Crashing the Market in China

Remember when they dropped prices at the Olympic Village by up to 50% and presales buyers got upset? At least they didn’t trash the sales office.

..the properties owners have not even taken the delivery of the properties (as they were pre-sold), but the latest “group-buying” offered a 30% discount to latest buyers. The properties owners were angry because they haven’t even got the properties … As a result, they went to the sales office last Saturday to demand a refund for the amount they lost, and they damaged the sales office in the process.

Reminds me of that Gem out of the states when a developer slashed prices on a partly pre-sold development. “They promised us they’d never sell for less than market value!”

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VMD
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VMD
October Sales / New Listings – Ratio 2011 – 2500-2800 / 4500-4800 ~ 57%? 2010 – 2337 / 3698 = 63% 2009 – 3704 / 4977 = 74% 2008 – 1364 / 4867 = 28% 2007 – 3028 / 4819 = 63% 2006 – 2722 / 4862 = 56% 2005 – 3099 / 4041 = 77% 2004 – 2734 / 3703 = 74% 2003 – 3765 / 4200 = 90% 2002 – 2866 / 3535 = 81% October Total Inventory / MOI 2011 ~ 16700 / ~6.3 2010 – 14075 / 6.0 2009 – 12084 / 3.3 2008 – 19257 / 14.1 2007 ~ 11500 / 3.8 2006 ~ 13000 / 4.8 2005 ~ 10000 / 3.2 It appears this October's [Sale/New Listing] Ratio may become the 2nd-3rd worst of the last decade. It also appears that both Total Inventory… Read more »
paradox
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paradox

Prices started to decline in 2008 with an inventory of 19257. We are now at 16700 and have possibly peaked.

I see more stagnation ahead. This market is so resilient and nobody can come with a good explanation so far as to why we are holding so well.

registered
Member
registered

FTA; "…when the market is up, they embrace capitalism, while when the market is down, they embrace socialism."

It's going to be lawn chair and popcorn time when the Vancouver market screws them over. Welcome to the risk side of capitalism.

mikoyan
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mikoyan
it's not pretty in Ireland Oct. 25 (Bloomberg) — Irish house prices fell in September from the previous month as a four-year property slump persisted, the Central Statistics office said. Home prices declined 1.5 percent from August and dropped 14.3 percent from a year earlier, the Cork-based statistics office said in a statement on its website today. That compares with an annual drop of 13.9 percent in August. Irish house prices have fallen 44 percent since peaking in 2007 as the ending of a decade-long property bubble was compounded by the global credit crisis and tighter lending criteria by banks. Ireland’s economy contracted about 15 percent in that period and unemployment almost trebled. “Given weak labour market conditions and the continuing lack of available bank credit, it is hard to be optimistic on the prospects for the property market in… Read more »
Boombust
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Boombust

"This market is so resilient and nobody can come with a good explanation so far as to why we are holding so well."

Those numbers do not account for the HUGE shadow inventory that is lurking on the sidelines.

This BOOM is now going bust. It ALWAYS happens that way.

patriotz
Member

"as the ending of a decade-long property bubble was compounded by the global credit crisis and tighter lending criteria by banks"

As if the latter were not the direct consequence of the former.

Runawayscreaming
Guest
Runawayscreaming
I suspect that there may be some wishful thinking that a real estate crash in China will somehow stop the Chinese from purchasing Vancouver. Falling prices will affect the little people in China who got hoodwinked into taking on more debt than they can handle. However, the upper class Chinese scoundrels who are absconding with money to purchase Vancouver real estate will not be as affected and there is no reason to believe they will not continue the flight of capital from China at the same rate or an even greater rate. No matter what happens to real estate, the disparity between the working class and the rich upper class in China will continue to grow and the super-rich in China may continue to seek safe havens like Vancouver where they are welcomed with open arms no matter what type… Read more »
space889
Member
space889

@Runawayscreaming: Well the good thing is that the actual number of super rich are fairly limited and they aren't being generated at the same rate as before. So you are probably getting 1 new one for each 2 or 3that buys here or elsewhere.

space889
Member
space889

You guys can thank Groupon for the group buying discount crazy in China right now, which included the discount on condos in this story.

Manna from heaven
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Manna from heaven

http://www.vancouversun.com/life/Business+growth+

That's what happens when you drive out the middle class folk.

space889
Member
space889

Well Vancouver Sun has followed up yesterday's article on rent vs own with another great one, rental options as advertised by landlords in Greater Vancouver.

http://www.househunting.ca/vancouversun/homes/559

Not seeing a lot of budget friendly family accommodations though. Note I said budget friendly.

Ziggy Strawdust
Guest
Ziggy Strawdust

@Runawayscreaming: I don't know what income level your at, but if it's less than a few hundred thousand a year what do you care what homes the wealthy are buying? Do you really think its rich Chinese bidding up the price of tear downs in east van and condos across the city?

Troll
Guest
Troll

@Boombust:

Those numbers do not account for the HUGE shadow inventory that is lurking on the sidelines.

