Vancouver Real Estate 'Bubble' at 30-year Peak

[Vin]

Originally Posted by fredinno

It's deliberate government intervention that kept the interest rates artificially low for so long, and thus, allowing the bubble to grow to enormous size. Normally, interest rates would rise once loan demand grows, preventing people from getting new loans.

It's pretty much beyond doubt at this point that the RE market in Vancouver is probably a bubble. When you have a bubble, the best thing to do is prevent it from getting too big, preventing investors from making ever-riskier bets; because every bubble pops.

The economy is still performing relatively well right now. If it starts to deteriorate then the Feds will have to stop raising or even reverse the mortgage interest rate once again. They need to find a balance.

The so-called "bubble" is actually the standard price-point for larger Canadian cities now. With so many home owners having their wealth tied to their properties, softening of prices to levels of the past is simply not possible, unless interest rate goes up to rates similar to those of the 80s, causing home owners to simply walk away from their mortgages or hold foreclosure sales. But then again that would not benefit the government either: why would they want to cause the economy to collapse?

This bubble isn't going to pop, just like those "bubbles" in Singapore, Tokyo, Hong Kong, London, New York, or Zurich are not popping either.

[Vin]

Need to repost this here:


Amid building boom, 1 in 10 Seattle apartments are empty, and rents are dropping
https://www.seattletimes.com/business/re...tments-are-empty-and-rents-are-dropping/

Does this also mean their condo unit prices are dropping too?

[misher]

Originally Posted by Vin

The economy is still performing relatively well right now. If it starts to deteriorate then the Feds will have to stop raising or even reverse the mortgage interest rate once again. They need to find a balance.

The so-called "bubble" is actually the standard price-point for larger Canadian cities now. With so many home owners having their wealth tied to their properties, softening of prices to levels of the past is simply not possible, unless interest rate goes up to rates similar to those of the 80s, causing home owners to simply walk away from their mortgages or hold foreclosure sales. But then again that would not benefit the government either: why would they want to cause the economy to collapse?

This bubble isn't going to pop, just like those "bubbles" in Singapore, Tokyo, Hong Kong, London, New York, or Zurich are not popping either.

But we’re going to try our damnest to prove you wrong! 😂 you’d be shocked how many people are supporting this and pushing politically for it to be done.

[whatnext]

Originally Posted by Vin

The economy is still performing relatively well right now. If it starts to deteriorate then the Feds will have to stop raising or even reverse the mortgage interest rate once again. They need to find a balance.

The so-called "bubble" is actually the standard price-point for larger Canadian cities now. With so many home owners having their wealth tied to their properties, softening of prices to levels of the past is simply not possible, unless interest rate goes up to rates similar to those of the 80s, causing home owners to simply walk away from their mortgages or hold foreclosure sales. But then again that would not benefit the government either: why would they want to cause the economy to collapse?

This bubble isn't going to pop, just like those "bubbles" in Singapore, Tokyo, Hong Kong, London, New York, or Zurich are not popping either.

ORLY?

A report from the New York Times. “Good news, New Yorkers: You may no longer need $1 million to buy a middle-of-the-road Manhattan apartment. But just barely. Lest the financially average among us get too excited, the median price only fell to $999,000, dipping below $1 million in the last quarter of 2018, according to Douglas Elliman. It was the first time the median price fell below seven figures since crossing the million-dollar listing threshold in 2015.”

“The slowdown in the city has followed patterns emerging across the United States. Sales are declining across the country, driving down prices, said Jonathan J. Miller, the real estate appraiser who prepared Douglas Elliman’s report. But the Manhattan apartment market has led the way.”

“‘The New York metro area was one of the first to really see a downshift,’ he said.”..
http://housingbubble.blog/?p=700

..“Central London is tanking because the traditional international buyers are staying away - and the quantum of buyers is falling. A disorderly Brexit will exacerbate this trend,” said Tony Williams at property consultancy Building Value.

