10 reasons the top is in for Vancouver real estate

Whistler or bust? posted this list of reasons they think the top is in for the Vancouver real estate market. What do you think? 

10 Reasons why am I calling a top now

1. Vancouver Real Estate has finally gone parabolic. It has gone from years of above average price increase to massive never before appreciation. No asset class that I am aware of has ever gone parabolic or hockey stick on a chart and not had a major crash. Not tulips, oil or tech stocks. This is textbook classic top – Greed has replaced Fear and it’s different this time for ______ and _______ has replaced rational thinking.

2. Panic buying and large price increase have spread to the distant suburbs such as Maple Ridge, Places where there is plenty of buildable land and lots of new inventory. Places are going multiple bids in average neighborhoods. People genuinely think if they do not buy now they will be priced out forever.

3. Real Estate prices in the vast majority of BC are flat to down. Its as if the Lower Mainland is an island onto itself. These are areas not affected by HAM or DAM so it better reflects the current economic fundamentals of the real estate.

4. The Canadian and BC economy is weak. There is risk that the spill over of falling oil prices will spread to Vancouver. This can be in the form of layoffs at West Jet or the CIBC because they have to cut costs due to losses on loans to oil companies. This is a bigger thing than many people think. 

5. Construction is the only growth industry we have and it accounts for 10-15% of BC’s economy. This is way beyond historical norms and way beyond what it should be based on the number of annual new arrivals to the Province. It is being driven by speculation.

6. A significant number of properties (of all types) have been purchased with dirty Asian money and/or hot Asian money and sit empty. These have been taken out of the rental and sales pools putting temporary artificial pressure on prices. I believe these account for far more than the 5% the spin doctors who benefit from the continued inflation of the bubble.

7. People are finally waking up to the effect of foreign buying and demanding change. There have been multiple sources siting the 5% number as a joke. The people are demanding change and the Gov’t is being forced to take notice. Not a day goes by without another article on empty houses, Asian money laundering, rents going up, houses being demolished and the like. This effect will continue to grow until political pressure will force change

8. Prices are dropping hard in other HAM and DAM places like Australia Singapore and HK. These bubbles were inflated first so its’ logical that they will pop first.

9. Price to rents, Price to income, and any other measure to gauge the valuation of our real estate is now well above the highest levels ever recorded. Its go beyond stupid to utterly absurd. I generally believe people will look back in 5 years and ask “what the hell were we thinking”

10. Capital Controls – Many exports feel that China will be forced to install capital controls in 2016 and stop the annual $50,000 per year allowance. While people will still find ways to smuggle money out of the country it will be much harder and much more expensive.

11. Bonus Reason! – Vancouverites are utterly giddy and euphoric about the state of Real Estate prices in Vancouver. There is zero fear of a correction or a downturn with most forecasting (in a survey) returns of high single to low double digit returns going forward. They are forgetting that at no time in history has real estate run up this fast. They are too busy crowing about how smart they were to buy and how everyone else should buy too or be priced out forever.

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dyugle
dyugle
4 years ago

To all the bulls the simple question is when do you sell? Real estate is highly illiquid and can go no bid really easily. So the obvious answer is to sell before the market peaks and the number of potential problems seems insurmountable. Well that appears to be this years spring market given the 10 reasons above and the lack of room to drop interest rates. Remember that to be all in real estate you would have flipped your way to a large point grey house and multiple condos or smaller houses in the burbs. You would have extracted as much equity as possible from each house as the equity becomes available from the rising market and used that to buy other houses or trade up your principal residence. All the while keeping the absolute minimum in equity in each… Read more »

Lurker
Lurker
4 years ago

Oh so you’re the guy that posted this on GreaterFool too.

Everyone of these reasons is garbage. You’re right there’s a bubble but not a single one of these is a valid reason for the top. You’re just re-iterating the same shit people have said for a decade: Vancouver is expensive.

