TD: Vancouver house price to drop $133,400

Sensational headline no? Here’s the deal: The REBGV benchmark price for a Greater Vancouver house is $901,680. TD Bank economists have just released a report in which they predict Vancouver house prices to drop by a remarkably precise 14.8% in the next two years. Based on the current benchmark price for a detached home that would be a loss of $133,400.

Now I know that for most of you $133k is nothing, but for some of us that’s real money.

“A combination of more subdued job and household income growth, rising interest rates, the recent tightening in borrowing rules for insured mortgages and fewer first time home buyers are expected to be the chief culprits behind the slowdown,” TD says.

Vancouver’s real estate market will fare the worst in the next two years. TD predicts a 25.4-percent peak-to-trough decline in sales and a 14.8-percent pullback in prices by 2013.

Of course everyone knows that different housing sectors drop at different rates and TD is predicting the worst carnage in the Condo market. What do you think will suffer the largest price drops – west side houses or east side condos?

Hat-tip to Real Professional for the link.

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Van MD
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Van MD
This is big news coming from a mortgage lending institution! so these are what I did in the last half hour: 1. emailed my boomer dad (who's selling the house in AB and contemplating buying vs renting in BC) 2. posted on facebook 3. spammed on the Mainland Chinese internet forum, in a thread started 3 days ago to poll the forum users what their predictions are for Canadian housing price (more specifically Van + TO) in the half year starting July 1st, ending Dec 31st, 2011. Currently 11% says "large increase",16% "mild increase", 11% "steady", 43% "mild decrease", 14% "crash", 5% "I'm the government so I won't tell you" http://translate.google.com/translate?js=n&pr… I have also taken the liberty to re-post yesterday's PaulB stats elsewhere on the forum, just to pierce some of the shroud the realtors are casting in that forum.… Read more »
CanuckDownUnder
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CanuckDownUnder

One of the big 4 banks in Australia just put out a prediction that prices here will fall a massive 1.4% in the next 12 months. Of course the market has already turned, prices were down 2.7% over the first five months of 2011.

And now one of the country's major retailers, David Jones, warned of an "unprecedented" slump and forecast that Q1 sales this fiscal year will be down 15 to 20 per cent! This is a sector wide problem, retail is dead now that there's no more increasing paper equity to draw from.

http://www.smh.com.au/business/unprecedented-slum

This market is toast, the only question now is how far and fast prices fall.

Anonymous
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Anonymous

Unfortunately many will think it's a buying opportunity and get into a lifetime of debt.

Alum
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Alum

Good luck with that. I don't buy this bullshit.

where else would you park your money (TM) ?

Anonymous
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Anonymous

Sale/list 32% !!

New Listings – 259

Back On Market Listings – 5

Price Changes – 102

Sold Listings – 83

*Attached & Detached – Date: 07/13/2011

gordholio
Member

VanMD: Can you translate stuff? My Cam Good rebuttal in The Sun a couple months ago would look pretty good over there in the mainland Chinese forum.

Here's the link:

http://www.vancouversun.com/business/Vancouver+re

whydoItry
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whydoItry

What's interesting is who they chose to deliver the TD prediction. One of the authors of the report, but not the lead economist. TD has learned their lesson when it comes to predictions. Better to have a newbie take the hit for the team, than the senior economist if their prediction is wrong – as most predictions can be. This is mostly just a "trial balloon" to see the reaction by the public. If it is favorable to TD, then the lead economist will come out of hiding to take the bows. I hate chicken shit economists.

observer
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observer

This is like Carney telling people to take it easy on the debt while keeping a ZIRP. Or saying a ball that goes up has to fall down. Likely the correction will be bigger, simply because people don't have a good grasp of what debt bubble is, so what has to happen is for the bubble to simply get out of control until is bursts (out of control).

YLTN @ Work
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YLTN @ Work

The TD report made the financial post:

http://business.financialpost.com/2011/07/13/hous

And they used Vancouver + bubble in the same sentence…finally!

WFT?
Guest
WFT?

@YLTN @ Work:

Doug porter, BMO economist called

Vancouver a bubble on BNN a couple of weeks ago. It is no longer seriously questioned than van is in a bubble. Only ideological bulls say otherwise. Bit ther are thousands of ideological bills in Vancouver.

patriotz
Member

@Anonymous:

Unfortunately many will think it’s a buying opportunity and get into a lifetime of debt.