Uncertainty over how Brexit negations pan out has already spooked foreign investors. When asked what effect a disorderly departure would have on London prices, responses ranged from “short-term fall” to “damaging” to “disaster”...
https://uk.reuters.com/article/uk-britain-property-poll/london-house-prices-to-fall-this-year-and-next-1-in-3-chance-of-a-crash-reuters-poll-idUKKCN1LE0D6

Hong Kong house prices have fallen on average for the first time since early 2016, as sentiment looks to have turned against the city’s notoriously expensive real estate market.

The city’s official index that tracks the price of private homes, dropped by 0.6 point to 393.9 last month, from 394.2 a month earlier, according to data by the Rating and Valuation Department....
https://www.cnbc.com/2018/09/28/hong-kongs-28-month-property-bull-run-just-came-to-an-end.html

SINGAPORE's hot property market has been put on notice. For the second time in eight months, the central bank is warning of a bubble building up and cautioning developers, banks and home buyers to proceed with care.

Property observers say the warnings are a reality check that the government will step in if the market overheats.

The latest reminder came from Ravi Menon, Monetary Authority of Singapore (MAS) managing director, who noted the "euphoria" in the Singapore property market. In December, Mr Menon's deputy, Ong Chong Tee, had warned of "excessive exuberance" in the property market as well as risks from rising land prices and a possible oversupply of housing stock...
https://www.businesstimes.com.sg/real-es...puts-singapore-property-market-on-notice

Nearly four years after a 1930s telephone switchboard center was transformed into 18 industrial-style loft apartments in Zurich’s Wiedikon neighborhood it is still not fully occupied...
.
...“A real estate bubble is the biggest asset risk on the banking side,” one regulatory official said. “The investment property, buy-to-let segment is definitely overheated.”

Vacancies on rental apartments more than doubled in nine years and the Swiss National Bank in June suggested implementing “targeted measures” for residential investment property lending.....

https://www.reuters.com/article/us-swiss...-ring-mortgage-alarm-bells-idUSKCN1LT14Z

[Vin]

Originally Posted by whatnext

ORLY?

A report from the New York Times. “Good news, New Yorkers: You may no longer need $1 million to buy a middle-of-the-road Manhattan apartment. But just barely. Lest the financially average among us get too excited, the median price only fell to $999,000, dipping below $1 million in the last quarter of 2018, according to Douglas Elliman. It was the first time the median price fell below seven figures since crossing the million-dollar listing threshold in 2015.”

“The slowdown in the city has followed patterns emerging across the United States. Sales are declining across the country, driving down prices, said Jonathan J. Miller, the real estate appraiser who prepared Douglas Elliman’s report. But the Manhattan apartment market has led the way.”

“‘The New York metro area was one of the first to really see a downshift,’ he said.”..
http://housingbubble.blog/?p=700

..“Central London is tanking because the traditional international buyers are staying away - and the quantum of buyers is falling. A disorderly Brexit will exacerbate this trend,” said Tony Williams at property consultancy Building Value.

Uncertainty over how Brexit negations pan out has already spooked foreign investors. When asked what effect a disorderly departure would have on London prices, responses ranged from “short-term fall” to “damaging” to “disaster”...
https://uk.reuters.com/article/uk-britain-property-poll/london-house-prices-to-fall-this-year-and-next-1-in-3-chance-of-a-crash-reuters-poll-idUKKCN1LE0D6

Hong Kong house prices have fallen on average for the first time since early 2016, as sentiment looks to have turned against the city’s notoriously expensive real estate market.

The city’s official index that tracks the price of private homes, dropped by 0.6 point to 393.9 last month, from 394.2 a month earlier, according to data by the Rating and Valuation Department....
https://www.cnbc.com/2018/09/28/hong-kongs-28-month-property-bull-run-just-came-to-an-end.html

SINGAPORE's hot property market has been put on notice. For the second time in eight months, the central bank is warning of a bubble building up and cautioning developers, banks and home buyers to proceed with care.

Property observers say the warnings are a reality check that the government will step in if the market overheats.