UBC in Crisis Mode
UBC in Crisis Mode
4 years ago

The top won’t be reached for a few more years at least (yeah, crazy!).
1. more money flows in from China, capital control or not, the bank (HSBC, CIBC) will help;
2. HAM started selling to late comers a while ago and Van West / West Van are hot:

4688 W. 6th Ave. Vancouver: sold for $2,355,000 in 2014
now listed for $3,688,900

4028 W. 11th Ave. Vancouver: sold for $2,301,000 in 2014
now on listed for $5,696,000

southseacompany
southseacompany
4 years ago

“Home prices in central Hamilton rose 88 per cent in 10 years”, CBC News

http://www.cbc.ca/news/canada/hamilton/news/home-prices-in-central-hamilton-rose-88-per-cent-in-10-years-1.3430479

“Home prices in central Hamilton have risen by the largest percentage of any sub-region in the Hamilton and Burlington region in the past decade, according to numbers from the Realtors Association of Hamilton-Burlington, which keeps the official stats. “

Spec
4 years ago

Yes. HAMilton’s on fire. Must be all that foreign money. Wait….. no HAM there? Why the massive appreciation? Could it be something else?

wwwwww
wwwwww
4 years ago
Reply to  Spec

wow, yeah. i guess that really casts doubt on the whole HAM hypothesis. the only way HAM could possible be real is if a neighbourhood in vancouver was up even more than central hamilton. 88% is a lot. so what are the chances of that? thankfully we don’t have to guess or speculate because the REBGV publishes the stats.

west side houses in vanocuver are up twice as much as central hamilton. 166% in 10 years.

looks like HAM is still real.

Many Franks
4 years ago

B.C. budget to address Vancouver’s hot real estate market The B.C. budget of Feb. 16 will include a double-barrelled response to Metro Vancouver’s superheated real estate market, Finance Minister Mike de Jong says. “The conversation has tended to be about pricing,” Mr. de Jong told reporters on Thursday. “If all we do is help increase the number of people getting into the market without increasing supply, we’ll probably have the opposite effect and drive up prices.” The province has been under pressure to impose measures to cool down the market. Mr. de Jong has already said he is looking at overhauling the property-transfer tax. The province is likely to raise the threshold for tax exemptions – and pay for the change by adding a new, higher tax rate for the most expensive houses. Mike de Jong is of course right… Read more »

Ulsterman
4 years ago

You logic is good but logic in this market as we all know, counts for squat. Just today a good friend of mine secured the sale of his parents’ house in british Properties. It’s a 25,000+sqft lot with a view, so is desireable. 2014 assessment = $2.5m. 2105 assessment = just over $3m. Listed last week for just over $4m. Sold yesterday to a developer for just over $5m. It’s certainly suggests a true mania is going on but i won’t believe a top is in or we are near one until i see significantly higher interest rates and a sudden reduction in the flow of high-end foreign money. Take it from someone lurking around these parts for 10 years, we’ve been proven wrong on timing over and over again.

Confucius
Confucius
4 years ago

I love how the bulls say there’s no bubble because prices keep going up. That’s exactly what bubbles do, we just haven’t gotten to the epic crash part yet.

Not sure why bulls aren’t busy in bidding wars everyday buying more property, as they’re so sure this is sustainable.

Shut It Down Already
Shut It Down Already
4 years ago
Reply to  Confucius

“I love how the bulls say there’s no bubble because prices keep going up.”

Nobody has said that.

tedeastside
tedeastside
4 years ago

epic number of for-lease signs on Robson…even Armani went out of Business,

Vancouver has weakest economy in North America…..

remember when super high end Steak Restaurant Morton’s closed their vancouver location….the only location they Closed out of over 70 in North America..even their Detroit location survived

Tim
Tim
4 years ago
Reply to  tedeastside

The whole stretch of Broadway west of Granville is littered with for lease signs and empty retail as well. Right along where all the millionaires are buying up lots.

Shut It Down Already
Shut It Down Already
4 years ago
Reply to  tedeastside

Morton’s is overpriced shit served out of a time machine from the 70s.

OkJackass
OkJackass
4 years ago

I’m interested in hearing if any of the Bulls have a logical case for continued appreciation. Is there a top in your mind, or do you really think a 3+2 in Ladner can support a 7 figure price tag long term?

crabman
crabman
4 years ago
Reply to  OkJackass

Of course not. All they have is “ha ha stupid bears are wrong”.

Shut It Down Already
Shut It Down Already
4 years ago
Reply to  crabman

Sorry, I just proved you wrong again.

