Canada's 'housing bubble' deemed close to bursting

[whatnext]

Originally Posted by theman23

No clue. Maybe from illegitimate means? I don't know, but that's not really what we're discussing.


Not sure how you know how much she made when you have no idea how much she leveraged herself or what her financial situation was. Anyways, she made $30K less than what she thought she would which isn't exactly chump change. ...

Perhaps not exactly what we're discussing but is certainly germane to the insane run-up in Vancouver home prices. I'd lay odds that money was spirited out of Mainland China before strict capital controls came in.

[misher]

Originally Posted by someone123

Those stats don't clearly show that at all. There's nothing in that chart that tells you that the current presale stuff will resemble the older building stock once completed. And the resale prices aren't affordable either.

$674 per square foot in New West means $674,000 for a resold 1,000 square foot place in one of the cheapest parts of town. Depending on how you measure it the typical household earns around $80,000-100,000 a year in metro Vancouver; it's about middle of the pack for Canadian cities. Maybe they could swing it but a $674,000 condo is not affordable for a family earning $100,000 a year.

https://en.wikipedia.org/wiki/List_of_cities_in_Canada_by_median_household_income

But a $337,000 500sqft condo is affordable and comfortable for a single person or a couple. In the end its not the 80's, the amount of people living by themselves is on the upswing and Vancouver isn't the place you go to raise a family on the cheap.

In the end we keep talking about how Vancouver isn't affordable but we haven't copied asian/european cities that deal with this problem by creating smaller, more efficient condos. The normal single person needs less than 200sqft to themselves working out to $135,000. It may not be glamorous but $135,000 is a price we can all afford and its great for part-time students or those saving up for a family someday. I myself lived in 200sqft for a while because the rent was cheap. We're building condos for our homeless that are more expensive than the "luxury condos" sold in Hong Kong for normal people because in the end we are prudes who insist that we need more. We need to change our views and see how other expensive cities provide affordable housing. We need 10 buildings like this around every skytrain station to provide affordable housing to our minimum wage workers and students. We should have 200sqft 1 bedrooms, 300sqft 2 bedrooms, and 400 sqft 3 bedrooms. A queen size bed is only 35sqft so a bedroom does not need to occupy more than 100sqft.



On another note, the latest foreign buyer numbers are interesting. Don't see a lot of Chinese in Delta or on farms outside cities so I assume they are coming from India and America.

Foreign absence

Conspicuous by their absence from last week’s provincial budget were any references to foreign-buyer taxes or speculation and vacancy taxes (for which declaration forms hit mailboxes last week).

Perhaps the lack of a mention was because, as Finance Minister James claimed, “the days of cashing in on a hot real estate market at the expense of hard-working British Columbians are done.” According to data from the B.C. Ministry of Finance, foreign involvement in B.C. residential real estate transactions last year stayed below 2 per cent during the final eight months of the year. The peak was in February, with 2.5 per cent of residential transactions in the province having foreign involvement, and activity ebbed to a low of 1 per cent in November.

These rates compare with 9 per cent in July 2016, when the BC Liberals introduced the first iteration of the foreign-buyer’s tax, and 3 per cent in 2017, the year the BC NDP came to power.

The average for the city of Vancouver last year was 3.5 per cent. The Metro Vancouver municipality with the highest rate of involvement was Delta, where 4 per cent of residential transactions involved a foreign buyer.

But the real haven for foreign buyers in Metro Vancouver was rural property, with 6.2 per cent of residential purchases involving a foreign buyer occurring on rural properties outside municipal boundaries.

https://www.westerninvestor.com/news/opi...t-expense-of-local-government-1.24084688

[milomilo]

Lol, — that. There is no need for Vancouverites to live in prison cells, the city just needs to desire more affordable housing (it does not yet) and build more houses. The anti developers need to pipe down too, they just make the problem worse.

[misher]

Originally Posted by milomilo

Lol, — that. There is no need for Vancouverites to live in prison cells, the city just needs to desire more affordable housing (it does not yet) and build more houses. The anti developers need to pipe down too, they just make the problem worse.

Lets not insult what other people live in? In the end this is the most many can afford. Even if land was free costs dictate at least $500/sqft.