The latest reminder came from Ravi Menon, Monetary Authority of Singapore (MAS) managing director, who noted the "euphoria" in the Singapore property market. In December, Mr Menon's deputy, Ong Chong Tee, had warned of "excessive exuberance" in the property market as well as risks from rising land prices and a possible oversupply of housing stock...
https://www.businesstimes.com.sg/real-es...puts-singapore-property-market-on-notice

Nearly four years after a 1930s telephone switchboard center was transformed into 18 industrial-style loft apartments in Zurich’s Wiedikon neighborhood it is still not fully occupied...
.
...“A real estate bubble is the biggest asset risk on the banking side,” one regulatory official said. “The investment property, buy-to-let segment is definitely overheated.”

Vacancies on rental apartments more than doubled in nine years and the Swiss National Bank in June suggested implementing “targeted measures” for residential investment property lending.....

https://www.reuters.com/article/us-swiss...-ring-mortgage-alarm-bells-idUSKCN1LT14Z

Well, in that case, please do let me know when the bubble finally bursts here in Vancouver and we're down to sane levels around year 2000, or about $300-$400/sqft for residential property sales.

[Changing City]

Originally Posted by Vin

Need to repost this here:


Amid building boom, 1 in 10 Seattle apartments are empty, and rents are dropping
https://www.seattletimes.com/business/re...tments-are-empty-and-rents-are-dropping/

Does this also mean their condo unit prices are dropping too?

It does. By the summer prices had fallen, and inventory had risen for the previous three months. The pattern was amazingly similar to Vancouver; prices in Seattle have continued to soften, and sales have dropped as well, so the number of homes available to buy has increased.

One factor is obviously that interest rates in the US have increased even more than in Canada. It appears that their mortgage rates are somewhat higher as a result.

[rofina]

Originally Posted by Vin

Well, in that case, please do let me know when the bubble finally bursts here in Vancouver and we're down to sane levels around year 2000, or about $300-$400/sqft for residential property sales.

That's the problem - that means condos will have to fall to half of what construction costs are. Let alone profit, etc.

Not sure how we achieve this. Code is getting more onerous, materials are typically imported from US, CAC's are ever higher, and labour shortages are not something that's about to go away considering youth are not enrolling in trades.

[WarrenC12]

Originally Posted by rofina

That's the problem - that means condos will have to fall to half of what construction costs are. Let alone profit, etc.

Not sure how we achieve this. Code is getting more onerous, materials are typically imported from US, CAC's are ever higher, and labour shortages are not something that's about to go away considering youth are not enrolling in trades.

Nobody is saying prices will drop to $400/sf or less. Vin is throwing out strawmen. The fact is, condo sales are dropping. 2019 assessments just delivered (prices assessed as of July 2018) look to be the high water mark. Condos in Vancouver are already selling for less than assessed value.

[misher]

Originally Posted by rofina

That's the problem - that means condos will have to fall to half of what construction costs are. Let alone profit, etc.

Not sure how we achieve this. Code is getting more onerous, materials are typically imported from US, CAC's are ever higher, and labour shortages are not something that's about to go away considering youth are not enrolling in trades.

Good points. Honestly feels like barring a major disaster the market cannot go below what if costs to build and that number is still very high.

If it ever does then long term new construction stops and supply constrains raising prices back up to normal.

[Vin]

Originally Posted by WarrenC12

Nobody is saying prices will drop to $400/sf or less. Vin is throwing out strawmen. The fact is, condo sales are dropping. 2019 assessments just delivered (prices assessed as of July 2018) look to be the high water mark. Condos in Vancouver are already selling for less than assessed value.

Overall property values in Vancouver proper increased by 2% as per the 2019 assessment, despite having multi-million dollar houses dropping in values by more than 10%. Sales of condos could be down, but when would the price bubble burst? And you do know what "bubble bursting" means right?