Shut It Down Already
Shut It Down Already
4 years ago
Reply to  OkJackass

The opposite of 50-90% crash doesn’t have to be indefinitely rising prices. I think SFH are a little overvalued right now, but other property types seem quite fair to me given current rents and interest rates. I think we’ll see a time when it’s not possible to buy anything downtown for below half a million. Conversely I see a 20-40% drop on the cards for the top end of the market. But I’m not a potential buyer for a Westside mansion so it likely won’t impact my future purchasing decisions.

Guest
Guest
4 years ago

The fact the real estate dominates the conversation exclusively in the papers, radio and coffee shops supports Whistler or Bust thesis. You have Bulls here who are rude at best and assholes at worst to anyone who questions their religion yet they provide no fundamental reasons as to why they think real estate will continue to go up. The truth is, there is no reason and they know it.

When the CEO of Hootsuite is writing articles for the paper we have long passed the point of reason.

I think a 50% reduction in prices is not out of the realm of possibility. Maybe it only takes prices back to a few years ago but it will DESTORY a generation of purchasers and scar them forever (just like in the US)

Bestplaceonearth
Bestplaceonearth
4 years ago
Reply to  Guest

And how long have bears used the word “fundamental” again? Since 2004. Bears calculated buy vs. Rent, value vs. Income, opportunity cost, etc…what more information do you need?

Bestplaceonearth
Bestplaceonearth
4 years ago
Reply to  Guest

And here you are, 50% reduction. Is this number from a bear’s arse again?

Shut It Down Already
Shut It Down Already
4 years ago
Reply to  Guest

So a 1 bed condo downtown will sell for $200k (after your 50% reduction) but still rent for $1600-1800?

Turist
Turist
4 years ago
Reply to  Guest

This beyond assholes ability to comprehend such scenario but I don’t understand what kind of a sick mind spend time frequenting this site just to annoy people with their garbage. Must be some sort of a mental deviation due to their background or some personal problems. Perhaps some sexual anomaly or something in that sense, who knows?

Bestplaceonearth
Bestplaceonearth
4 years ago
Reply to  Turist

Hahaha, another angry one just joined in. Are you talking about your asshole ability of sexual anomaly? What does it have any thing to do with real estate?

Vanco
Vanco
4 years ago

300 sales. Ouch.

paulb
paulb
4 years ago

New
224
Sold
303
TI:7556

http://www.paulboenisch.com

wwwww
wwwww
4 years ago
Reply to  paulb

CNY is in full swing.

Shut It Down Already
Shut It Down Already
4 years ago
Reply to  wwwww

Wait – I thought the China market declines were causing them to pull their money out of Vancouver? You guys really need to make your minds up.

wwww
wwww
4 years ago

If I wasn’t paying a mortgage on a house I would buy a condo. Downtown rents are up 30% in the past year.

space889
space889
4 years ago
Jay Lee
Jay Lee
4 years ago

House next door to us on Westside, went up for sale on Saturday for $3.15 Mill. sold on Wed. for $3.65 Mill.Asian buyers.Thats $500,00 over asking.,…………… but it was a 45 ft. lot, and it does have some nice trees and a shed.

Bull! Bull! Bull!
Bull! Bull! Bull!
4 years ago

China’s Biggest Ponzi Scheme Shows Rot in Internet Financing

http://www.bloomberg.com/news/articles/2016-02-03/china-s-biggest-ponzi-scheme-shows-rot-in-internet-financing

so much cash in china looking for an a place to go.

Vanco
Vanco
4 years ago

Bear #1: here are my reasons for a market top.
Bear #2: exellent insight. Just a minor quibble with point 2.
Bear#3: my confidence in a correction is sky high especially given the 20%+ jump in prices last year!

Observers: WTF?

It’s really comical if not so sad.

Shut It Down Already
Shut It Down Already
4 years ago
Reply to  Vanco

Even funnier when they can’t do simple buy vs rent comparisons without considering mortgage principal repayments to be an expense.

Manson
Manson
4 years ago
patriotz
4 years ago
Reply to  Manson

The difference between what sellers in Middlesex County, located in north-central New Jersey and part of the New York City metropolitan area, paid for their homes vs. what they sold them for was 52%. They pocketed an average of $92,500.