While we do need to build more we also need to build "affordable" housing. A 200sqft apartment for $700/month rent is much better for that then a 400sqft apartment for $1200/month.

[WarrenC12]

Originally Posted by milomilo

Lol, — that. There is no need for Vancouverites to live in prison cells, the city just needs to desire more affordable housing (it does not yet) and build more houses. The anti developers need to pipe down too, they just make the problem worse.

People should be free to live in whatever setup they like.

And yes, the NIMBYs need to get beaten back and zoning needs to open up across some areas of the city that are not dense at all today.

[someone123]

Originally Posted by WarrenC12

People should be free to live in whatever setup they like.

Few people would choose to live in a 200 square foot apartment instead of an 800 square foot one. But I agree that it's good to focus on choice.

Right now the Vancouver condo market doesn't offer very good choices. Most new construction is expensive and small. There aren't a lot of larger (which now even means 1,000 square feet; 1,500 would be nice) no-frills units.

It's just wrong that it has to cost $500 a square foot for new condo units in Vancouver. And even at $500 per square foot the land costs and development fees are a significant portion of the total. Multi-unit land is expensive because little land is zoned for highrises and most of it is owned by a few builders.

[misher]

Originally Posted by someone123

Few people would choose to live in a 200 square foot apartment instead of an 800 square foot one. But I agree that it's good to focus on choice.

Right now the Vancouver condo market doesn't offer very good choices. Most new construction is expensive and small. There aren't a lot of larger (which now even means 1,000 square feet; 1,500 would be nice) no-frills units.

It's just wrong that it has to cost $500 a square foot for new condo units in Vancouver. And even at $500 per square foot the land costs and development fees are a significant portion of the total. Multi-unit land is expensive because little land is zoned for highrises and most of it is owned by a few builders.

Unless your suggesting we should pay people less, cut taxes on development, charges on development, revise the building code, decrease energy efficiency, or increase approval times there is no way to drop this cost. The city is paying around $500/sqft for its temporary modular housing. $500 is probably low given that it doesn't include the cost to build common areas and the parkade. Remember that in Vancouver we are in an earthquake zone so there are requirements for thicker concrete and in a rainforest climate so we have additional requirements for exteriors, drains, and roofs. Plus the city has requirements for landscaping, asthetic requirements, and amenity requirements.

I think even the people who argue with me would agree that we cannot go below $500/sqft on new construction. Decades ago when the construction worker was paid near minimum wage and was often a foreign immigrant we could build cheaper and the materials to build were also cheaper with less complicated systems and worse insulation. Nowadays they are well paid professionals and materials are expensive plus we demand the latest technology from insulation to boilers to wiring.

[whatnext]

So t turns out not only were foreign buyers an issue, but in some cases mortgage fraud perpetrated by them amplified the housing crisis:

Mortgage fraud amplified foreign money, court case reveals
February 26, 2020

Vancouver’s runaway housing prices have long been blamed on foreign money. But a recently concluded BC supreme case reveals that the impact of foreign money has been amplified by mortgage fraud.

Meet wealthy businessman Jian Guo Wang who moved to Canada from China with his wife Fei Fei Wu to give their daughter Yi Meng Wang AKA Sharon a good education1. Mr Wang doesn’t work in Canada and makes all his money in China.

[16] The Claimant, Jian Guo Wang is a wealthy, self-made man. He got his start as a young man studying machinery, and now with a few partners, runs a successful manufacturing company in China. Mr. Wang is also an astute investor.
[17] In 2002, Mr. Wang and his wife Fei Fei Wu (“Ms. Wu”) immigrated to Canada so that their daughter, Sharon could have a good education.
[18] Mr. Wang and Ms. Wu initially settled in Richmond. Later, they purchased a home on West 21st Avenue in Vancouver.
[19] After completing high school, Sharon studied economics at Western University in Ontario, and later transferred to Simon Fraser University to complete her studies. During this time, and for a considerable time thereafter, Sharon was supported by her parents.
[20] Mr. Wang does not work in Canada. Rather, he has supported his family through his income in China and he divides his time between China and Canada.

Sharon meets and marries Jun Cheng Jiang AKA John, who came to Canada from China with his parents as refugees “because they did not have the financial holdings to justify being investors or entrepreneurs.”

