Vancouver Condo Info

Breath easy my friends, Vancouver Sun says no second recession in 2012:

The Conference Board of Canada, for instance, ruled out a double-dip recession for Canada, although it qualified the forecast, noting that it relies on the assumption that the European Union will successfully resolve its sovereign debt problems

BMO slightly more pessimistic, but still 60% no problem!

BMO puts the odds of the U.S. slipping into recession next year at roughly 40 per cent with depressed consumer confidence and ongoing foreclosures. A financial shock from Europe could tip the U.S. economy over the edge.

RBC thinks we should have kept the HST:

Royal Bank of Canada noted in its provincial outlook that the rejection of the harmonized sales tax in last summer’s referendum has added to the down-side risk in its forecast as the return to the provincial sales tax and the shift of the tax burden to business could slow the pace of business investment and job creation. RBC has lowered its growth estimate for 2012 to 2.3 per cent from an earlier forecast of three per cent.

But on a bright note we get those seaspan jobs!

Seaspan’s federal shipbuilding contract and the provincial government’s commitment to bring new mines into production should boost B.C. employment; how-ever, these will take time to materialize. Nevertheless, resource industries hold the most promise for robust growth for the rest of this decade with the greatest share of benefits skewed, for a change, to northern regions of the province.

Now which of these forecasters was most accurate going into 2008?

This post was submitted by Scott.

A very sensible forecast from Tsur Sommerville:

“We start off by saying I have no idea,” Somerville told the Georgia Straight in a phone interview. For him, forecasting is a risky business because “you’re wrong more often, even if you’re intelligent”.

An economist who earned his PhD from Harvard University, Somerville said that he prefers to evaluate what others have projected for the new year.

“The general trend seems to be that it’s going to be a slower market than 2011, and I think the combination of lingering economic unease and uncertainty is consistent with that,” the UBC academic explained. “The other thing is 2011—if you take away Richmond, the West Side [of Vancouver], and West Vancouver—was not some amazing prices-going-through-the-ceiling kind of year. In general for most places, things are going to look like 2011. Maybe a little bit slower.”

Asked about the biggest risk to the market, Somerville responded: “The economy, the economy, and the economy.”

Full article in the Georgia Straight.

This post was submitted by Karl Marx Carney.

Here’s David Chilton on using home equity as a substitute for retirement savings:

There are too many risks associated with real estate — even in pricey markets like Vancouver — to justify making it the sole element of a retirement plan, the author and personal finance expert says.

“I don’t like it as a strategy at all because what happens is that anytime you have that kind of exponential rise in real estate it almost always ends up going the other way,” says Chilton. His latest book, The Wealthy Barber Returns, was released in September.

“It may not happen here because there’s so much foreign money coming in. But the potential for a significant pullback is still there.”

House price increases even in super-heated markets are likely to become more muted as the tailwind generated by rock-bottom interest rates eases, he says.

Did I just enter Bizzaro World? Aren’t ‘super heated’ markets often at a greater risk of a pullback?

This post was submitted by Scott.

The controlled collapse of the Chinese housing bubble seems to be proceeding right on schedule. If HAM is a factor in BC what affect will this have here?

Home prices nationwide declined in November for the third straight month, according to an index of values in 100 major cities compiled by the China Index Academy, an independent real estate firm. Average prices in the Shanghai area are down about 40% from their peak in mid-2009, to about $176,000 for a 1,000-square-foot home.

Sales have plummeted. In Beijing, nearly two years’ worth of inventory is clogging the market, and more than 1,000 real estate agencies have closed this year. Developers who once pre-sold housing projects within hours are growing desperate. A real estate company in the eastern city of Wenzhou is offering to throw in a new BMW with a home purchase.

The swift turnaround has stunned buyers such as Shanghai resident Mark Li, who thought prices had nowhere to go but up. The software engineer closed on a $250,000, three-bedroom apartment in August, only to watch weeks later as the developer slashed prices 25% on identical units to attract buyers in a slowing market.

