BC, Canada, economy, equity, opinion, prices

Vancouver real estate a ‘currency exchange ponzi scheme’?

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49 Comments

Polozi Scheme posted this link to a post at Ross McKay real estate consultants with the theory that the Vancouver real estate is a ‘currency exchange ponzi scheme’.

A investor seeking to remove Chinese Yuan from China and have it converted into a foreign currency purchases a home in Vancouver. The investor once having the currency exchange authorized and completed for the purchase to take place then offers the same opportunity to another investor who is willing to offset any costs the original investor incurred through paying a high enough price for the same home that then allows the previous investor to “break-even”. This pattern is continued over and over again causing the selling price to raise higher and higher at no risk to the investor, while at the same time offering higher and higher amounts of currency to be exchanged on the rising home price being paid.

At no time is the price paid reflective of fundamental value of the real estate being traded but is being established for ulterior purposes that are not related to normal house price growth.
At some point in time the scheme ends as the last investor is converting so much currency that the benefits exceed even the need to “break even” and the home can be sold at a net loss. When that moment is reached the appearance of sustained house price growth ends and the scheme ends moving the scheme somewhere else.

Read the full posting here.

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paulb

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http://www.paulboenisch.com

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8888888

Heres some more economic success stories from Vancouver. http://vancouversun.com/news/local-news/drop-in-vancouver-area-home-sales-suggests-owners-spooked-by-rocketing-prices-crea

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Newcomer (N)

Saving up for first and last month’s rent, huh? I hope they are able to do that by they time they’re 35.

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southseacompany

“Toronto housing market shows signs of cooling: Report”, Toronto Star

https://www.thestar.com/business/2016/05/16/toronto-housing-market-shows-signs-of-cooling-report.html

“Month-to-month figures for Vancouver and Toronto suggest the two frothy markets may be starting to cool, CREA president Cliff Iverson said.” “That comes on the heels of a tepid March, when Vancouver and Toronto saw sales fall 0.3 per cent and 1.8 per cent, respectively, from February.”

TD economist Diana Petramala says the data suggests that new federal rules that came into effect in mid-February and require larger down payments for homes between $500,000 and $1 million have had some impact on the two markets.

“Activity was down or flat in both for the second consecutive month, suggesting that a soft-landing may be in store for these red-hot markets,” Petramala said in a note.”

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space889

I’m not sure that 1 month of falling sales is a sign the market is cooling, especially when prices keeps going up like crazy.

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Newcomer (N)

Exactly. I get down on my knees and pray for the bust every night, but with record low inventory and everything selling over asking this doesn’t look like it. (It is worth noting that every single RE related prediction I have made for the past ten years has been wrong, so me claiming that this is not the top may, in fact, be a good indicator that the top is in.)

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Shut It Down Already

There’s still a chance of another leg up as people with preapprovals rush to buy within 90 days of a future rate increase….

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Grim

A decline in sales during the hottest month in spring is a negative sign.

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BubbleTea

We need more stories like this. House listing will explode when Vancouver housing peaks.

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southseacompany

“Toronto, Vancouver Housing Markets Have ‘Topped Out’: Real Estate Association” Huffington Post

http://www.huffingtonpost.ca/2016/05/16/toronto-vancouver-housing-topped-out-crea_n_9994224.html

“The wild ride in the Toronto and Vancouver housing markets may be over. Either that, or it’s taking a breather right in the middle of the hot spring home-buying season. After several years of rapid growth, home sales in both cities have flatlined and even shrunk mildly over the past two months.”

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southseacompany

“Toronto, Vancouver home sales may have ‘topped out’, CREA warns”, BNN w. video

http://www.bnn.ca/News/2016/5/16/Toronto-BC-boost-home-sales-to-record-mark-CREA-.aspx

“Sales of existing homes in Canada rose in April from March, even as activity in the two largest markets, Toronto and Vancouver, appears to have peaked, a report from the Canadian Real Estate Association showed on Monday.”

