BC, Canada, data, opinion, politics, predictions, supply

More supply in a bubble leads to a bigger crash

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35 Comments

Southseacompany pointed out this article:

“The BC government has promised to tackle the housing affordability crisis in Metro Vancouver by “aggressively” increasing supply. A new study coming out of Princeton suggests that the NDP government may want to reconsider that strategy. In Economic Consequences of Housing Speculation, researchers link increased supply to a more severe crash when the bubble bursts”

“But Zhenyu Gao, Michael Sockin, Wei Xiong found that “housing speculation, anchored, in part, on extrapolation of past housing price changes, led not only to greater price increases and more housing construction during the boom in 2004 to 2006, but also to more severe economic downturns during the subsequent bust in 2007 to 2009.”

Read the full article here. 

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bullwhip29

City of Vancouver proposes rental-only zones, new rental czar to ease housing crunch
https://globalnews.ca/news/3875485/city-of-vancouver-proposes-rental-only-zones-new-rental-czar-to-ease-housing-crunch/

– city creating new position, the renters protection manager

– changing bylaw to allow six or more people to live in a single-family home

– protect rental stock by forcing anyone redeveloping a building with more than three rental suites must replace all rental units

– offer density bonuses to new developments that offer 100 per cent rental housing and that holding 20 per cent of their units for low income people

– city to consider “rental only zones” but provided no details (INTERESTING…HOW ABOUT MARPOLE???)

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Just me

By the way, today’s uch anticipated announcement about the “housing plan” of the Federal government was beyond disappointing. What effect do they expect from tinkering around the edges like they propose? They should have announced serious legislation to reduce the illegal flows of foreign money, massive money laundering, and untaxed speculation. They chose to be silent on all this.

Shame on the bunch of them. Talking about this nonsense while our major cities are being sold to the highest (foreign) bidder.

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Just me

The article on Panda bonds above reported the following booming facts about BC trade with China:
Quick Facts:
– In the first three quarters of 2017, exports to mainland China from British Columbia grew by 12.7%.
– In the same period, exports to Hong Kong from British Columbia grew by 14.6%.
– In 2016, some of B.C.’s key exports to China include agrifood and seafood products, lumber exports, copper and coal.

Funny that just today the Vancouver Sun reports another type of trade taking place: “B.C. man convicted of trafficking in bear parts handed stiff fine.”

https://news.gov.bc.ca/releases/2017FIN0033-001931

Cache Creek resident Hong Hui Xie appeared in provincial court in Kamloops on Monday and was fined a total of $18,000 for purchasing bear paws and gall bladders.

Trade is always good, right?

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Abdul Lahazi

There are locusts in Cache Creek too? They infest everywhere.

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BubbleTeab

Foreign Buyer Numbers Rise In Surrey As Pre Sale Condos Complete
“Since Park Avenue was granted occupancy in September, there have been 51 units re-sold or currently for sale, with many of the owners offering several units for sale”
http://vancitycondoguide.com/surrey-foreign-buyers/
WHERES THE NDP/CRA ON THIS!

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Just me

And this does not even account fully for foreign cash being deployed. In most cases, foreign cash is deployed by legal residents who act as proxies (the famous students, housewives and the numbered companies with local holders).

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Sketchy

Why would they want to “invest” in a clearly-declining RE market. Have you seen all the price drops on “My Realty Check.ca”, lately?

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Sketchy

IF YOU ACTUALLY READ the article it points out that these “off-shore/foreign buyers” are only NOW being registered for completions that were begun about two years ago.

So, nice try in trying to whip everyone into a frenzy.

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Just me

The simple fact that assignment contracts are still a sought-after commodity is a simple indication that foreign buyers are alive and well. Taxing them to the hilt would remove them from the picture. Clearly, our government is refusing to remove this money from the market.

This is still a frenzy, at least in segments outside SFH. And SFH sales are lagging behind because of Chinese restrictions to money outflows, not because our governments did anything of any consequence.

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stagnate

basic economics, of course the solution is on the supply side. it doesn’t matter where and why the demand is coming from. the supply needs to meet that demand. when the demand evaporates you have too much supply and a healthy correction occurs. if you’re having trouble getting the supply ramped up for the demand you end up with a Vancouver style correction.