When you get to a market top there aren't "many" left to buy. That's why it's the top.

On the way down the number of new buyers made possible by lower prices is outnumbered by speculators bailing, and later by foreclosures. That's what keeps the ball rolling.

space889
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space889

If you @Van MD: If you want to really get the word out to the Chinese buyers, especially those HAM, try the forums in http://www.vansky.com, http://www.westca.com, http://www.van001.com

Good luck with it, the layout are so crammed with links and such it gives me a headache everytime I try to read it.

Patiently Waiting
Member
Patiently Waiting

Pro-renting article in a Canadian business magazine:

"The belief that we’re not responsible adults until we own our home, whether or not we can afford it, has distorted and stigmatized the cheaper and safer alternative: renting. And we’re literally paying the price."

http://www.canadianbusiness.com/article/33638–re

Devore
Member
Devore

@CanuckDownUnder: So, sell Canadian discretionary retail? 😉

gordholio
Member

#10, WFT: And let us not forget all of Canada was deemed to be in a "bubble close to bursting" in this CBC headline of two weeks ago:

http://www.cbc.ca/news/business/story/2011/06/29/

It's all in the perception.

Troll
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Troll

@patriotz:

On the way down the number of new buyers made possible by lower prices is outnumbered by speculators bailing, and later by foreclosures. That’s what keeps the ball rolling.

It's a nice theory and sounds good. Too bad it was invalidated as recently as the 2008 fall price freefall when buyers jumped back in when affordability improved through lower rates.

WFT?
Guest
WFT?
taylor192
Member

I love some of the comments on the predicted 25% decline: "It'll just bring prices back 2 years, the majority will be fine".

Their math is wrong. A 15% decline is equal to a 20% gain and would bring prices back 3 years, more on condos that haven't kept the pace of gains of SFHs.

patriotz
Member

@Troll:

Too bad it was invalidated as recently as the 2008 fall price freefall when buyers jumped back in when affordability improved through lower rates.

Lowing interest rates moves the goal posts and allows a new cohort of buyers to enter the market.

There is nowhere to move the goalposts this time.

Troll
Guest
Troll

@patriotz:

Lowing interest rates moves the goal posts and allows a new cohort of buyers to enter the market.

There is nowhere to move the goalposts this time.

Lower prices also move the goalposts (affordability), that's my point. Get it?

A non mouse
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A non mouse

"According to Melbourne, he used to rent outside the Olympic Village and paid about $60 a month for his energy consumption.

“Now it takes me $140,” Melbourne said of his B.C. Hydro and Enerpro bills. He noted that it’s the first time he’s ever had to pay for cold water."

http://www.straight.com/article-403554/vancouver/

Sorry if this was already posted…

Not to harp on the Olympic Village debacle continuously, but does a 140$ a month for utilities on a condo not seem ludicrous? It never mentions the square footage, but even a 2 bedroom 1000sqft wouldn't cost close to that in a normal development.

jesse
Member

@Troll: "Lower prices also move the goalposts"

Lack of income gains, borderline incompetent fiscal management through negative cash flow investing, and banks refusing to lend even with low rates, all move the goalposts back.

It's not just about affordability. Ask people south of the line.

jesse
Member

@A non mouse: I blogged about a previous article here. That development's infrastructure will be a millstone for decades to come.

patriotz
Member

@Troll:

Lower prices also move the goalposts (affordability), that’s my point. Get it?

What you don't get is that busts happen in spite of this. That's no theory, that's the plain truth. Everywhere.

Now why don't you come up with a theory for this, if you don't like mine.

Best place on meth
Member
Active Member
Best place on meth

@Patiently Waiting: #13

Nice hat-tip to VREAA in that article.

“There’s always been a high home-ownerships rate here, but through this recent mania, the stigma on renting has grown more extreme,” explains the Vancouver Real Estate Anecdote Archivist (VREAA), a blogger who’s tracked the housing run-up since early 2008 (and whose unpopular opinions have led to a carefully guarded anonymity). “It’s very [common] for renters to go to a barbecue and feel sheepish when they speak to the brother-in-law or colleagues. And if you claim online that you can afford to buy but choose not to, you’re jeered as clearly lying.”

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