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OPENHOUSEMASSACRE

People think buying is bad rent is bad too.Some landlords are asking price are astronomical vs the state of rental property .

https://twitter.com/dearYVRlandlord/with_replies

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Royce McCutcheon

Rent affordability has started to erode after years (decades?) of not keeping pace with inflation. But it is still much more affordable than buying.

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Newcomer (N)

My guess is that a lot supply has been removed and is sitting empty but, as you stay it’s still much cheaper than carrying costs on a buy. A friend just sold his place for 2M and is renting another place that was just bought for 2.4M. He is paying 4500, so about half the carrying costs, and that is not even a particularly good deal.

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Royce McCutcheon

Yup. It’s an odd phenomenon I’ve experienced in this market: people who bought long ago balk almost violently when they see rents that high. Then I ask them to crunch the numbers on the same place if it was bought new today , even with a huuuuge down payment. That slows them down yet they still think buying is better in general, even if it means “sacrificing like everyone did in previous generations” to buy a vastly inferior place way outside the city (never mind that that place could also be rented for comparatively less).

I’ve been accused of being hard-headed on this topic, but I really feel like buying at any cost seems like the more inflexible and entrenched line of thinking.

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Newcomer (N)

Yeah. But that’s what they are, asking prices. It’s possible to see price drops on Craig’s list, but I wish it were possible to get the real scoop on how much people are paying.

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space889

Apparently bears are paying a LOT under the asking price as evidences by various posts in the previous years whenever this topic comes up. How they negotiate? Well by seeking out and twists the balls of desperate moronic investors who overpaid and need to carry the place. Some have even claimed to get good solid houses in Van West for like $2500 or $3K/month with no rent increases in years.

So maybe they can post their inside tips again for the young bears here who are so depressed about being priced out of the market and can’t save anything cuz they insist on being independent and rent.

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Combat roach

You are fucking sick.

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david

Ross Kay should be ashamed of such blatant racism.
There’s no evidence of that.
arrgggghhh…..

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space889

Ross Kay didn’t post the article and the article isn’t claiming all mainland Chinese people are criminal scums. If you can’t see the difference between claiming out the facts, sensationalize news for political and/or racist views / goals, and out and out racism like team BPOM on this blog then there is no point in treating you as a mature person with logical & analytical ability.

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Combat roach

Nobody ever said: “all mainland Chinese people are criminal scums” but that there are obviously more than enough of them to fuck this city/province up as long as they are let to do it. How else do you explain that in any shoddy or sketchy RE activity Chinese are 99% involved?

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space889

This coming from a guy who basically calls all mainland Chinese locusts, scum, criminals, liars, etc, etc, etc in pretty much every post.

Give me a break….

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david

Don’t ask for one…just take one. A long one.

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david

You seem upset. That’s a real shame.

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bullwhip29

CIBC suggests tax on foreign ‘flippers’ driving up Canadian home prices
http://www.theglobeandmail.com/report-on-business/top-business-stories/tax-foreign-flippers-driving-up-canadian-home-prices-cibc/article30029648

http://www.theglobeandmail.com/incoming/article29781851.ece/binary/housing.jpg

>>>i find it rather hilarious that there is WEAK evidence of problematic conditions in Canada as a whole when all cities except Halifax and St Johns are exhibiting either MODERATE or STRONG evidence to the contrary

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space889

Also the suggestion that taxes on foreign investors drive up local prices. If anything, high taxes tend to discourage foreign buyers & investments leading to lower prices over medium to long runs.

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Grits

??? There’s no suggestion that taxes on foreign investors is driving up prices, Space889. CIBC is proposing that taxes *should be* levied on foreign buyers in order to curtail prices. Their very point is that high taxes will tend to discourage the flipping and speculating in the market, and lead to lower prices, as you say.

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space889

First line of Bullwhip29’s post says:
CIBC suggests tax on foreign ‘flippers’ driving up Canadian home prices

Pretty clear to me that means tax on foreign flippers is causing Canadian home price to go up.

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Angry_Lemon

Space, you’re reading it as “CIBC suggests tax on foreign ‘flippers’, driving up Canadian home prices” when there is no comma. The intended sentence is” CIBC suggests tax on [i] foreign flippers driving up Canadian home prices [/i]”

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Grits

It’s meant to be read: CIBC suggests (a) tax on foreign ‘flippers’ (who are) driving up Canadian home prices. It does not mean: CIBC suggests (that a) tax on foreign ‘flippers’ (is) driving up Canadian home prices.