There’s strong, and then there’s crazy.

patriotz
4 years ago

http://news.nationalpost.com/news/canada/this-6-2-million-mansion-was-sold-in-2010-today-its-vacant-and-rotting

My compliments to the reporters for spending $20 to see the property records and identify the owners, something seen too infrequently in the media.

pricedoutfornow
pricedoutfornow
4 years ago
Reply to  patriotz

Isn’t it free to look up this info? When we applied to rent our current house, I took a trip down to BC Assessment and looked up the actual owners of our house. Free. Maybe not free if you do it offsite.

Shut It Down Already
Shut It Down Already
4 years ago

Open question to any of the bears – given your ideal price:rent (or any other metric you choose) how much should a SFH in the city cost? It’s not enough simply to say that prices are too high – where’s your “normal” sit?

bestplaceonearth
bestplaceonearth
4 years ago

it has to be affordable to the point that a person on minimum wage can afford to own it outright with three years of income; the property has to be in point grey. bears don’t want vancouver east; it’s for blue collar.

Yunak
Yunak
4 years ago

Given the economy, household income, infrastructure, climate, livability and all other related factors it should be same as Portland, Oregon. I don’t see any other reason to be different unless you factor China and Hong Kong moment.

http://www.zillow.com/portland-or/home-values/

Shut It Down Already
Shut It Down Already
4 years ago
Reply to  Yunak

Yunak, you’re saying an average city SFH should cost $350k?

patriotz
4 years ago

The federal loan limit for a SFH in Portland is $368,000. You think there might be a cause and effect between how much you can borrow and how much houses sell for?

Guest
Guest
4 years ago

Why not?

Shut It Down Already
Shut It Down Already
4 years ago
Reply to  Guest

“Why not ($350k)”?

Because a price of 350K is justified for a small 1 bed condo given current rents. Should SFH cost the same?

crabman
crabman
4 years ago

For Vancouver SFH valuations to be in line with Seattle, prices would need to fall about 60%.

http://www.vancouverobserver.com/opinion/how-tell-were-housing-bubble

bestplaceonearth
bestplaceonearth
4 years ago

bear’s anger index hits new high…this is no good for the medicare system either…

VanRant
VanRant
4 years ago

Tidbits on China’s house of cards: Just over 106 skyscrapers completed in 2014 and 58% of them were built in China. (Only 2 were build in US, no 1 economy in the world). Similar results in 2013. China’s debat is approx 27 trillion, long surpassing the US’s 18 trillions. “From 2008-2014, new credit flooding the economy increased by more than $US20 trillion, exceeding the size of the entire American commercial banking sector by one and a half times.” China’s actual GDP growth rate is 0 to 4%, not the 6.8% according to many economist. In two years, China has used more concrete than the US in 100 years (Including concrete used on the Hoover Dam in the 30’s) There are 23 Ghost Cities in China at the moment. If US wants to have similar growth as China, its simple, just… Read more »

Yunak
Yunak
4 years ago
Reply to  VanRant

There are 23 Ghost Cities in China at the moment.

And then… why for a fuck sake they keep coming here? They are totally useless except maybe few, just unnecessary fat and waste on already loaded system and society.

Tim
Tim
4 years ago
Reply to  Yunak

It’s the people who built the ghost cities that are coming here.

Local officials need to post a minimum growth rate. So they back development and infrastructure loans to ensure that. They also receive kickbacks from the developers.

Developers borrow vast amounts of money with government backing.

Both sets of people manage to keep a large part of the government-backed debts personally. They can’t take it out of china formally, so they get a loan from a bank like HSBC, backed by their assets or cash within China as collateral.

Notice how much debt is involved in this chain? The recent rush is because they’re getting out of dodge with their part of the China’s credit bubble while they still can. When it stops, it’s going to stop like a jumper hitting concrete from the 50th floor.

Raincity
Raincity
4 years ago

Looks like LNG is dead in BC. How else will Christy top up the coffers? By keeping the housing market going. It’s the only revenue source she has.

Oracle
Oracle
4 years ago

As long as inflows from China continue, and temp immigration at its present level is sustained. Prices will become the highest in the world.

Where else in the western world can you bring your entire extended family with you. Plus Vancouver is the most Asian city outside Asia now. I would emigrate here if I was Asian.

Yunak
Yunak
4 years ago
Reply to  Oracle

That is exactly how retarded immigration policy combined with some group of people interest screwed up most of immigrants who came here in past 30-40 years expecting they will live in Canada and not in China. Same goes for Canadians who been here for several generations, they build Canada but ended up in China.