toulouse for $500 (market price: $2000). That's because she started renting more than 30 years ago. The apartment is worth a fortune, but the landlord could never kick her out (and he tried, believe me! The building was even sold, but the new landlord had to keep the renters). May be the price/rent ratio does not have the exact same meaning in different countries, so comparisons are not as valuable as it might first seem.
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March 9th, 2011 at 9:29 am 220
Question. How could Australia's inflation/interest rate be at 2.7%/4.75% and ours (Canada's) 2.3%/1% ?
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March 9th, 2011 at 10:05 am 221
@VanRant:
>>><<>>>>>>
Because we have a minority government, who tells the bank governor what to set the rates at to increase the probability of achieving a majority government, while the homeowner is still under the illusion of being wealthy.
The Bank of Canada Governor in theory is independent, but that is just a theory.
Please don't interpret my knock on the politicians as anti Conservative, the opposition would likely do the same.
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March 9th, 2011 at 10:10 am 222
This ad from Craigslist gives us another glimpse into the Vancouver economy and real estate industry.
http://vancouver.en.craigslist.ca/van/apa/2256972…
What I don't understand is if the place is being used as a grow-up why the need for renters. Moreover, if you were running a grow-up in a house, why would you want to rent it out and risk being found out?
Maybe the owners consumed a little bit too much of their own product.
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March 9th, 2011 at 10:22 am 223
@Keeping An Eye On The Pimps:
It's unlikely she was a billionaire to start with. She apparently borrowed less than $150 million for her grandiose projects. Why would you have trouble financing that debt if you're earning $1.6 mil a week in interest.
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March 9th, 2011 at 10:24 am 224
@oneangryslav2: The grow-op was probably busted and the owner is trying to hide that fact.
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March 9th, 2011 at 10:37 am 225
@chip: If you need to finance a $40 million project, $1.6 just won't do. So much easier to borrow, than to spend a chunk of your money.
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March 9th, 2011 at 10:54 am 226
I sense big sales numbers today. Too bad Paul doesn't have access anymore.
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March 9th, 2011 at 11:01 am 227
@218 other ted Says: "I don’t buy the argument made by demographia. A city they are big on is Calgary. "
Especially odd given in that degree and speed of 'bubbliness' the Teranet HPI shows Calgary trumps Vancouver.
http://img844.imageshack.us/img844/7460/201012ter…
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March 9th, 2011 at 11:03 am 228
The Economist should try comparing Hong Kong to other cities, not other countries.
For all intents and purposes it's just a city.
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March 9th, 2011 at 11:05 am 229
@Dave:
Nothing special for the 8th last day before the 35 year goes bye-bye.
Vancouver East & West*
New Listings – 102
Back On Market Listings -0
Price Changes -20
Sold Listings – 69
Vancouver All Areas*
New Listings – 312
Back On Market Listings – 0
Price Changes – 73
Sold Listings – 191
*Attached & Detached – Date: 03/09/2011 Time:18:50 Pacific YatterMatters.com:Courtesy REBGV. Data believed to be accurate but is not guaranteed.
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March 9th, 2011 at 11:06 am 230
#226 Dave Says: "I sense big sales numbers today."
Maybe you'll do better than those who claimed the Vancouver market was on fire in January:
http://www.vancouversun.com/business/home+prices+…
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March 9th, 2011 at 11:07 am 231
@Dave:
Yes Dave is right big sales day 325!
big list day as well 576!
price changes 235; 90% price reductions, most seller are getting the message the window is narrowing, and want out.
Even most underpriced are not getting the bidding frenzie the strategy once achieved.
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March 9th, 2011 at 11:13 am 232
I filled in the missing days of data using the 5-day moving average. What are you gonna do. Anyway, here are the projections given the data we have so far this month. Better than nothing!
March 2011 month-end projections
Days elapsed so far 7
Days remaining 16
5 Day Moving Average: Sales 187
5 Day Moving Average: Listings 324
SALES
Sales so far 1285.4
Projection for rest of month (using 5day MA) 2987
Projected month end total 4272 +/- 416
NEW LISTINGS
Listings so far 2275.92
Projection for rest of month (using 5day MA) 5177
Projected month end total 7453 +/- 523
Sell-list so far 56.5%
Projected month-end sell-list 57.3%
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March 9th, 2011 at 11:40 am 233
@VHB:
Good stuff VHB. Bring on the 18th.
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March 9th, 2011 at 11:45 am 234
@paulb.:
It might be a little flat for the month after, but I think you guys are putting too much hope into this change. It would be another thing if they increased the down payment requirements.
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March 9th, 2011 at 11:47 am 235
@VanRant:
Different people fixing the numbers?
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March 9th, 2011 at 11:51 am 236
@Keeping An Eye On The Pimps:
She'll find herself another rich old fool and have that winery running in no time.
Easy come, easy go.
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March 9th, 2011 at 12:12 pm 237
"Dave" up to his old tricks, posting from several computers.
I have to agree with the other bears, it's become too obvious, he is the nut case who messed up his blog big time, and now he is lost.
Sad, so sad he has so little else.
Vomit, be kind give him some attention,
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March 9th, 2011 at 12:25 pm 238
@Thurston Howell:
Project much 'Thurston"? You have been stalking me for years with that accusation.
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March 9th, 2011 at 12:31 pm 239
@Anonymous:
At least this is a new one and keeps it interesting.
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March 9th, 2011 at 4:33 pm 240
@Thurston Howell:
'“Dave” up to his old tricks, posting from several computers.'
Evidence?
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March 9th, 2011 at 8:25 pm 241
http://www.mortgagedave.ca/
buy before its too late!
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March 11th, 2011 at 5:24 am 242
[...] at vancouvercondo.info March 8th, 2011 at 9:19 am- “There is a suite for sale in my building for $310K. 10% down for 30 years @ 4% is $1300/mn [...]
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March 13th, 2011 at 6:51 am 243
[...] Kanuk at vancouvercondo.info March 8th, 2011 at 12:28 pm- “Texas is a subject near and dear to my heart. I lived in Houston for 5 years (left about 6 [...]
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