Outraged, Li and hundreds of others who paid full price trashed the sales office, scuffled with employees and protested for three days before police broke up the demonstration. Walking away now would mean losing the $75,000 down payment that he borrowed from his working-class parents.

“I still haven’t told them,” Li, 29, said of his home’s plummeting value. “It will just make them worry, and it’s already too late.”

Full article in the LA Times.

This post was submitted by xct.

The CEO of TD bank has said in an interview that he thinks the government should make mortgage rules stricter.

Mr. Clark believes cutting the maximum length on federally insured mortgages to 25 years, from 30 years, would be a good step to slow rising household debt, which hit a new record this week, surpassing that of the United States and Britain.

“If you thought the Canadian economy was strong enough to take another adjustment, then we would say take the 30 [year amortization limit] down to 25 and get this back to where it originally was,” Mr. Clark told The Globe and Mail.

“It’s hard to know whether the economy can take another crank like that,” he said, referring to Ottawa’s last round of changes. “But my own gut would tell me that it may turn out that we do have the absorption capacity.”

Now why would a bank that spends tonnes of money on advertising mortgages and essentially makes risk-free income on insured mortgages want the government to tighten up the rules? Could they be seeing consumer debt levels starting to pose a risk to uninsured loans?

This post was submitted by Eddie.

It keeps going and going.. Canadian household debt has risen yet again to a new record level of 152.98 per cent of annual disposable income.

Debt continues to rise, per capita net worth is falling and incomes are flat.

How’s this going to end?

For those that missed it, there’s an interesting article over at Canadian Mortgage Trends – the major banks have done away with their variable rate discount mortgages and are now charging a premium over prime.

Prime + 0.10% (i.e., 3.10%) is an interesting number. A few months ago consumers thought that fat variable-rate discounts were here to stay. Variables above prime will now come as a shock to some people.

The banks are well aware of that. They know that pricing above prime impacts consumer psychology.

They could have priced at prime. Spreads are not that horrendous. But pricing above prime makes more of an impact. It makes higher-profit fixed rates more appealing and it mentally prepares consumers for potentially higher VRM premiums down the road.

That said, banks are not just arbitrarily sticking it to borrowers. The main reason variable rates are worsening is that banks’ costs are rising, and they want to recoup those costs.

Read the full article for more on the factors at play in this move.

This post was submitted by Karl Marx Carney.

FishyRE points out that the latest housing market numbers out of Victoria look bad. Really bad.

House prices are down YOY for two years now. Condos are down YOY and flat over two. Attached is down 15% over two years. Yikes.

This post was submitted by teekay.

Good news! Markets are up! Money is flowing! and the Canadian Economy expanded more than expected in the third quarter:

The energy sector led the way and notable increases also occurred in manufacturing, construction, wholesale trade and the transportation and warehousing sector.

On a monthly basis, real gross domestic product by industry increased 0.2 per cent in September.

Some analysts cautioned against overestimating the strength of the Canadian economy. Much like the second, the third quarter was also driven by temporary factors that won’t be sustained, they said.

Full article over at the CBC.

This post was submitted by Adam.

If you recently bought a condo in Vancouver this probably isn’t what you want to hear, but let’s just think about this situation realistically. Let’s pretend we get the ‘perfect’ scenario of constantly rising house prices. A young couple buys a condo to get on the property ladder and plans on starting a family and moving up to a larger home in a few years. When it’s time to sell, it’s a jackpot! Their condo has increased by $100 grand and they magically find a buyer at that price right away..

but wait. That home they wanted to buy is up $200 grand. Better hope their income has been increasing a lot faster than everyone else.

And that’s in the magic ‘balanced’ scenario where homes and condos increase at roughly the same percentage year over year. For a while here in Vancouver, house prices have lept up while condos have been mostly flat. The hypothetical move-up buyer is even more screwed.

Maybe it’s time to get some smaller furniture and turn the ‘den’ into a babies room, since we don’t seem to build many large family size apartments in Vancouver. It’s either houses or ‘junior’ one bedrooms with little in between.

Constantly increasing house prices means you only win if you sell and get out of town or sell and rent. The move-up buyer is screwed.

This post was submitted by John.