Canada's 'housing bubble' deemed close to bursting - Page 391

someone123 · #**7801** Posted **Dec 21, 2017, 4:33 PM**

Quote:

Originally Posted by lio45

The reasons "new is pricier" is that we've got higher standards for almost anything, regulations are a lot more strict, and labor and materials are also pricier than they used to.

Plus houses wear out and depreciate in value. The buildings themselves are money pits. It is only the land that increases in value over time.

East Van is full of 100 year old houses that are assessed at under $50,000 and sit on plots of land worth $1.5M and up. That right there is a major sign of how messed up the housing market is in Vancouver. Some of the most valuable land is built up with improvements with barely any value. The city is using its land poorly.

lio45 · #**7802** Posted **Dec 21, 2017, 7:25 PM**

Quote:

Originally Posted by someone123

Plus houses wear out and depreciate in value. The buildings themselves are money pits. It is only the land that increases in value over time.

Depends. There are some things that don't get finer with age (electricity, plumbing) so that's true for those, but there are materials that are the opposite, that have gotten rarer and pricier nowadays. Also, there's the 'cachet' that comes with age.

Of course, that's only true for building stock that's old enough to be considered desirable as a function of its age/style, which is most of the building stock here but it's different in the West. Same thing with cars: "old cars appreciate with the passage of time" (if they're old enough to be classic cars), yet "old cars depreciate with the passage of time" (if they aren't).

Another exception to the depreciation rule might be what Pinion pointed out: when there are eras well known for high-quality construction, which then went downhill in subsequent decades, properties from the "solid era" might be more in demand. A good example of that would be 1950s concrete block houses with terrazzo floors versus 1990s wood-framed houses with vinyl siding.

ssiguy · #**7803** Posted **Dec 21, 2017, 7:45 PM**

It has nothing to do with the age of the homes. Every other city on the planet has old homes but they don't rip them down.

If Vancouver was serious about bringing home prices down to reasonable levels and open up more rental units {which it most definately is not} it would simply put it's laundered money where it's mouth is and forbid any housing destruction and rebuild unless the rebuild is of higher density. In other the vast majority of $2 million shacks sold would have to be lived in. The prices would plunge 50% overnight and well off people who still have to rent could move into real estate freeinbg up rental accomodation.

Vancouver has no desire in the slightest to reign in the real estate frenzy because it is the backbone of the economy. Shutting down the housing frenzy in Vancouver would be like shutting down the federal government in Ottawa.

someone123 · #**7804** Posted **Dec 21, 2017, 8:03 PM**

Quote:

Originally Posted by lio45

Depends. There are some things that don't get finer with age (electricity, plumbing) so that's true for those, but there are materials that are the opposite, that have gotten rarer and pricier nowadays. Also, there's the 'cachet' that comes with age.

Sure. You might have a unique mansion built by expert stonemasons in some past century that has cachet today, would be difficult to duplicate, and therefore sells at a premium. This is tiny niche that has little impact on major North American housing markets.

I don't think this is a significant factor in Vancouver, at all. There are few older houses and most of the ones in Vancouver are of low quality. The few that are higher in quality are if anything more at risk of being torn down completely. People are speculating on land values in Vancouver, not the future value of hardwood staircases and marble fireplaces.

Pinion · #**7805** Posted **Dec 22, 2017, 6:29 PM**

.

MonctonRad · #**7806** Posted **Dec 22, 2017, 6:38 PM**

That's about 5x the value of my house in Moncton, and I've got five bedrooms, 3.5 baths, a three car garage, finished basement, an in-ground pool (including pool house and gazebo) all on a professionally landscaped treed double sized lot on a quiet cul-de-sac, about a five minute walk from a K-8 school.

Absolutely ridiculous......

Wentworth · #**7807** Posted **Dec 22, 2017, 7:01 PM**

Quote:

Originally Posted by logan5

Have a look at this ALR map.

http://www.writeopinions.com/agricultural-land-reserve

That's 100's of square km's that can't be developed. Now transpose that map onto a Google Earth view of Metro Vancouver and you will see that there is very little developable land left. Then there's the fact that most detached houses in Metro Vancouver are built on 50 to 60 foot wide lots. Grossly oversized for a such a land constrained city.

