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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RFM
Guest
RFM

Amen brother!

space889
Member
space889

Well, if this year doesn’t turn out to be the top, I guess you can always blame it on Chinese again right? If only those darn stupid Chinese with their $$$$$ didn’t came over and ruin your plan!

And if this is the top and the prices drop back down to 2013 prices? Yah?? Cuz you can now finally buy that dream home on West side for $2.5M instead of $3.5M? It’s totally affordable and worth it at $2.5M right?? You are so awesome for not buying in 2008/2009 or earlier! That decision really paid off!

a-non-mouse
Guest
a-non-mouse

2nd Bonus Reason – A few bears I know have finally capitulated and bought or are looking to buy. Bears are finally caving…

bestplaceonearth
Guest
bestplaceonearth

here we go, the cracked crystal ball at work again! providing 10 reasons are not good enough, you need more charts and graphs to prove it. this is your last chance to buy a town house or a condo…or… go protesting for free housing near chip wilson’s mansion.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

i remember when people on this blog talked about data. and how idiotic buyers were for ignoring quantitative evidence. but when the data tells a story people don’t want to hear, they make up a bunch of stories to keep believing what they want to believe. i continue to be amazed by the cognitive dissonance on this blog.

remember when everyone was denying HAM? wasn’t that long ago. people here were among the last in the city to admit it was real.

you guys aren’t ahead of the curve, you are horribly behind it.

Royce McCutcheon
Member
Royce McCutcheon
For #7, I disagree this is a change factor. More may have ‘woken up’, to the issues related to this high pricing (whether its foreign drivers or the downside of such high prices to the community in general). But all you need to do is ask yourself what, realistically, this awareness is worth to those who already “own” real estate (you know – the vast majority and a record percentage of the citizenry). What % of their exploded equity would they give up to support a politician who wants to address this? I’d be shocked if it’s even 1%. I’m not making a judgment on whether that is a good or a bad thing, but I am trying to deal in reality. Tut-tutting the status quo and nodding sympathetically? It costs nothing. Beginning to introduce systemic changes that MIGHT challenge… Read more »
Best place on meth
Member
Best place on meth

#10 is the big one, when the stolen money from China dries up it’s all over. One by one the avenues of smuggling cash out of locustland is being shut down, the latest being the Hong Kong insurance scam.

I would like to add #12, the enormous and growing gap between condo and SFH prices as rung after rung on the property ladder has been knocked out leaving no way for condo owners to move up.

Who’s going to buy houses at average 1.8 million prices when the dirty money flow comes to an end?

space889
Member
space889

People who actually work and create value and wealth, instead of bitching and complaining all day and all night.

Tim
Guest
Tim

“People who actually work and create value and wealth”

So, people outside of Vancouver.

Best place on meth
Member
Best place on meth

There is plenty of evidence that China is in deep trouble, as are the countries that used to supply it with raw materials (like Canada).
The Baltic Dry Index measures shipping prices for bulk materials like iron ore and coal.

Well……

http://36.media.tumblr.com/c9bc827592b9f89a099db07355683986/tumblr_inline_o20b2nQISk1sq14jh_500.jpg

GreenSalad
Guest
GreenSalad

How crises at home are dampening wealthy Russian, Chinese appetite for luxury London property

“If people have bought a property here, which a lot of Chinese people have done over the last few years, we are definitely seeing more of them coming to us, saying look can you sell it for me.”

http://www.financialpost.com/m/wp/news/blog.html?b=business.financialpost.com/personal-finance/mortgages-real-estate/crises-spoil-chinese-russian-appetite-for-luxury-london-property&pubdate=2016-02-04

pricedoutfornow
Guest
pricedoutfornow
I think you’re right. The prices are beyond ridiculous. Everyone is following the “story” that they must BUY NOW or be priced out forever, because THE CHINESE ARE COMING! (with suitcases of cash). One guy I know is out every weekend, bidding on houses (and losing) though things will be really tight if he does manage to win a bid on an overpriced SFH. He feels that for the future of his children, he must buy NOW otherwise his children won’t be able to live in Vancouver when they grow up, because they won’t be able to buy a house, because prices will be 10X what they are now, in twenty years. I say he’s bankrupting his family’s future by buying now but does anyone listen to me….no….it’s all rampant speculation. I can’t wait for it to be over. We… Read more »
Yunak
Member
Yunak

“We need a real cleansing to bring this city back to normality.”

Right, and first thing would be to eliminate foreign speculative and money laundering factors (a.k.a “investments”) in a same way as performing surgery to treat cancer in order to completely remove the tumor or cancerous tissue from a specific place in the body.

space889
Member
space889

Or more likely end up like cutting off your nose to spit in your face?

Best place on meth
Member
Best place on meth

Perhaps mainland chinese crooks should be added to the Invasive Species list, along with Hogweed, Zebra mussels, snakeheads and West Nile virus.

Then at least we could spray them.

bestplaceonearth
Guest
bestplaceonearth

hadn’t you bears preached this song since 2004?

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

Beware the Minuses of Negative Interest Rates

Pushing rates below zero doesn’t help if the private sector sits on cash. Is the solution to get rid of currency?

http://www.barrons.com/articles/beware-the-minuses-of-negative-interest-rates-1454543139

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

Why they’re talking about negative interest rates: Mayers

Negative interest rates are really already here. Check out your high interest savings account and subtract inflation.

http://www.thestar.com/business/personal_finance/2016/02/03/why-theyre-talking-about-negative-interest-rates-mayers.html

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

Prospect of minimum income gaining steam as Canada clamours for new ways to manage welfare and benefits

http://news.nationalpost.com/news/canada/prospect-of-minimum-income-gaining-steam-as-canada-clamours-for-new-ways-to-manage-welfare-and-benefits

Friedman was the main proponent of the monetarist school of economics. He maintained that there is a close and stable association between inflation and the money supply, mainly that inflation could be avoided with proper regulation of the monetary base’s growth rate. He famously used the analogy of “dropping money out of a helicopter.”,[46] in order to avoid dealing with money injection mechanisms and other factors that would overcomplicate his models.

space889
Member
space889

And his “research” has wrecked havoc on the world with the people and gov’t believing in the new religions of central banks and monetary policies. Why do we still listen to this garbage?

Oracle
Guest
Oracle

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
Member
Yunak

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.

Raincity
Guest
Raincity

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.

VanRant
Member
VanRant
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
Member
Yunak

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
Guest
Tim

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.

bestplaceonearth
Guest
bestplaceonearth

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

Shut It Down Already
Guest
Shut It Down Already

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
Guest
bestplaceonearth

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
Member
Yunak

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
Guest
Shut It Down Already

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

patriotz
Member

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
Guest

Why not?

Shut It Down Already
Guest
Shut It Down Already

“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
Guest
crabman

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

patriotz
Member

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
Guest
pricedoutfornow

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.

Manson
Guest
Manson
patriotz
Member

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.

Vanco
Guest
Vanco

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
Guest
Shut It Down Already

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

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

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.

Jay Lee
Guest
Jay Lee

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.

space889
Member
space889
wwww
Guest
wwww

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

paulb
Member
Trusted Member

New
224
Sold
303
TI:7556

http://www.paulboenisch.com

wwwww
Guest
wwwww

CNY is in full swing.

Shut It Down Already
Guest
Shut It Down Already

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.

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