Vancouver Real Estate 'Bubble' at 30-year Peak

[Alex Mackinnon]

Originally Posted by WarrenC12

I don't think anybody today is buying $1M as a first time buyer, unless they are coming from another country with a pile of cash anyway.

I'm betting you would be surprised. Anyone looking to buy West of Cambie under 30 would likely be in that lot. High earner DINKs mostly.

Looking at MLS, there are exactly 3 houses under $1M West of Cambie.

[WarrenC12]

Originally Posted by Alex Mackinnon

I'm betting you would be surprised. Anyone looking to buy West of Cambie under 30 would likely be in that lot. High earner DINKs mostly.

Looking at MLS, there are exactly 3 houses under $1M West of Cambie.

Well, in order to qualify for CMHC you need to put down less than 20%. I guess what I'm implying is that there aren't many first time buyers financing over $800k. I could be mistaken...

[whatnext]

Originally Posted by WarrenC12

I don't think anybody today is buying $1M as a first time buyer, unless they are coming from another country with a pile of cash anyway.

The whole West Side housing market has pretty much been turned over to that buyer anyway. Maybe there's a smattering of professionals trading up, or kids spending an inheritance, but on a Vancouverite's average income there's a no way an average family could afford a house West of Main (I read somewhere Colliers had moved their Westside delineator to Main).

[whatnext]

Garth Turner's blog reports that last month sales in Richmond dropped a whopping 52% from last year, and prices have slid 7%. New mortgage rules kick in at midnight, will be interesting to see what happens.

[jsbertram]

Just stumbled across this:

http://www.bbc.co.uk/news/magazine-17390729
Ordos: The biggest ghost town in China

In Inner Mongolia a new city stands largely empty. This city, Ordos, suggests that the great Chinese building boom, which did so much to fuel the country's astonishing economic growth, is over.

Is a bubble about to burst?



If China gets an economic cold, who do you think is going to get pneumonia?

[GMasterAres]

I don't see how that article is related in any way to us here. What the article basically says is "A coal mining town grew too fast before the economy in that area went bust."

But to say the Chinese market is bursting is like saying when Prince Rupert lost jobs due to the ports and cruise ship reductions a decade ago, that the "Canadian housing market" was bursting. Or even that the housing market in Vancouver was bursting.

I do like the fact though that page 1 of this thread which declares that the market is at peak, was from August 2010. We're about 2 years later and... hmm... holding true to my moto, if you say something long enough it will eventually become true.

15 years from now when the natural cycle of things means the markets head downward a fair amount, people that posted 2 years ago will say "I TOLD YOU SO!"

Simple truths are, Vancouver is too expensive but nothing will change until people don't buy any more. Locals selling for crazy prices are just as much to blame for the insane prices as are those buying.

Final truth is, if you want to buy your first home, don't waste your time looking North of Fraser.

[worldwide]

I'm really surprised how quiet this topic has been. lots going on right now, very interesting to watch.

[WarrenC12]

It's pretty slow moving... the only discussion points come up when the monthly RE stats are released, or some financing rules change. Unless you want to talk specific properties. I continue to see price drops in the downtown condo market, but prices are still far from reasonable vis a vis the going rental rates.

[whatnext]

One thing not commonly known is that credit unions aren't federally regulated through OFSI, so the most recent rules tightening wouldn't apply to them. And something like 25% of BC's mortgages are through credit unions.

[easy as pie]

reading this yglesias post today led me to this bloomberg quick note: http://www.bloomberg.com/news/2012-0...ng-bubble.html

it speaks to that weird stat on how vancouverites' household wealth is the highest in canada, and also speaks nicely to how much the banks have done (and how carefully they've done it) to maintain the real estate market over the past years. exploding real estate prices now affect every market in the country, including previous immune areas (quebec, rural new brunswick, etc). the mind-bending number of condominium projects on the boards in toronto, the 350% 10-year increase in real estate prices in regina, montreal's market exceeding the pre-olympic construction boom of 1976 - you line up this activity with capacity and population shifts and you get this shudder of terror, a dumbstruck feeling, like slow-motion vertigo.

it's not that we're a cascade of defaulted loans away from a really serious price correction, but more that maintaining current prices requires either that a) canadians moving into ownership take on an increasingly high level of debt (which, since wages haven't increased anything like enough to meet housing inflation, would mean either lower lending standards and/or a greater reliance of co-signatories in lieu of collateral); or that b) investor capital continues to flow into real estate at steadily increasing levels. neither of those seems like something especially promising to bank on, and at any rate, the longer an unsustaible cycle continues, the more painful the eventual correction, so the canadian government and the bank of canada will probably try to cool the market little by little.

whatever happens, it's a terrible time to invest in real estate, broadly speaking, though vancouver is almost certainly less exposed to severe price-shock than somewhere like regina or lethbridge, or even the ring of cities surrounding toronto.

(the shudder of terror is for skyscraper afficionados, obviously)

[phesto]

I've been tracking the Cosmo building on Georgia, not because I'm interested in buying there, but because it is one of the most recent downtown projects to take occupancy.

There are more and more units being listed for resale in the building (now 36 units!) and nothing has sold in two months...even with some massive price drops.

Here's an example:

V952916 Active $ 678000 25-May-12
V952916 Active $ 618000 31-May-12
V952916 Active $ 598000 09-Jul-12

[Zassk]

Just a guess on my part, but the prices can't go down too far before they become enticing to speculators and regular buyers. I would guess they will dip 20% max. before people start snatching them up and supply/demand goes back to "Vancouver normal".