The ALR is not a geographical constraint, and is not immutable. It certainly constrains the supply of land presently, but that could be changed. My in-laws have a parcel in a prime location in Surrey that they optimistically believe will one day be exempted from the ALR. Like most of the parcels in Surrey, it is too small to be economically viable for anything other than hobby farming, and has not been used for agriculture in probably 50 years.

someone123 · #**7808** Posted **Dec 22, 2017, 7:20 PM**

Quote:

Originally Posted by MonctonRad

That's about 5x the value of my house in Moncton, and I've got five bedrooms, 3.5 baths, a three car garage, finished basement, an in-ground pool (including pool house and gazebo) all on a professionally landscaped treed double sized lot on a quiet cul-de-sac, about a five minute walk from a K-8 school.

Absolutely ridiculous......

The $3.8M Vancouver shack can only be explained in terms of investment and speculation. It doesn't have a $3.8M value to anybody as housing. It might sell for $3.8M because someone wants to — that it will be worth $4.8M next year after more suitcases full of cash arrive. It's a high risk — though.

casper · #**7809** Posted **Dec 22, 2017, 7:39 PM**

Quote:

Originally Posted by someone123

The $3.8M Vancouver shack can only be explained in terms of investment and speculation. It doesn't have a $3.8M value to anybody as housing. It might sell for $3.8M because someone wants to — that it will be worth $4.8M next year after more suitcases full of cash arrive. It's a high risk — though.

First off it is in West Point Grey (a fairly high end area of the city that always has a premium associated with it).

Secondly most single family home lots in Vancouver are now zoned to permit legal secondary suites (basically it can accommodate a duplex) + a laneway suite above the garage.

casper · #**7810** Posted **Dec 22, 2017, 7:43 PM**

Quote:

Originally Posted by Wentworth

The ALR is not a geographical constraint, and is not immutable. It certainly constrains the supply of land presently, but that could be changed. My in-laws have a parcel in a prime location in Surrey that they optimistically believe will one day be exempted from the ALR. Like most of the parcels in Surrey, it is too small to be economically viable for anything other than hobby farming, and has not been used for agriculture in probably 50 years.

It is a political constraint. The same with the US boarder. The same with the restrictions with building up the north shore mountains to protect the watershed. All the park land is also a political constraint.

The ocean is the other constraint.

From a food security perspective I think a lot of thouse small hobby farm sized lots should remain in the ALR. They either need to be amalgamated with other farmland or they will end up housing intensive agriculture (chicken farms or the like).

geotag277 · #**7811** Posted **Dec 22, 2017, 8:26 PM**

Quote:

Originally Posted by casper

First off it is in West Point Grey (a fairly high end area of the city that always has a premium associated with it).

Secondly most single family home lots in Vancouver are now zoned to permit legal secondary suites (basically it can accommodate a duplex) + a laneway suite above the garage.

These comparisons are so disingenuous. Here is a contextless property with a relatively high price tag, therefore, proof of a bubble.

What's that? This is in one of the most expensive neighbourhoods of Vancouver, walking distance to Spanish Banks beach, a beautiful ocean front beach, in a neighbourhood a mere 8 km from downtown Vancouver? Doesn't matter, my house in Moncton was cheaper and is better.

Want further proof of a housing bubble in Canada? Check out this "shack" available for sale in Calgary:

How much would you expect this 2 bed 1 bath 1000 sqft house to cost? Keep in mind Calgary is in the middle of a historically large recession with historically high unemployment and a battered real estate market?

In fact, it is 800k! What a bubble!

MonctonRad · #**7812** Posted **Dec 22, 2017, 9:05 PM**

No bubble in Moncton.

My house is worth the same now as when I built it 15 years ago. It'll probably be the same when I sell it in 5-7 years time.

In fact, there's pretty much even chances that I'll sell it at a loss.

Real estate is not an investment in NB.

You could however sell your shack in Vancouver, move to NB and live like a king if you wanted.........

geotag277 · #**7813** Posted **Dec 22, 2017, 9:20 PM**

The conditions that allow real estate to be an investment to not exist right now in NB. I would argue there are several sufficient conditions required:

* rapidly growing city
* an inflection point in population that causes tangible benefits to centrally located property to materialise/puts upward pressure on land prices (200k+ population typically)
* an inflection point in land availability that causes land to become scarce and housing stock can no longer be added using SFH (Vancouver in 90s, Toronto recently, FortMac artificially by restricting develop-able land, Calgary artificially by constraining sprawl, etc.)

