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.