[whatnext]

Originally Posted by Zassk

Just a guess on my part, but the prices can't go down too far before they become enticing to speculators and regular buyers. I would guess they will dip 20% max. before people start snatching them up and supply/demand goes back to "Vancouver normal".

What's "Vancouver normal"? 20% takes us back to, what, 2009? It would take a good 40% to get prices back to where they probably reflect the economic fundamentals of the region and average incomes.

[logan5]

Just a guess on my part, but the prices can't go down too far before they become enticing to speculators and regular buyers. I would guess they will dip 20% max. before people start snatching them up and supply/demand goes back to "Vancouver normal

That's what I'm thinking as well. It seems that there is a large untapped market waiting for lower housing prices here in Vancouver - people who would otherwise own in most other cities.

Some people like to incite fear by making comparisons to the U.S. housing crash, which is not a fair comparison, so I'm always skeptical of people who use fear mongering language in a city that has a relatively strong economy/employment, and has strong population growth.

Any counterpoints are welcome.

[WarrenC12]

Originally Posted by logan5

That's what I'm thinking as well. It seems that there is a large untapped market waiting for lower housing prices here in Vancouver - people who would otherwise own in most other cities.

Some people like to incite fear by making comparisons to the U.S. housing crash, which is not a fair comparison, so I'm always skeptical of people who use fear mongering language in a city that has a relatively strong economy/employment, and has strong population growth.

Any counterpoints are welcome.

I wouldn't incite fear, but Vancouver does have a history of huge property swings up and down. We're definitely near the end of a big upswing. Once things start to slide I think there will be panic as they continue to slide. I'd say 50% max, mainly for the most expensive properties, like $2M+ west side homes and $1M+ downtown condos.

[WarrenC12]

Originally Posted by phesto

I've been tracking the Cosmo building on Georgia, not because I'm interested in buying there, but because it is one of the most recent downtown projects to take occupancy.

There are more and more units being listed for resale in the building (now 36 units!) and nothing has sold in two months...even with some massive price drops.

Here's an example:

V952916 Active $ 678000 25-May-12
V952916 Active $ 618000 31-May-12
V952916 Active $ 598000 09-Jul-12

I assume this is a unit that has never been lived in. The real question is, what was the original presale price? It could be $500k and this is a wild swing for big $$, or it could have been $600k and this is a sign of some big issues in the condo market...

Based on the fact that they are still asking $750/sf (way above the value for that area and building), I'm guessing the purchase price was under $500k.

[go_leafs_go02]

Originally Posted by logan5

That's what I'm thinking as well. It seems that there is a large untapped market waiting for lower housing prices here in Vancouver - people who would otherwise own in most other cities.

Some people like to incite fear by making comparisons to the U.S. housing crash, which is not a fair comparison, so I'm always skeptical of people who use fear mongering language in a city that has a relatively strong economy/employment, and has strong population growth.

Any counterpoints are welcome.

That's me to a tee. Of course, I am looking to buy in Cloverdale/Langley, but still, house prices are too high for me to look into buying without pretty much putting my life on hold as I won't have any additional $$$ for anything besides the bare necessities. And I'm talking about a townhouse/strata/condo unit, not an actual house.

If home prices go down 25-35% compared to now (about 100-150K here in Surrey) I'm going to buy as soon as possible. Saving $500 a month on a mortgage is HUGE

[whatnext]

Originally Posted by jhausner

I don't see how that article is related in any way to us here. What the article basically says is "A coal mining town grew too fast before the economy in that area went bust."

But to say the Chinese market is bursting is like saying when Prince Rupert lost jobs due to the ports and cruise ship reductions a decade ago, that the "Canadian housing market" was bursting. Or even that the housing market in Vancouver was bursting..

The point of the article is that one city is emblematic of the problem, not the problem itself. You don;t have to search far for other examples:

“When construction is 60 percent of your economy, and you are building lots of things that people don’t need, the state may let this get out of control,” he said. “It’s hard to manage this type of bubble.”
http://www.cnbc.com/id/40605908/Chin..._a_Wall_Chanos

If one looks for future ghost towns here, I'd suggest River Green as a potential one.

[b5baxter]

Originally Posted by Zassk

Just a guess on my part, but the prices can't go down too far before they become enticing to speculators and regular buyers. I would guess they will dip 20% max. before people start snatching them up and supply/demand goes back to "Vancouver normal".

That is not how it woks in a defalationary environment. Why would someone buy an asset when they know it will go down in price even more next month?

Anyone who understand Real Estate economics is going to wait for a 40-50% drop not 20%.

Look what happened in Japan. 20 years and real estate prices still haven't recovered.

As others have pointed out the "Vancouver normal" is bubbles and bursts. In the early 80s there was a drop of around 40%. A smaller drop in the late nineties. And even bigger drops in the 1890s, 1918 and 1930. Even Ruyard Kipling got burned on Vancouver Real Estate.

[whatnext]

Vancouver Real Estate Market in Full Retreat

Vancouver realtors are calling it a “summer lull” but the city’s real estate market appears to be in full retreat.

The Real Estate Board of Greater Vancouver said property sales in the area remained stuck at 10-year lows in July, dropping another 11.2% from June.

There were 2,098 residential property sales of detached, attached and apartment properties in July, off 18.4% from a year ago. It’s the worst July since 2000 and 31.2% below the 10-year average of 3,051 sales for the month.
http://business.financialpost.com/20...-full-retreat/