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.
CMHC has surveyed condo owners in Vancouver and Toronto and found that the number of owners with multiple units is growing.
…the total number of investors in the two regions who say they have purchased at least two condo units in addition to their primary residence has risen nearly 13 per cent over the past two years. Nearly a quarter of condo investors told CMHC that they owned least two units, with close to 10 per cent reporting that they owned three or more condos.
Buyers are looking for both rental income and appreciation, with some interesting math:
Among condo investors in Toronto and Vancouver, half told the federal housing agency that they had bought their investment unit for rental income. Of those, 56 per cent expect the value of their condo to go up, while only 8 per cent thought that it would go down. The share of condo investors in Toronto who expected their unit to increase in value fell to 60 from 64 per cent from a year earlier, while the share in Vancouver who expected their condos to increase in value rose to 50 from 41.5 per cent.
A slightly larger share of investors in Vancouver reported paying higher prices for units than in Toronto, although the survey found that the reverse was true of rents, which were higher in Toronto. Nearly 16 per cent of Vancouver landlords reported charging less than $1,000 in rent for their condos compared with fewer than 5 per cent in Toronto. By contrast, nearly 50 per cent of condo landlords in Toronto said they charged more than $1,500 for their units, compared with 33 per cent in Vancouver.
Read the full article over at the Globe and Mail. So how many condos do you own and how many are you thinking of buying this year?
On the plus side, gas prices are cheaper.
On the negative the side the Canadian economy is getting whacked by the slide in oil prices.
It’s been nine straight days of losses in the S&P/TSX, which is down 7.4% in that time.
Analysts at Morgan Stanley projected Brent oil may slump to as low as $20 a barrel on strength in the dollar. Brent dropped 6.7 percent to $31.32 a barrel in London. Bank of America Corp. cut its average 2016 Brent forecast to $46 a barrel from $50.
“Risk appetite will not return until we start to see crude carve out a bottom,” said David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates Inc., in a note to clients.
The S&P/TSX fell 1 percent to 12,319.25 at 4 p.m. in Toronto. The gauge capped a 20 percent plunge from its September 2014 record on Jan. 7, hitting a magnitude in declines commonly defined as a bear market. Canada was the second Group of 7 country to see its benchmark enter a bear market, after Germany’s DAX Index did in August.
Are you selling, buying or staying put?
Read the full article here.
Every so often it’s fun to play a game of compare and despair with the price of Vancouver real estate.
Buzzfeed has just discovered this and posted a list of 9 castles that cost less than a Vancouver condo.
I’m betting none of those castles is walking distance to a coffee shop.