Most people in Canada don’t care about the Vancouver housing market, but that doesn’t mean they would be unaffected by a bursting housing bubble here.
Canadian Business argues that what we need is a national regulator to deal with risks in the financial system:
In 2013, the International Monetary Fund called on Canada to create a federal entity with a clear mandate to monitor threats to the financial system. The IMF earlier this month scolded Ottawa for so far ignoring its advice.
The Vancouver house-price surge is exactly the sort of thing the independent agency should handle. It is a national issue: everyone knows who will be called on to clean up the mess if it bursts. The banks would feel it and likely would curb lending. CMHC would feel it because it has insured most of the mortgages Vancouverites have used to buy their inflated assets.
Unfortunately as a politician anything you could do about the housing market would most likely be political suicide. Owners are voters and nobody wants to see the value of their home drop. Read the full article here.
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.
A recent report out of SFUs school of public policy is generating headlines that are rather extreme:
Foreign buyers crushing Vancouver home dreams as governments do little.
“People recognize what’s going on, and they’re willing to call a spade a spade,” he said, stressing that such views are based on reality, not racism.
His report compiles a number of other studies, including data on home-buying trends, population density, the cancelled immigrant investor program, and American research on the same issue.
Gordon said his report blames Vancouver’s housing crisis on foreign buyers, particularly from China, because “this is where the evidence points, not because of some anti-Chinese animus.”
Chinese investors have also spiked home prices in the Toronto region, but Vancouver has seen the highest rise in real estate due to the influx of foreign money reaching an unprecedented level in the last year, he said.
Gordon noted that other countries, including Australia and Singapore, have created policies for foreign homebuyers to protect their own citizens but that hasn’t happened in Canada.
Read the full article over at the CBC.
Those of you who complain about the local real estate market should calm down and take a moment to reflect on the benefits of the current situation.
Without financial support from real estate developers how would the provincial government be able to provide necessities like salary top-ups for the premiere?
Without fundraising by condo marketers it would be you the taxpayer that would have to pay for that extra $300k given to the premiere since 2011.
And if you’re concerned about conflicts of interest, don’t be! The premiere herself has addressed this issue:
‘The issue for us is to make sure we always separate our public duties from any sources of funding for political parties, and I think that’s the most important thing for all of us to remember,” Clark has reportedly said in defense of the stipend. ”I always keep that utmost in my mind when we’re making decisions.”
If you want to read David Ebys concerns about the current situation, you can find them over at the Tyee but just remember, he’s likely motivated by sour grapes or jealousy. After all, Eby has been stuck with the MLA responsibilities for Vancouver Point Grey for the last few years while Clark gets to enjoy Kelowna.
Canada’s housing market is overheating.
Don’t worry, there’s no risk of a crash yet and further action by the federal government is expect to cool things down.
This according to Bank of America Merrill Lynch economist Emanuella Enenajor.
And, perhaps more importantly, she noted that “it’s different this time” because the Federal Reserve is in the midst of gradually raising interest rates.
“Economists and investors have become numb to signs of housing excess, as the sector has defied gravity for years,” Ms. Enenajor said.
“However, as the Fed gradually exits its accommodative policy, medium-term rates in Canada could also rise.”
This, she warned, heightens the threat of a correction in Canada’s housing market.
Read the full article over at the Globe and Mail.
Over at MoneySense they have a list of 4 casualties of the Vancouver real estate market.
The first one isn’t really a negative though, it’s just people jumping into the market without any conditions or clauses and taking on the risks that entails. That only affects willing participants in the market.
The other 3 points affect everyone – Empty zombie neighborhoods, high rental prices and fewer options for local food.
…land prices in the rich and productive soils of the Fraser River delta have risen and now sell in the range of $80,000 to $110,000 per acre. While prices can drop for parcels of land greater than five acres, these price increases are setting off alarm bells, especially when paired with statistics from agricultural lender Farm Credit Canada that show that any land priced above $80,000 per acre makes farming unsustainable.