[47] However, Ms. Jiang acknowledges that she and Mr. Jiang came to Canada as refugees because they did not have the financial holdings to justify being investors or entrepreneurs. She also acknowledged during cross-examination by Sharon’s counsel that, at discovery, she made no mention of having any substantial assets. No contemporaneous loan documents have been produced by Ms. Jiang or John...

...According to the version of events accepted by the courts, Mr. Wang wanted to “get into the real estate market in Vancouver” and decided to buy 2772 West 20th Avene Vancouver, because, among other things, “Mr. Wang liked how close West 20th was to his home on West 21st Avenue”....

...The property, which cost $2,123,000, was bought in John and Sharon’s name with $850,000 provided by Mr. Wang, and the rest financed by a mortgage that John and Sharon assumed.

How did John qualify for the mortgage?

[93] In his application to CIBC to assume the vendor’s mortgage, John provided various financial information about himself. That information included:

(a) He was then working for Westin International Trading Inc., and had been since March 16, 2009, and that he was earning $18,750 per month;

(b) Sharon was then working at Mr. Zhang Enterprises Inc. and had been since January 6, 2010, as office manager and bookkeeper, earning $4,000 per month;

(c) John owned a Mercedes worth $95,000; and

(d) In addition to the value of West 20th, which he listed as $2,123,000, John had $850,000 of his own funds in a bank account.

[94] According to the Claimant, none of that information was true:

(a) By this time John had already started WIT [Wingsum International Trading Inc., which will be dealt with in more detail in the matrimonial action], and had ceased working for Westin. Also, according to his own evidence at trial, John was not earning anywhere close to $18,750 per month, rather, as he said during his evidence in chief and confirmed during cross-examination, he was earning a little over $3,000 per month.

(b) Sharon never worked at any business called Mr. Zhang Enterprises Inc. In 2012, she was still a student, and was not working at all. At trial, John confirmed that Mr. Zhang was one of his customers.

(c) John did not own any Mercedes. Ms. Wu owned a Mercedes, which Sharon used from time to time.

(d) John did not have $850,000 of his own funds, in addition to the value of West 20th. Rather, John had $850,000 of Mr. Wang’s money which was required in order to complete the purchase of West 20th.

Mr Wang and John both were both interested in real estate, so they decided to buy 7371 Sunnymede Crescent, Richmond, this time in John’s m[/I]other Ms. Jiang’s name...

https://openhousing.ca/2020/02/26/mortgage-fraud-amplified-foreign-money-court-case-reveals/

[misher]

Originally Posted by whatnext

So it turns out not only were foreign buyers an issue, but in some cases mortgage fraud perpetrated by them amplified the housing crisis:


[17] In 2002, Mr. Wang and his wife Fei Fei Wu (“Ms. Wu”) immigrated to Canada so that their daughter, Sharon could have a good education.

Are you saying people with Asian names are foreign buyers even if they are immigrants with Canadian citizenship? Or are all immigrants foreign buyers?

[milomilo]

Originally Posted by misher

Lets not insult what other people live in? In the end this is the most many can afford. Even if land was free costs dictate at least $500/sqft.

While we do need to build more we also need to build "affordable" housing. A 200sqft apartment for $700/month rent is much better for that then a 400sqft apartment for $1200/month.

That sounds awful, such a waste of money for so little. There is no need for any Canadian to live in such a tiny space. If people do want to live in such a space, then they should be paying an appropriately cheap rent.

Vancouver is a sea of SFHs. You could house 10x the population in larger units if the city actually wanted to improve affordability, but they don't.

[misher]

Originally Posted by milomilo

That sounds awful, such a waste of money for so little. There is no need for any Canadian to live in such a tiny space. If people do want to live in such a space, then they should be paying an appropriately cheap rent.

Vancouver is a sea of SFHs. You could house 10x the population in larger units if the city actually wanted to improve affordability, but they don't.

Its impossible to get rent down to $700/month in new units unless we reduce the size of units. You can deny that all you want but its reality. And many of us would be happy with a 200sqft apartment if our rents were $700/month. They are definitely perfect for students who compete for our rental supply. Also a great alternative for those who currently rent a bedroom with shared bathroom.