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Time to go

So what happens when supply is incorrectly used? Housing is not meant to be used as a financial asset and kept empty. In your scenario, we’d end up with thousands of empty houses/apartments along with empty neighborhoods and schools rotting a city from within. And this will only correct when all the corrupt and easy credit money supply is finally exhausted, which could mean a city completely devoid of inhabitants? C’mon, demand vs supply is way too simplistic of an argument when it comes to housing.

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Just me

Let me remind you that you cannot buy your way out of a tulip mania by adding more tulips to the supply side.

The solution to high prices is clear: lower prices. Economists know this. Politicians know this. it is high time that someone has the guts to say it out loud.

Supply side growth in Vancouver has made the problem worse, as it has attracted further speculation in the new stock. Arguably, more condo supply seems to have prolonged the life of this massive bubble, supported by foreign capital.

Turn the foreign money spigot off, and then let me know what happens…..

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Abdul Lahazi

Fed minutes show general support for 3rd rate hike this year:

http://www.news1130.com/2017/11/22/fed-minutes-show-general-support-for-3rd-rate-hike-this-year/

Poloz will have his hand forced.

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KickThemOut

Study Authors: Zhenyu Gao, Michael Sockin, Wei Xiong

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bullwhip29

London’s famous Harrods store set for biggest revamp in its history to attract more Asian customers
http://www.scmp.com/business/companies/article/2121160/londons-famous-harrods-store-set-biggest-revamp-its-180-year

“Our Chinese and Asian customers are extremely important to Harrods…”

“…the interior of the shop, which has 330 different sections covering a million square feet of retail space, will be entirely redeveloped…”

“…various options are being considered to attract more Chinese customers, including improved signage to help them navigate the store and more product information on food items – something specifically requested by Chinese customers…”

“Many of our customers from Hong Kong have second homes in London and may have children at boarding school in the UK. They spend a significant amount of time in London and at Harrods so we don’t see them as tourists, even if they do get to benefit from tax-free shopping…”

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bullwhip29

and in Paris where ” locals complain that bad behaviour by Chinese tourists – from spitting to queue jumping – is spoiling their iconic city….” retailers have devised other more subtle solutions to keep all parties happy.

“After the Eiffel Tower, the second most popular destination for Chinese tourists is the Galeries Lafayette department store, which has a separate entrance and shopping area for Chinese tourists, where they can buy in their own currency from Mandarin-speaking shop assistants”
https://www.iol.co.za/travel/travel-tips/how-to-be-a-chinese-tourist-2047014

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Abdul Lahazi

Should be titled: “how to be a decent human being”.

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Combat roach

“Our Chinese and Asian customers are extremely important to Harrods…”

Right, the shift from Arabs who were the “most important customers” and dominated Harrods from the mid-’70s for about 30 years, now it’s Chinese time. Who will be next?

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bullwhip29

The B.C. government will soon require sellers to disclose their residency during a real-estate transaction so that information can be shared with the Canada Revenue Agency
https://www.theglobeandmail.com/news/british-columbia/bc-property-transfer-tax-forms-to-indicate-sellers-residency/article37047238/

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DaMann

Few comments on this, first. It has always been a law that the buyer is responsible for knowing if the seller is a tax resident or not and their responsibility to hold 25% of the purchase price back in escrow until CRA has determined if capital gains are owing or not. If the buyer fails to do this they themselves are on the hook for the taxes! Here is why I have zero respect for RE agents. They are generally useless and not worth a fraction of their outrageous commissions. I have brought that up with three different agents and all said that is not true and absurd! They don’t even know the basics of the RE law!Second. They can offer no legal advice and can’t even notarize the contracts and paperwork. So what is their $20k,$30k and up commissions… Read more »

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bullwhip29

if this becomes a recurring problem, you can expect buyers will start including this as a strict condition on contract to purchase. this said, the old form had no box to check and initial whatsoever, so this is still a small step in the right direction. if the seller (and their lawyers, agents) are blatantly lying, i think any reasonable minded judge would side with the buyer. as we’ve seen with phony PDS declarations, such a scenario would be incredibly tedious, frustrating and likely expensive to resolve.

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DaMann

I agree it’s definitely a step in the right direction to even just have the box. And I believe you are right again in that should they be caught lying it would probably be an easy case to win. But the question begs, why put the onus on the buyer to determine this??!?! The onus should be on the seller to declare their tax status. Makes no sense to have it on the buyer what so ever.