Moncton has potential to become a reasonable place for real estate investment if it continues to grow healthily for a few more decades.

Vancouver and in some ways Toronto are in a perfect storm of conditions, such that the only thing that can really shock the market downwards is psychological panic through government policies to artificially spook the market (such as with foreign buyer taxes). The greatest effect this has is on domestic consumption of housing.

You can see the unnatural effect of these policies on the market in the way they spur on the growth rates of multi-family housing prices beyond single family homes - obstinately a sign something unnatural is happening in the market as multi-family units are *leading* causes of a housing correction, not SFH.

As Vancouver has evolved from one of the foremost trailblazers in urban planning to the spiritual seat of all Canadian NIMBYism, I expect it will remain a safe real estate investment for quite a while. As always, any investment carries risk, and you have to understand the investment you are making and the context it lives within.

whatnext · #**7814** Posted **Dec 23, 2017, 12:39 AM**

Quote:

Originally Posted by geotag277

Well, for one thing, while 20% of condos in the City of Vancouver seems high, that does also imply that 80% are being bought by residents.

Again, that 20% props up demand for the units, which allows them to be built, which adds more rental stock to the city, which helps moderate rental price increases. How many new rental units is Vancouver building?

While it may seem from statistics that Vancouver is building at a "dizzying" pace compared to it's history, there is a strong case to be made that Vancouver has been perpetually under-building new supply since at least the 80s. Prices have been driven by supply constraints for at least as long, and warning bells should have gone off when Vancouver housing passed Toronto in average value (which was decades ago).

What case is there that there was underbuilding? Starting with the Expo 86 lands, then Downtown South , then Olympic Village the City of Vancouver alone has been adding plenty of units.

Increasing supply is not the answer, especially if it is the condo model as we saw from today's purchase announcement of a downtown lot:

The Vancouver Sun is reporting that Shato Holdings, owners of White Spot, have sold their location at West Georgia Street to a Hong Kong-based developer for $245 million.

The sale price is extraordinary, and one of the highest prices ever paid for residential real estate in Vancouver. The buyer was Carnival International Holdings Ltd.

SFU business professor and real estate finance expert Andrey Pavlov told the Vancouver Sun that given the price paid for the land, units would need to start at a minimum of $1.5 million.

Just this past summer, Shato Holdings was showing off preliminary designs for two residential condo towers on the site — 33 storeys and 39 storeys — with a total of 250 units.

The architects, IBI Group and PWL Partnership, envisioned the towers as clad in a combination of curtain and window wall in a charcoal grey colour, with light-coloured stone accents.

It’s likely that the new owners, Carnival International Holdings Ltd., will present a new plan for the site, with new architects...

https://urbanyvr.com/white-spot-west-georgia-hong-kong-developer

Developers flipping to developers and the money trail all leads back to Chinese connections.

lio45 · #**7815** Posted **Dec 23, 2017, 12:45 AM**

Quote:

Originally Posted by someone123

The $3.8M Vancouver shack can only be explained in terms of investment and speculation. It doesn't have a $3.8M value to anybody as housing. It might sell for $3.8M because someone wants to — that it will be worth $4.8M next year after more suitcases full of cash arrive. It's a high risk — though.

For the record, if I had to pick between this house and 150 bitcoins as of a few days ago, I would have chosen the house in a heartbeat.

lio45 · #**7816** Posted **Dec 23, 2017, 12:51 AM**

Quote:

Originally Posted by geotag277

Want further proof of a housing bubble in Canada? Check out this "shack" available for sale in Calgary:

How much would you expect this 2 bed 1 bath 1000 sqft house to cost? Keep in mind Calgary is in the middle of a historically large recession with historically high unemployment and a battered real estate market?

In fact, it is 800k! What a bubble!

I'm considering getting this decently well located commercial duplex - link below - which I visited this fall already without committing at the time (it's empty and likely not easy to finance). Sharing the link to give you guys some perspective. Out of curiosity, is that Calgary shack really well located? (obvious teardown I guess?)

