Archive for the ‘opinion’ Category

Evangelists for buying

Monday, October 20th, 2014

Many Franks pointed out this article in the Globe and Mail and then pulled out a whole bunch of gems.

“Here’s a hilarious litany of Vancouver real estate orthodoxy straight from the punch bowl:”

…the city renowned in popular mythology as a place with such astronomical house prices that its young will be forced to live in basement suites forever…“

That’s right, buy or basement suites forever, your choice.

…There’s definitely sacrifices. I budgeted. I didn’t eat out. Some could say I missed some life experiences. But if you have that [home ownership] as your goal, anything is possible…”

It’s amazing whats possible if you just skip life experiences.

…the proliferation of condos and townhouses here gives them a lower-priced product to choose from compared with other cities that are dominated by houses…

Not only a magical city, but also one of the only ones around that has condos and townhouses!

…siblings or friends will buy an apartment together until they’ve built up enough equity to sell and take their proceeds…

Because what could go wrong with that?

…they’ve decided they’re going to buy in, no matter what…

NO MATTER WHAT!!

…buying became an emotional decision about moving to a new life phase. “This was the first step of being an adult,” said Mr. Richard…

Emotional decisions are an important first step of being an adult.

…some young homeowners have become slightly evangelical about the need for others to realize it’s possible if they stop being so clueless about money…

All it takes is a little knowledge.

“They don’t know anyone who owns, they don’t understand money, they just don’t think it’s possible. I keep telling them: “It’s a conspiracy to keep you as renters. Then you can pay someone else’s mortgage.’”

As Many Franks says “Amazing how much paydirt you can pack into a single article.”

 

Well, that must be the top then.

Tuesday, October 14th, 2014

Over the weekend we found out that a bearish poster on this site just bought a house.  Not in Vancouver mind you, but still..

What went wrong? Landlord wanted to move back in. Now if it was just me I would have rented another place, but as it isn’t just me I decided to see if I could make buying work.

Had to look outside my old neighbourhood, but I found a house on a big lot, price $330,000. Taxes about $3000/year, rental value about $1750/month. Great deal? No. But one I can live with. There might be some downside on the price going forward, but what matters to me is value, i.e. ownership costs versus rent, not expectation of price changes going forward.

And in that same thread we found out that a bullish poster sold his house and is now renting.

In all sincerity, when a voracious bear purchases, it may signal a top. Market trends often reverse at points like this.

To let you guys in on a secret, yours truly is no longer a home owner. I rent. I do have other real estate interests though.

So are these signals of a market top or what?

 

The problem isn’t prices, it’s the buyers

Tuesday, October 7th, 2014

Over on Medium there’s an Op-Ed by Spencer Thompson on the high cost of Vancouver Real Estate.

Not just the literal high cost of property, but the risk of a greater price paid by the city .

The secret that no-one actually wants to talk about is that the quality of a city is mostly determined by a simple factor — the number of smart, ambitious people who live there. These people are the ones who want to drive that city forward by investing in opening businesses, donating their time to the arts & community, participating in city planning, etc… Without them, growth wouldn’t happen and you wouldn’t get all of the benefits that great cities enjoy.

The biggest contributor to the decline of a great city is simple — it’s the decline of those smart people. When they decide that the cost of living in a place outweighs the benefit, they move. They don’t just take their money with them, they take their intellectual and future capital with them. This is dangerous. When people aren’t willing to make an investment in a place to live any more, the city doesn’t just lose their taxes for the year, they lose a massive function of potential jobs created, culture added and future capital they can put to work.

Read the full article here.

Now clearly Mr. Thompson is a believer in foreign investors as a primary driver of prices in this city, but whatever the cause, HAM, Drugs or Credit, does he have a point? Do high real estate prices risk driving out ‘smart people’ who would contribute to a brighter future for the city?

Vancouver: Getting better or worse?

Monday, September 29th, 2014

Pete McMartin has an editorial over at the Vancouver Sun about the ‘amenity paradox‘ – that is that the attributes that make a city attractive to live in eventually erode liveability.

“It’s funny that you should mention the Amenity Paradox,” said author and urban planner Lance Berlowitz. “I was thinking about that very thing last month when I was in Barcelona. It’s one of my favourite cities and I’ve been there many times, and local people I know there were complaining that they can no longer afford to live in the city, that it has become too tourist-oriented, that, like Paris, it has become a caricature of itself.”

That is not the case in Vancouver. As much as our Chamber of Commerce would convince us of our global significance, we are not anywhere near being in the league of Barcelona, Paris, or even Toronto, for that matter. And we have a long way to go in terms of becoming truly urbane.

Wrote Bob Ransford, consultant and bi-weekly columnist for The Sun on urban design:

“We are quite delusional about what we are in Vancouver. We’re a small regional city that has seen a population spike, changing quickly some of our old ways. Those old ways were not that impressive. We’re like the 14-year-old — neither an adult nor a child, but we think we’re pretty special and we pretend we’re more gorgeous than any other teen — yet we’re terribly insecure.

So what do you think? Is Vancouver getting better as it grows more mature or are we still an adolescent insecure city in many ways?

Read the full article here.

Harper: No Bubble in Canada

Thursday, September 25th, 2014

Getting tired of the word ‘bubble’ yet?

With all the news stories and predictions of an Canadian real estate market crash, it’s time for the leader of this great nation to chime in with his opinion:

…Harper told a New York business audience that he did not anticipate a housing crisis in Canada, and that that there was no comparison between the Canadian housing market now and the U.S. market before the crash of 2008.

He said only  small percentage of Canadian households would be vulnerable to interest rate hikes or a downturn in prices.