Nonsense. You want a 'shadow' inventory, take a look at the US where thousands of properties are being held off the market. THAT's shadow inventory.

space889
Member
space889

Well this Vancouver Sun article states that City of Vancouver only added about 86K+ people and 45K homes between 1998 to now. That's not a lot of people but a lot of houses!

http://www.vancouversun.com/life/Business+growth+

Troll
Guest
Troll

@VMD: Certainly not a strong October, but not particularly weak either since sales are holding up well, stronger than last year. Expect continued stagnation, with some areas up and some down. Short of an external shock (rate hikes, unemployment) which would force an increase in desperate 'must sell' listings, the key right now is how many sellers are stepping up to absorb inventory. Looks like they are continuing to do so, to the bears continued shagrin.

Troll
Guest
Troll

http://www.acornhomes.com/whatsnewdisplay.php?new

ACORN HOMES GUARANTEES YOU OUR LOWEST HOME CONSTRUCTION PRICING. IF PRICES ARE REDUCED, UP TO ONE YEAR AFTER OCCUPANCY OF YOUR HOME, YOU WILL BE REFUNDED THE DIFFERENCE.

Followed by this gem….

*Prices subject to change without notice.

patriotz
Member

@Troll:

Note "construction pricing". When property prices fall, almost all of the fall is in the cost of the land, not the structure.

Alum
Guest
Alum

Bank of Canada today announced keeping interest rates unchanged.

This would maintain RE prices in Vancouver at current levels and prevent a slowdown in housing.

Yalie
Guest
Yalie
@Troll: Expect continued stagnation, with some areas up and some down. Short of an external shock (rate hikes, unemployment) which would force an increase in desperate ‘must sell’ listings, the key right now is how many sellers are stepping up to absorb inventory. Ah yes, the old "external shock" theory. What a load. What you don't seem to get is that "must-sell" situations don't happen because of external events, they happen because even at low rates, there is still a limit to the amount a debt a person can handle. And we have collectively reached that limit. As someone who has experienced the crushing effects of overwhelming debt more recently than I care to remember, I know first-hand that no external shock is necessary for the walls to come crashing down around you. All that is needed is time. Once… Read more »
jesse
Member
@Troll: "the key right now is how many sellers are stepping up to absorb inventory" Part of this is an absorption of in-migrants from the past few years who have decided to permanently settle. If the population growth numbers continue a downwards trend I'm expecting lower sales into 2012 and 2013, and potentially higher inventory. Here are some numbers: Q1 Net International average 1992-2010: 9905 Net International average 2003-2010: 10858 Net international 2011: 7049 Net pop growth average 1992-2010: 13939 (1.6% YOY) Net pop growth average 2003-2010: 14279 (1.3% YOY) Net pop growth 2011: 9211 (1.1% YOY) Q2 Net International average 1992-2010: 10270 Net International average 2003-2010: 11024 Net international 2011: 9525 Net pop growth average 1992-2010: 16691 (1.6% YOY) Net pop growth average 2003-2010: 17135 (1.3% YOY) Net pop growth 2011: 12281 (1.3% YOY) Q3 Net International average 1992-2010:… Read more »
Troll
Guest
Troll
@Yalie: What you don’t seem to get is that “must-sell” situations don’t happen because of external events, they happen because even at low rates, there is still a limit to the amount a debt a person can handle. And we have collectively reached that limit. What, you don't seem to get is that argument has been used for almost 5 years now, so clearly it's not reflective of reality. But keep sticking to your dogma. Of course longer term, all that debt will have to be unwound and we'll have to return to some sort of fundamentals for VanRE. But my point, which you can't seem to grasp, is that I wouldn't expect much of a change for the next while since there doesn't seem to be much downward pressure on prices. Things will keep on keeping on until we… Read more »
Yalie
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Yalie

@Troll:

Things will keep on keeping on until we see some significant change in owner’s ability to service their debt or the pool of buyers dries up. There seems to be no indication of either right now.

You don't consider the highest consumer debt levels in all of recorded history to be indicative of a "significant change in owner's ability to service debt"?

What do you think people are doing with those extra credit cards, LOCs, and "debt consolidation" loans? They're paying off other debts.

Have a look at Greece if you want a sneak peek at how well that particular strategy is likely to work out over here.

gordholio
Member

18 Alum: Uh…sure. Because, as we all know, a comparatively low Bank of Canada interest rate is the *only* thing that matters. Spiraling cost of living doesn't matter. Record per capita debt loads don't matter. Mortgage restrictions don't matter. As long as the BoC interest rate remains unchanged, we can continue to boast one of the biggest, fattest, sloppiest, most hurtful housing bubbles on the face of the earth.

Just look at the US for unquestionable proof. Interest rates down there also remain ridiculously low and their bubble is just as juicy and inflated as it was in 2005.

Oh wait. It completely and totally deflated? Leaving a ruined country and destroyed families in its wake? You can buy a nice house in Scottsdale for a sixth of the price of a nice house in Vancouver? Never mind.

Benny Wang
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Benny Wang

@Troll: can I ask what you think the "external factor" was that caused prices in US bubble markets to drop?

kits college girlz
Guest
kits college girlz

Yup, and Shiller chimed today there is no bottom yet in US housing.

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