Vancouver drug economy and house prices

How much does the drug economy in Vancouver drive up prices? I was sceptical about it’s impact until I read this recent article in Vancouver Magazine:

Cam Hui was stunned when he moved back to his hometown after a stint on the East coast. “This city is not overrun with the super-rich,” he says. “But you can’t get into the Vancouver West Side for less than $1.5 million for something that’s not falling down.” In Stamford, Connecticut, where Hui, an investment counsellor, lived previously, prices were just as high. But there it was understandable. The place was infested with people working in the investment business. Stamford has the head office of GE Capital, and, with Swiss bank UBS, the world’s largest trading floor.

Hui doesn’t see that level of financial activity here; nor does he buy the standard explanation for Vancouver’s real-estate prices: that offshore investment or Asian money is largely responsible. In a private blog, he argues that there has to be a connection to the drug industry. “And just putting my economist’s hat on, if it winds up back in the local economy, it creates inflation.” He, by the way, has not bought here because Vancouver’s market is so crazy. He rents instead.

Read the full article here.

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Anonymous
Anonymous
9 years ago

"The question is what makes Vancouver prices so much more expensive than these other cities if it’s subject to the same speculative influences."

You can look at the US and not everywhere was subject to the same level of a bubble even though the same speculative influences were nation wide. Phoenix, Miami or Las Vegas are to the US what Vancouver is to Canada.

Anonymouse
Anonymouse
9 years ago

@cgh:

Most people don't read the Economist.

Keeping An Eye On Th
Keeping An Eye On Th
9 years ago

http://www.bclocalnews.com/vancouver_island_south

"We saw a 39-per-cent drop in housing starts in Greater Victoria. … As a result there's been a significant drop in price as well."

But you better hurry the expert say:

he said. "It's certainly a good time for consumers to be looking right now because people are caught up in the HST issue thinking that they're going to save money if they wait for another year or two."

Maybe this pimp expects lot of drug dealers to move to Victoria.

ReadyToPop
ReadyToPop
9 years ago

Sales of the CMHC’s mortgage insurance fell by 10% immediately after the changes were introduced, though they have regained some ground since then.

According to the CMHC, these numbers show it’s doing a good job of maintaining a healthy, sustainable housing market.

But Finn Poschmann, vice president of research at the C.D. Howe Institute, is skeptical. “The size of the drop in refinancing is surprising to the point of shocking,” Mr. Poschmann said in an email. “You could hardly have better evidence of the extent to which CMHC practices have been supporting high debt and risky borrowing by homeowners.”

 Did CMHC support risky borrowing?

cgh
cgh
9 years ago

@Anonymouse:

How does your "wager" refute the international sources I gave? I couldn't post all the urls because of the spam filter, but any city whose gang problems make The Economist is internationally known for such, by definition. Or do you think Sicily or other cliched locales made famous by the movies are the only ones that count?

chip
chip
9 years ago

@patriotz:

"Vancouver RE prices started falling rapidly in 2008, at the same time as Toronto. Calgary and Edmonton had started falling in 2007."

Not sure anyone is arguing that Vancouver is immune to the same cycles as other Canadian cities. The question is what makes Vancouver prices so much more expensive than these other cities if it's subject to the same speculative influences.

On a separate note, the Economist has apparently gone sour on our dear city, dropping us to third place of the world's most liveable cities, the first time we've dropped in almost a decade.
http://www.theaustralian.com.au/business/economic

Space889
Space889
9 years ago

@Patiently Waiting: Wow, thanks for the info. I never knew it can be so common for grow ops in rental. I would think most landlord would do inspection an maybe do anonymous tip to police for possible grow ops, to protect their investments.

painted turtle
painted turtle
9 years ago
Keeping An Eye On Th
Keeping An Eye On Th
9 years ago

It has to be the drug dealers and that slutty Tooth Fairy.

It can’t be the Real Estate Cartel, and a pliant media.

Or teaser mortgage rates, less than the rate of inflation, cash back mortgages, or mortgage brokers who specialize in creative writing.

And it can’t be the madness of the crowds, because humans are rational beings that never fall for the greater fool theory, no it can’t be.

It’s the drug dealers.

Anonymous
Anonymous
9 years ago

"Will be interesting to see ifnwe hit 18000 next month!,,,,,"

not likely at the rate things are going

been stuck below 17k for a couple of months now, right?

nice if it happens, but i really doubt it

Li Kai Shing
Li Kai Shing
9 years ago

Meth man like Pillsbury Dough boy…he is on a roll !