[whatnext]

Originally Posted by Vin

Overall property values in Vancouver proper increased by 2% as per the 2019 assessment, despite having multi-million dollar houses dropping in values by more than 10%. Sales of condos could be down, but when would the price bubble burst? And you do know what "bubble bursting" means right?

Assessments are a alagging indicator and not truly indicative of where the market is right now. The worm has turned.

This is how Canada’s housing correction begins
Canadians are finally getting a taste of what a world with rising interest rates will look like, and one thing is painfully clear: we’re not ready for what happens next

Kirk Marsh first noticed the mood start to turn in Vancouver’s housing market a year ago. As a real estate investor who buys homes and condos then fixes them up for resale, Marsh has an excellent vantage point on the market. Since giving up his old job in tech three years ago to flip real estate—“Sitting at a desk was killing me,” he says—Marsh has bought and sold six detached homes and condominiums across the B.C. Lower Mainland. “It’s not like TV shows where you see them making $100,000 or more each time, it’s just not like that,” he says. But he’s done well, always able to find buyers and come out ahead.

Or that’s how it used to be. “Today, everything has stalled,” he says.

While visiting open houses over the past year looking for his next flip, Marsh watched the frothing crowds and bidding wars steadily dwindle away. “There’s just nobody showing up at the open houses now,” he says. “Especially downtown. Usually you’d see a group of very aggressive people coming out.” But he’s also keenly aware of the slowdown because he’s trying to unload a renovated two-bedroom condo in New Westminster, just east of Vancouver. The unit, with an asking price of $569,000, had been sitting on the market for two months as of mid-December, with almost no interest...

...When the governor of the Bank of Canada stood to deliver a speech in Edmonton about his latest rate hike, the reception was frosty. While the goal of the hike was to cool an overheated economy, oil prices were sliding and households were already struggling to absorb a series of earlier increases. The governor stood firm: “It is not the bank’s job to be popular.”

While the current governor, Stephen Poloz, may share that conviction, the governor who delivered that speech was Gerald Bouey. The year was 1981, and in the span of just seven weeks, Bouey had cranked up rates seven times. His latest hike put the bank rate at a stunning 18.75 per cent. Yet Bouey wasn’t done. Rates would climb to 21 per cent as the bank strained to tame runaway inflation.

That era looms large in the minds of older Canadians. But a whole generation has grown up and entered the workforce and the house-hunting race never knowing a time when rates were above five per cent. The fact is that rates don’t have to rise to anywhere close to double-digit levels to create havoc with household finances, because households now carry so much more debt than they did then....

https://www.macleans.ca/economy/realestateeconomy/this-is-how-canadas-housing-correction-begins/

[240glt]

^ We've liquidated all of our properties in Edmonton except the house we live in, and all the proceeds from those sales have gone into GIC's. Real estate in Edmonton has been very soft with condos bearing the brunt and most concur that the worst is yet to come. We have no debt so frankly I hope interest rates keep going up which will help pad our short term savings and hopefully lower prices in the southern interior where we want to buy land in a few years.

[misher]

Originally Posted by 240glt

^ We've liquidated all of our properties in Edmonton except the house we live in, and all the proceeds from those sales have gone into GIC's. Real estate in Edmonton has been very soft with condos bearing the brunt and most concur that the worst is yet to come. We have no debt so frankly I hope interest rates keep going up which will help pad our short term savings and hopefully lower prices in the southern interior where we want to buy land in a few years.

I wonder what everyone who is anti speculator is going to say when speculators begin speculating that prices will go down. Will they then argue that government should increase prices to fight speculators?

[WarrenC12]

Originally Posted by Vin

Overall property values in Vancouver proper increased by 2% as per the 2019 assessment, despite having multi-million dollar houses dropping in values by more than 10%. Sales of condos could be down, but when would the price bubble burst? And you do know what "bubble bursting" means right?

Did you misread your assessment? They went down by 2%.

[Alex Mackinnon]

Originally Posted by misher

I wonder what everyone who is anti speculator is going to say when speculators begin speculating that prices will go down. Will they then argue that government should increase prices to fight speculators?