Read the full article here.
Did you know that the Vancouver School Board owns the land under Kingsgate Mall?
Well now you do.
The VSB is seeking ideas on what to do with this asset due to current budget shortfalls.
Surprisingly, the modest little mall has also been generating big money for the Vancouver School Board — upwards of $750,000 per year, The VSB has owned the East Broadway and Kingsway lot on which the mall sits since 1892 when the long-gone False Creek School first opened on the site.
But 124 years later and facing a $24 million budget shortfall, the VSB is now contemplating its future with Kingsgate, and asking for public input.
“One of the questions we’re asking is what do you think the school board should do with it,” said VSB chairman Mike Lombardi.
According to Lombardi, the VSB could see revenue from the property increase to $2 million annually — money which flows directly into the operations budget, offsetting the deficit. The lease with mall operator, Beedie Development Group is set to be renegotiated next year.
Selling the land is also a possibility, although money raised from a sale won’t help the budget shortfall because it would be restricted to capital projects like new school construction and building upgrades.
Read the full article over at the CBC.
The oil market has had an effect on house prices in Alberta. Now with prices lower than they were a year ago does Alberta pose a good buying opportunity for real estate investors?
Don Pittis over at CBC says maybe not yet.
According to long time investment adviser and real estate guru Hilliard MacBeth, the bargain hunting in Alberta has already started.
“I’ve heard of lots of people who say, ‘The prices are down. I’m going to jump in,'” said MacBeth, Edmonton-based author of When the Bubble Bursts.
In fact, some of the people he advises have already identified a buying opportunity and jumped into the market, at least on behalf of their kids, who they are helping out in the role of bank of mom and dad.
“I would have counselled them against it,” said MacBeth by phone as he put on his ski boots in the Lake Louise parking lot. “I would have said, ‘Wait,’ because we’re early days yet.”
It’s more exciting to buy when prices are rising, so maybe try the Fraser Valley instead, where prices are up 27% over a year ago and they don’t have high paying oil jobs to lose.
“One of the things that was supporting Alberta home prices was the fact that our incomes were 40 to 50 per cent higher than the rest of Canada, and that’s changing very rapidly,” said MacBeth.
But property owners and prospective buyers elsewhere would be wise to watch and see if, indeed, the plunge is nipped in the bud by bargain hunters or whether prices continue to fall for a while yet.
Read the full article here.
Low energy prices are a bit of a bummer for a country like Canada, but we’re not worried, we’ll always have real estate!
According to weekly polling by Nanos Research, the share of respondents expecting higher real estate prices reached the most since December 2014 last week, or 38.7 per cent. That pushed the Bloomberg Nanos Consumer Confidence Index to 54.7 last week, the highest this year, from 54.5 previously.
“The main positive driver for the forward look on the economy was the view that the value of real estate would increase,” said Nik Nanos, chairman at Ottawa-based Nanos Research Group.
The only potential downside is that young Canadian families are ‘swimming in debt. Read the full article over at the Financial Post.
This city has lost more than a thousand people a year in the 25-44 age group since 2012 and it’s not hard to guess why.
One of those people has an editorial in the Vancouver Sun:
Sure, I managed to pay rent on a 380-square-foot apartment and eat takeout sushi once in while, but I definitely haven’t saved for retirement or been able to afford to give birth yet. I’ve spent most of my 30s on the west coast (land of economic opportunities?) while I watched my friends on the east coast (with less education than me) buy four-bedroom houses and multiple cars.
Sure, they shovel snow, but they also run across the street to borrow sugar from the neighbours. They trade gardening tips with the elders living next door. Their children play in the backyard. They are happy and connected.
In Vancouver I’m lucky to get a hello in an elevator.
Read the full editorial here.
Are you in that 25-44 year old demographic and if so are you thinking of leaving or in love with the city and never gonna go?