Best place on meth
Best place on meth
9 years ago

My god, it just hit me.

Wasn't it during the summer of 2008 when drug activity mysteriously stopped completely in Vancouver and didn't return again until the spring of 2009?

Also the same thing happened in 1980 and 1989 if memory serves.

Yes, I'm sure that's how I remember it happening.

/s

Best place on meth
Best place on meth
9 years ago

No wait, wait….scratch that – it just occurred to me that Afghanistan has incredibly sky-high real estate prices. So high that the Chinese are starting to take notice and buy there because you know they only like to buy things that are really, really expensive.

So it must be the drug economy after all.

/s

Best place on meth
Best place on meth
9 years ago

This drug economy must be something new in BC, because real estate did jack squat in the 90's so I guess there was no drug economy way, way back then.

Yep, this huge-ass drug economy must have just started in 2002, right around the time interest rates started to fall.

/s

bubba
bubba
9 years ago

Vancouver is injection point for the global enema.

We turfed our Ports police, did we not?

The whole ponzi scheme that is Vancouver is set up as $$$ laundry, "legal" via HAM …….or otherwise.

The higher ups don't give a shit, other than the odd token arrest and oft delayed prosecution.

F*ck the system, like meth man implies, time for the implosion so we can start over.

Romeo Jordan
Romeo Jordan
9 years ago

Thanks PaulB

Will be interesting to see ifnwe hit 18000 next month!,,,,,

Not much of a name..
Not much of a name..
9 years ago

@vreaa: Just like it was stated earlier. The drug is being supplied by the BoC and CHMC. It's called debt!

vreaa
9 years ago

@patriotz: "I guess you could find some way to explain this incorporating drug money or some other occult source, or you could just come to the obvious conclusion that the marginal buyer in all Canadian markets is using borrowed money."

Bingo.

Why do we have to make it so complicated when the last ten years of price action is explained COMPLETELY by a debt-fueled speculative mania? Occam's Razor

paulb.
paulb.
9 years ago

New Listings 194

Price Changes 95

Sold Listings 106

TI:16492

http://www.laurenandpaul.ca Check out our website for more stats

http://tinyurl.com/paulandlauren Like our Facebook page 🙂

ReadyToPop
ReadyToPop
9 years ago

^^ I enjoyed the last paragraph the most…. 🙂

Some are investors, betting the market will keep overheating. Many are simply people who buy beyond their income level, believing the housing market is worth betting on. Prices keep going up because they’ve all become part of a Ponzi scheme, betting that the next set of buyers will make the same calculation they did in deciding to get into the game. It doesn’t take drug money to drive up housing prices. It just takes buyers who act like they’ve been smoking too many funny little cigarettes.

patriotz
9 years ago

Vancouver RE prices started falling rapidly in 2008, at the same time as Toronto. Calgary and Edmonton had started falling in 2007.

This drop continued until the huge reduction in interest rates at the end of 2008, and all Canadian RE markets rose in 2009, including some which had not seen a large rise or decline previously.

Now I guess you could find some way to explain this incorporating drug money or some other occult source, or you could just come to the obvious conclusion that the marginal buyer in all Canadian markets is using borrowed money.

Including in Vancouver.

jesse
9 years ago

@Anonymous: "And it was the same size with the same housing requirements 15 years ago too – pre bubble."

No because all drug dealers want to live in Vancouver… now. It makes total sense when you think like a criminal: hey, I need to grow some dope and export it to the US. Why not… buy a house in the continent's most expensive market and make drugs in the basement? The higher the price the better because I have so much money to launder. Oh yeah, and Vancouver real estate only goes up.

Anonymous
Anonymous
9 years ago

"Vancouver is a special economic drug zone"

Yes sure. I am picturing the Vancouver drug kingpin. The Bacon brothers living in their parents Abbotsford basement suite. Now picture a Miami drug kingpin. Scarface with water front property, a jet and a boat on his private dock. Yes Scarface was a movie but Vancouver drug dealers are small time compared to other centers.

Anonymous
Anonymous
9 years ago

"Drugs are a $7 billion dollar industry which uses RE for production"

And it was the same size with the same housing requirements 15 years ago too – pre bubble.

Devore
Devore
9 years ago

@N: Well, insurance companies know where the grow ops are, they are so sure they will decline insurance (and what reason would they give?), but the police do not. Perhaps they are on the take?

I know there is a drug industry in Vancouver. There is in every city and town. Lets not blow things completely out of proportion with hysterics, whether it's drugs or HAM.