.... lol, wut?

[mcminsen]

Originally Posted by Vin

Overall property values in Vancouver proper increased by 2% as per the 2019 assessment, despite having multi-million dollar houses dropping in values by more than 10%. Sales of condos could be down, but when would the price bubble burst? And you do know what "bubble bursting" means right?

Originally Posted by WarrenC12

Did you misread your assessment? They went down by 2%.

My new assessment says City of Vancouver down an average of 2%. My particular assessment was still up 7%, which was about half of the previous year's increase (13%), which was about half of the one before that (27%). I think I see a trend.



my pic:

[WarrenC12]

Originally Posted by mcminsen

my pic:

Both of my condos went up. I've even heard east side SFH are up, so those high end west side SFH must have taken a beating.

[whatnext]

Originally Posted by misher

I wonder what everyone who is anti speculator is going to say when speculators begin speculating that prices will go down. Will they then argue that government should increase prices to fight speculators?

Speculators do nothing but drive up prices. Are you arguing in their favour?

Meanwhile, this seems tailormade for Vin, from today's Financial Post:

It’s not just Vancouver: Property market slump goes global, jolting cities from Hong Kong to Sydney
Rising borrowing costs, increased government regulation and volatile stock markets playing a role, along with dwindling demand from Chinese buyers

Asia is finally succumbing to the global property slowdown that’s jolted homeowners and investors from Vancouver to London, with markets in Singapore, Hong Kong and Australia showing fresh signs of softening.

The economic ramifications could be serious. Lower house prices and higher mortgage rates will not only dent consumer confidence, but also disposable incomes, S&P Global Ratings said in a report last month. A simultaneous decline in house prices globally could lead to “financial and macroeconomic instability,” the IMF said in study released in April.

While each city in the region has its own distinct characteristics, there are a few common denominators: rising borrowing costs, increased government regulation and volatile stock markets. There’s also dwindling demand from a force so powerful it pushed prices to a record in many places — Chinese buyers...

https://business.financialpost.com/real-...ey-join-global-slump?video_autoplay=true

[misher]

Originally Posted by whatnext

Speculators do nothing but drive up prices. Are you arguing in their favour?

Uh no, you can speculate things will go up or things will go down. It goes both ways.

Are you a speculator? I was accused of supporting speculators before and now that its predicted that prices will go down speculation is on that side. So anyone wanting prices to decrease is supporting speculation.

Breaking Down the Speculator
Speculators attempt to predict price changes and extract profit from the price moves in an asset. They may utilize leverage to magnify returns (and losses), although this is a personal choice of the individual. There are speculators in all markets.

Normally, speculators operate in a shorter time frame than a traditional investor. For example, a person may call themself an investor if they buy 20 strong companies and plan to hold those stocks for at least 10 years, assuming the companies continue to perform well. A speculator, on the other hand, may use all their portfolio capital to buy five stocks, or several futures contracts, expecting them to rise over the next few days, weeks, or months. Speculators typically utilize trading strategies that tell them when to buy, when to sell (at a loss or profit), and how big of a position to take.

https://www.investopedia.com/terms/s/speculator.asp

[fredinno]

Originally Posted by misher

I wonder what everyone who is anti speculator is going to say when speculators begin speculating that prices will go down. Will they then argue that government should increase prices to fight speculators?

hmmm....

Originally Posted by Vin

Well, in that case, please do let me know when the bubble finally bursts here in Vancouver and we're down to sane levels around year 2000, or about $300-$400/sqft for residential property sales.

$400/sqft is ~$552/sqft today adjusted for inflation. Accounting for that, a New Westminister New Build 2-bedroom condo might cost $400,000, which sounds about right. Not sure, but might still be profitable...? Maybe? Anyone want to confirm?


Also, 2000 was the beginning of the post Dot-com recession, so prices were lower back then than would be expected from this so far.


Unless enough people and banks were betting on RE prices to rise, in which case, falling RE prices might predicate a recession in and of by itself anyways.