For some reason we're probably closer to NB as a market than Ontario and the West, even though the economy's doing well here.

https://www.remax-quebec.com/fr/commerci...seph-desjardins-levis-levis-22045268.rmx

lio45 · #**7817** Posted **Dec 23, 2017, 12:57 AM**

Quote:

Originally Posted by someone123

Sure. You might have a unique mansion built by expert stonemasons in some past century that has cachet today, would be difficult to duplicate, and therefore sells at a premium. This is tiny niche that has little impact on major North American housing markets.

I don't think this is a significant factor in Vancouver, at all. There are few older houses and most of the ones in Vancouver are of low quality. The few that are higher in quality are if anything more at risk of being torn down completely. People are speculating on land values in Vancouver, not the future value of hardwood staircases and marble fireplaces.

Oh, absolutely, in Vancouver it's irrelevant; we're talking millions for the land only, numbers which obviously greatly dwarf any variation in price from heritage desirability or rare materials.

Around here though most housing is old enough that depreciation isn't really a factor. It's already very old when you're buying it, and it's going to be approximately equally old when you'll be reselling it.

But yeah, sure, if you bought a state-of-the-art suburban house in the 1990s, by now it's going to be dated and somewhat worn, and if it's selling for a lot more than it was you can definitely thank rising land values for it.

casper · #**7818** Posted **Dec 23, 2017, 3:38 AM**

Quote:

Originally Posted by whatnext

What case is there that there was underbuilding? Starting with the Expo 86 lands, then Downtown South , then Olympic Village the City of Vancouver alone has been adding plenty of units.

Increasing supply is not the answer, especially if it is the condo model as we saw from today's purchase announcement of a downtown lot:

The Vancouver Sun is reporting that Shato Holdings, owners of White Spot, have sold their location at West Georgia Street to a Hong Kong-based developer for $245 million.

The sale price is extraordinary, and one of the highest prices ever paid for residential real estate in Vancouver. The buyer was Carnival International Holdings Ltd.

SFU business professor and real estate finance expert Andrey Pavlov told the Vancouver Sun that given the price paid for the land, units would need to start at a minimum of $1.5 million.

Just this past summer, Shato Holdings was showing off preliminary designs for two residential condo towers on the site — 33 storeys and 39 storeys — with a total of 250 units.

The architects, IBI Group and PWL Partnership, envisioned the towers as clad in a combination of curtain and window wall in a charcoal grey colour, with light-coloured stone accents.

It’s likely that the new owners, Carnival International Holdings Ltd., will present a new plan for the site, with new architects...

https://urbanyvr.com/white-spot-west-georgia-hong-kong-developer

Developers flipping to developers and the money trail all leads back to Chinese connections.

A parcel of land in downtown Vancouver, about a block away from the ocean sells for $245M. If you compare it to the land across the street on Alberni, it should be able to accommodate 5 buildings some high-rise buildings.

What would be a more reasonable price to pay for commercial property of that scale?

Pinion · #**7819** Posted **Dec 23, 2017, 4:04 AM**

.

geotag277 · #**7820** Posted **Dec 23, 2017, 4:47 AM**

Again the wild flaying attacks and rampant paranoia of "shilling" with people who call you out on your BS.

For the record, i can easily beat your dad's appreciation. My grandmother's family was gifted land as part of an agreement to settle the west coming as a refugee/immigrant into Canada. As that land is now worth a non-zero amount, that represents an undefinable amount of appreciation. Crazy huh?

Also, you wouldn't believe the rates for land in Calgary in 1911.

Cities evolve, previously run of the mill neighbourhoods turn into luxury enclaves. You could find tear down shacks in Upper Mount Royal in Calgary during the recession for 1.5 million (all sold now, fancy that).

None of this means anything without context.

And why are people surprised that luxury condos are a thing? There will always be luxury condos. Hotel Germain in Calgary developed a prime real estate spot right across from Calgary Tower. Guess how much those units go for? One bedrooms over a million dollars. Is Calgary in crisis?

An honest conversation about Vancouver real estate (which has many problems) is not helped by your wild flaying accusations, your disingenuous examples, and your absurd crocodile tears at the mere thought a luxury condominium might be built.