Archive for the ‘predictions’ Category

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.

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.

Buy in the suburbs, prices dropping like crazy.

Sunday, August 24th, 2014

Astute reader ‘reveal the truth‘ pointed out a few similarities between a recent Business in Vancouver article about people buying in the suburbs and an earlier article published in June:

Millenials Decamp to Suburbs”, published August 20, 2014, sure sounds a lot like “First Time Homebuyers Driving Surrey Market”, published June 24th.

Let’s see:
June 24th: Shayna Thow, director of sales for BLVD Marketing Group – which handles marketing for two Surrey developments for Vancouver’s Fairborne Homes Ltd. – said Surrey has become a viable option for first-time homebuyers who can’t afford to buy in Vancouver. While the average price for a single-family detached home in Greater Vancouver has soared to more than $1.36 million, the average price in the Fraser Valley is still under $655,000.

August 20th: Shayna Thow, director of sales for BLVD Marketing Group – which handles marketing for two Surrey developments for Vancouver’s Fairborne Homes Ltd. – said Surrey has also become a viable option for first-time homebuyers who can’t afford to buy in Vancouver. While the average price for a single-family detached home in Greater Vancouver has soared to more than $1.36 million, the average price in the Fraser Valley is still under $600,000, she noted.

Uh-oh. The only thing that stayed the same was the word for word structure. The PRICE however showed a DROP of nearly 10%! Yikes!!

!

Foreign buyers in the USA

Wednesday, August 13th, 2014

Move over China, Canada has become the top foreign investor in US real estate.

A report from commercial brokerage Marcus & Millichap, as reported by the Tampa Bay Times, found that, “an influx of cash-laden foreign investors, especially from Canada and South America, are targeting assets in Tampa Bay for lower entry costs and higher initial yields.”

It’s all pointing to signs of limitless, massive growth opportunity.

While opportunities across the United States are, in fact, limitless for Canadian investors, the key to investing well is to identify hot spots others have not identified. Take Phoenix, Arizona, for example, where Talia Jevan Properties Inc.’s High Income Real Estate has been aggressively buying property.

“Phoenix became one of the most battered real estate regions in the country,” noted Harmel Rayat. “Nowadays, the region just finished securing $430 million in deals in 2013 alone thanks to higher occupancy rates, falling unemployment, and opportunities for strong population growth.”

Read the full article here.

The everything bubble: how does it end?

Tuesday, July 8th, 2014

Does every major asset seem expensive to you right now?  Does it seem overpriced?

Well, what if it is, where do we end up?

The NY Times has an article titled How The Everything Boom might end: The Good, Bad and the ugly.

Basically it breaks down into (1) the good: Low price of capital unleashes productivity, economy grows into current valuations. (2) The bad: Japan style stagnation 15 years of low rates and low returns or (3) the ugly: spike in prices with a depressed economy.

But the pattern of the last few years shows that the “bad” scenario has been closest to the reality. That doesn’t mean the rest of the bad script will continue in the years ahead, but it should prompt those predicting the first or third outcome to wrestle with why they have been wrong so far.

So what do you think? Whats the future look like from your view point and would it have been any easier to predict the future in the past?

Could we get some big companies here?

Wednesday, June 25th, 2014

This is an interesting post over at medium- basically positing that high home prices in Vancouver threaten it’s future, and proposing a tax to try to change that risk:

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.

There are two issues here: the generation of local business opportunity and an attempt to draw established business head offices to town.

What do you think of a proposal for a housing tax that attempts to encourage economic development?

A future based on past results

Thursday, June 5th, 2014

Here’s an extrapolation for you: Altus group does home appraisal and valuations.

They looked at the numbers and say if everything carries on as usual the average home price on the west side will be 7 million in 10 years.

“If [the current] trend continues, in the year 2024 the average price for older [detached housing] stock could be greater than $2 million on the Eastside and $7 million on the Westside of Vancouver. We are not saying this will happen, we are simply applying the math from the past decade and extrapolating forward to the next decade,” said Pedro Tavares, Altus Group’s director of research, valuation and advisory.

And as any investor will tell you, past performance practically guarantees future results right? So what are you waiting for? Get out there and buy something!

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