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Screwed

Because it will be difficult to reach the seller in chins where they hide

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bullwhip29

The Liberals will announce plans today to spend tens of billions in federal dollars on a housing strategy
http://www.ctvnews.ca/politics/liberals-look-to-make-housing-more-affordable-for-neediest-families-1.3688768

>>> only to be a fly on the wall when decisions are made as to who will receive the free govt cash to build housing units that will wind up costing more per sq/ft than even the most expensive luxury condos currently under development and which neighbourhoods (and lucky buyers that just happened to be in the right place at the right time) will be presented with windfall offers they can’t refuse

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southseacompany

“Economic impact of mortgage stress test nothing to ‘laugh at’: Veritas”, BNN video

http://www.bnn.ca/economic-impact-of-mortgage-stress-test-nothing-to-laugh-at-veritas-1.920355

“The head of one of Canada’s largest independent equity research firms is warning Canadians may be underestimating the economic impact of tighter mortgage regulations.”

“In an interview on BNN, Veritas Investment Research President and CEO Anthony Scilipoti said the impact of the Office of the Superintendent of Financial Institutions’ move to stress test uninsured mortgages, known as B-20, may deliver a significant hit to economic growth.”

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history

http://www.ekathimerini.com/223489/article/ekathimerini/business/airbnb-locks-horns-with-athens

Airbnb gambles that it’s above and beyond the law. Let’s see.

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kabloona

“Maria Sharapova under investigation in condo flop”

😉

https://www.usatoday.com/story/sports/tennis/2017/11/21/maria-sharapova-under-investigation-luxury-condo-flop-india/887552001/

“Maria Sharapova invested in and endorsed a high-rise complex just outside of New Delhi called Ballet by Sharapova.
Now, she is under investigation for cheating and criminal conspiracy after the project’s collapse, according to police in India. The news first was reported by AFP.
The development firm behind the project, Homestead Infrastructure Development, also was named and that group is alleged to have stolen millions from potential home buyers before the collapse.
The five-time Grand Slam champion, who returned from a 15-month ban for doping in April, launched the high-rise complex – which boasted a tennis academy, clubhouse and helipad – during a trip to India in 2012…..”

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Abdul Lahazi

B.C. prepares to return to the Panda bond market

https://news.gov.bc.ca/releases/2017FIN0033-001931

It’s funny how what used to be a problem for the NDP is now not a problem.

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paulb

New
211
Price Change
46
Sold
161

TI:9470

http://www.clivestevepaul.com

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history

taken from the article above. Quote found by searching on ‘correlation’ Only twice does this word show up in this 48 page study. A very weak study without correlation findings, i might add. Steve Keen remains and forever the Patron Saint of VCI
https://www.princeton.edu/~wxiong/papers/Speculation.pdf

“Figure 5 shows little correlation between the distribution of housing speculation and that of
subprime mortgages across zip codes. Statistically, the correlation coefficient between the fraction
of non-owner-occupied home purchases in 2004 to 2006 and the fraction of subprime mortgages
in 2005 is only 0.004 and is insignificant. This suggests that housing speculation is a phenomenon
largely independent of the credit expansion to subprime households. Instead, our measure of
housing speculation captures the purchases of second homes by relatively wealthier households in
booming areas.”

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Super Oracle

Lol

Studies Stdies

All you need to know is:

1) Highest per capita immigration rate in the world PLUS allowed to bring parents/grandparents
2) Recent immigrants bringing in foreign money to buy multiple houses
3) Non-residents buying multiple homes (10 yr visa holders and Students) by exploiting loopholes thereby evading FBT
4) C R A not really going after Cap gains evaders nor landlords not declaring rents.

Studies. HA!

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Sketchy

Super Oracle,

You must be a realtor trying to spook locals into FOMO-buying.

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Sketchy

But, the only trouble with that angle of yours is that people are now on to it.

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history

there’s a sizable class of East Indians that have bought, quite literally, hundreds of housing units, condos, apartments… They’ve gone to town! The smorg presented itself and they Pigged out. They aint bad people, by and large… just simple pigs in a new country. They speil Growth. I speil Value. We dont see Eye to Eye because we live at different angles. The thing will resolve itself eventually. We’ll see how good they are at Socializing losses… we may be in for a surprise or two. It’ll be painful half dozen years for some of us.

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