On the flipside of the argument is a securities analyst with a book to sell and a negative message:

In an interview published in the Globe and Mail today, MacBeth predicts a serious crash in house prices as soon as this coming spring, and advises people with large mortgages to sell, and rent.. His book, When the Bubble Bursts, forecasts a drop of up to 50 per cent in housing prices.

Read the full article here.

Beautiful Empty Homes of Vancouver

Tuesday, September 23rd, 2014

A group of about 20 concerned west side residents have started posting a photo collection of vacant abandoned homes in Vancouver.

For some of these homes the term ‘beautiful’ is a bit of a stretch, but it’s interesting to see the growing resentment of abandoned and vacant properties in a town with high house prices.

There’s an article in the Province about that site as well:

The blog is “a documentation of what happens when Vancouver real estate enters the global real estate market,” but there may be factors other than absentee owners that contribute to the rubble-strewn yards and the decaying homes it showcases, Yan said.

As aging baby boomers begin downsizing to condos in other parts of the city “perhaps a good number” of their single-family homes are sitting empty between real estate deals, Yan said.

Still, this phenomenon could be the “edge of the new normal,” as Vancouver becomes a “resort city” where people from around the world invest their money in home ownership.

Regardless of why they are emptying, these neighbourhoods were centred around public schools and built for families, Yan said.

Read the full article here and visit the site here: Beautiful Empty Homes of Vancouver.

 

CMHC considers sharing risk with banks

Monday, September 22nd, 2014

The CEO of the CMHC is saying that although some Canadian house prices are certainly too high, they aren’t worried about a market collapse at this point.

One option they are considering as a way to help cool an overheated market is sharing mortgage loan risk with the banks that are handing out loans.

The mortgage insurance that CMHC and its two competitors sell repays banks when consumers default on their mortgages. At the moment it makes the banks whole. The OECD has called for changes to the system to ensure that lenders take on more of the risk. In other countries with mortgage insurance, the product tends to only cover 10 to 30 per cent of the losses. In his speech, Mr. Siddall said that CMHC is evaluating “risk-sharing with lenders to further confront moral hazard” and is advising the government about its thoughts.

Read the full article here.

Hat-tip to southseacompany.

TD outgoing CEO wants tighter lending rules

Thursday, September 18th, 2014

Ed Clark is the CEO of Canada’s 2nd largest lender: TD Bank, but he’s heading out in November.

He has some interesting things to say about mortgage lending in Canada:

“It’s just not realistic in a competitive marketplace to say, ‘Why doesn’t one bank lead the way and change the rules?’ It won’t happen. This is a responsibility of the government,” he told Reuters.

“I get why they keep worrying about doing it. But I think you have to just keep touching this brake. As long as you run low interest rates, you then should be continuously leaning against asset bubbles.”

Why is it not realistic for an individual bank to change lending rules? Because they would be the chump to leave money on the table.  If your business had an oppourtunity for income which the government would insure against loss, how much sense would it make to not take advantage of that business?

And you’ve got to love this seemingly prerequisite paragraph that comes next in all of these articles:

Canada’s Conservative government has stepped in four times since 2008 to tighten mortgage lending rules to cool a real estate market that flourished as the financial crisis ebbed.

It is accurate to say that the government has stepped in four times since 2008 to tighten mortgage lending rules, but it omits the change before 2008. For those of you just tuning in they look something like this:

•March ’06: CMHC change to allow 0% down, 30 year Amort.

•June ’06: Allow 35 year amort & interest only payments for 10 yrs

•Nov. ’06: Aw heck, lets go all out and allow 40 year amorts!

•April ’07: Insured min. down payment moved from 25% to 20%

•Oct. ’08: 5% down allowed, amort moved back to 35 years

•April ’10: Require approval at 5 year fixed rate

•March ’11: Drop back down to 30 year amorts.

•July ’12: Drop back down to 25 year amorts.

Shouldn’t we take into account how much gas was applied before we started tapping the brakes?

Politicians shouldn’t meddle with housing market

Wednesday, September 17th, 2014

This is probably the first housing editorial in The Province that most readers here can agree on.  Well, the headline any ways:

Politicians shouldn’t meddle with the housing market.

Imagine a world where the government didn’t meddle with the housing market.  There would be no CMHC insuring close to $600 Billion in mortgages, instead lenders would loan based only on their own assessment of risk.  There would be no HBP, no HOG. In 2006 there would not have been the rule change that allowed zero down 40 year mortgages with interest only payments for 10 years. After 2008 the CMHC wouldn’t have purchased $69 billion of mortgages off bank books.

But of course you’ve probably figured out that this Province editorial isn’t about that. No, this editorial is about someone suggesting we should levy a tax on vacant properties, likely the tiniest possible example you could find for ‘meddling’ in the housing market.

Wong is not alone in unfairly blaming foreign investors for Vancouver’s high housing prices. The reality is that real estate is a commodity whose price is set in a free market, appropriately, through the forces of supply and demand. No one has a “right” to own a house in a particular city or neighbourhood, and it’s about time that people like Wong and her COPE and NDP pals stopped promoting such notions, especially when it involves taking money from one group and giving it to another. You want a house? Work hard and buy one — or move somewhere cheaper.

Read the full editorial here.

 

Most ‘overvalued’ housing markets

Tuesday, September 2nd, 2014

The Economist magazine has named the Canadian housing market among the most overvalued in the world. (Even though they love our cities)

Measured using price-to-rent and price-to-income ratios, the Economist says housing markets are at least 25 per cent overvalued in nine of the 23 economies it tracked.

When comparing the relationship between the costs of buying and renting, it cited Canada, Hong Kong and New Zealand as “the most glaring examples” of overheated markets.

“The overshoot in these economies and others bears an unhappy resemblance to the situation that prevailed in America at the height of its boom, just before the financial crisis,” the magazine states.

Read the full article here.

Hat-tip to kabloona for the link.

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