The first line of the post is in “headlinese” style, with clipped grammar. I get why you mistook the meaning initially. But click the link and read even just the first sentence of the article to see for yourself what is meant.

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bullwhip29

Lululemon founder Chip Wilson loads up on Vancouver properties
Wilson family’s Low Tide Properties aims to have $1.5 billion portfolio within a decade
https://www.biv.com/article/2016/5/lululemon-founder-chip-wilson-loads-vancouver-prop/

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patriotz

While LTP has yet to buy any single-family homes or condominiums, it does have rental buildings, Chang said.

Clearly he knows a bad (or more politely speculative) investment when he sees one. Or maybe he just doesn’t like fixing toilets. 🙂

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space889

Wow, I didn’t realize that the Chinese Commies got local biz titans like Chip Wilson too….man these commies must have good agents…

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david

Low Tide…..what a strange name to give a real estate company.

At least, to those who have any appreciation for the eventuality and consequences of what comes right after…

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bullwhip29

Debate heats up over probability of Lower Mainland’s residential real estate bubble bursting
https://www.biv.com/article/2016/5/debate-heats-over-probability-lower-mainlands-resi/

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bullwhip29

Petition to the Government of Canada
https://petitions.parl.gc.ca/en/Petition/Details?Petition=e-281

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bullwhip29

>>> chasing after phantoms will be both difficult to execute and harmful to political careers. only sensible solution from their perspective will be to reintroduce less stringent policies for local buyers, first time buyers etc. through tax breaks/credits/deferrals, longer amortization, new and improved buyer programs sponsored by CMHC and the like.

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space889

Reframe the debate from popping bubble into raising revenues for healthcare, infrastructure, and reducing provincial debt / income tax without raising local taxes, and you will find lots of support. I doubt the people who buy $5M house in cash is going to care about an extra 1% to 3% in taxes.

If those foreign buyers bulk at an extra 3% taxes then foreign money problem solved and you still raise a bunch of extra revenue, win – win.

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123

Where are the Federal Liberals and their promises regarding the Van & TO markets to help make them more affordable for Canadians? JT get behind a podium and talk to Canadian families now.

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space889

Zoning is city controlled and look how much people complain against densification in Vancouver, while complaining about high housing prices. I lay 70% of blame directly at residents of CoV for protesting against densification, especially against towers on major / arterial streets, and electing politicians who are reliant on RE bribes.

And no, cutting off all foreign immigrations isn’t going to help cuz locals are still having children, people living in suburbs still want to move to Vancouver, and we are losing SFH.

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patriotz

Actual restrictions on the growth of housing stock, whether due to government policies or natural features, result in both prices and rents rising in proportion – like in San Francisco.

Bubbles, which by definition are prices rising out of proportion to rents, are not the result of such restrictions. They are the result of policies which encourage people to buy at excessive prices.

Also I don’t know where you get the idea that people in the suburbs want to move to CoV, except for 20 somethings leaving the family home.

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space889

Seriously?? You don’t get that a lot of people who live in Surrey, Mission, etc don’t feel that living in West Van, Van West is a sign of success and a badge of honor?

Well, you haven’t been Van for what? almost a decade? And you telling me how people in Vancouver, a RE & status obsessed city feel about where they live is not important in terms of social status?? Seriously?

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bullwhip29

imho infrastructure money will be used to make commute to/from regions many families previously overlooked (but now have no option but to consider) somewhat easier.

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space889

that’s assuming we get the money which currently we don’t have any for anything….unless some interested party who stands to make a lot of $$$ made a big donation to BC LIbs.

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space889

Nice theory but doesn’t explain the run up in prices, especially in the last few months, on Condos, TH, and SFH in subburbs like Mission, Port Moody, Ladner, Langley, etc.

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david

Even small-timers and newbies need “starters” when getting into the Ponzi/ laundering biz.

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space889

First!!!

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