Have you ever lived in dorms? Dorms are a lot smaller than 200sqft. I think if you lived in 200sqft you might learn to like it. People from Asia, Europe, or New York wouldn't bat an eye at it. You can see below that with a bed, kitchen, living area, and bathroom you are provided the essentials of life and an enjoyable space. Most of my friends in university (and after) would have killed for their own apartment they could rent for cheaper than they pay to share an apartment/house.

To adjust to being a big city we need to adapt to what other big cities have done. If you want space move to a smaller town or a farm.

• Video Link

[misher]

Odds of a rate cut now over 96%. Busy Spring season, reduced supply coming on market, lower stress test in April, and lower rates? Vroom vroom vroom!

The odds of a Fed rate cut in March are now over 96%. Was 33% yesterday and only 9% 1 week ago.

https://twitter.com/charliebilello/status/1233180290622816256

[milomilo]

Originally Posted by misher

Its impossible to get rent down to $700/month in new units unless we reduce the size of units. You can deny that all you want but its reality. And many of us would be happy with a 200sqft apartment if our rents were $700/month. They are definitely perfect for students who compete for our rental supply. Also a great alternative for those who currently rent a bedroom with shared bathroom.

Have you ever lived in dorms? Dorms are a lot smaller than 200sqft. I think if you lived in 200sqft you might learn to like it. People from Asia, Europe, or New York wouldn't bat an eye at it. You can see below that with a bed, kitchen, living area, and bathroom you are provided the essentials of life and an enjoyable space. Most of my friends in university (and after) would have killed for their own apartment they could rent for cheaper than they pay to share an apartment/house.

To adjust to being a big city we need to adapt to what other big cities have done. If you want space move to a smaller town or a farm.

• Video Link

I have lived in things like that, when I was a student. But I am an adult now and no adult in Canada with a half decent job should have to expect to live like that. Sure, build some buildings full of units like that if there is demand, but we shouldn't expect that to be the norm. It's perfectly within the realms of economics in Vancouver to have affordable housing that is good (there's plenty of space), it has just been denied by the population and government.

[milomilo]

Is that video a parody? The poor girl looks like she is about to crack up and burst into tears. "It's amazing! I can literally prepare food while I sit on the toilet!".

[whatnext]

Originally Posted by milomilo

Is that video a parody? The poor girl looks like she is about to crack up and burst into tears. "It's amazing! I can literally prepare food while I sit on the toilet!".

Why do you hate efficiency?!

[vid]

Originally Posted by lio45

You've got that "grab an energy drink and get to work!" $50,000 house available, if you want. Probably a good deal, now that Thunder Bay rents are starting to be Torontoesque. (Or at least, that's kinda what I've been hearing - from my one TB source, i.e. you)

oh i dont like red bull

i want a house that's already done that house is like someone puts a raw beef on ur plate and is all "h a m b u r d e r" like omg no

my landlord replaced the fire alarm pull tab last week like yes, that's exactly what was wrong with this building thenk you

[lio45]

"Houses that are already done" are for losers. I built a sizable real estate portfolio (actually two of them) on the diametrically opposite approach, and couldn't have achieved anywhere near as much with any other method. You want the $50k fixer-upper, not the $200k cooked hamburger.

[casper]

Originally Posted by milomilo

I have lived in things like that, when I was a student. But I am an adult now and no adult in Canada with a half decent job should have to expect to live like that. Sure, build some buildings full of units like that if there is demand, but we shouldn't expect that to be the norm. It's perfectly within the realms of economics in Vancouver to have affordable housing that is good (there's plenty of space), it has just been denied by the population and government.

We have no shortage of students in metro Vancouver.

We have no shortage of new grads just starting out that would choice this for a few year if it means they can save up some money.

We have no shortage of seniors who are and want to live on their own and would be better of in something like this instead of an institution.

We have no shortage of people living on the street that are struggling to get into any form of housing.

With the evolving nature of work we have no shortage of people who have a main home on the island outside the city and come in for a day or two a week and spent the rest of their time working from their "other" home.

[vid]

Originally Posted by lio45

"Houses that are already done" are for losers. I built a sizable real estate portfolio (actually two of them) on the diametrically opposite approach, and couldn't have achieved anywhere near as much with any other method. You want the $50k fixer-upper, not the $200k cooked hamburger.

I'm not looking for a portfolio. I'm looking for a home that I can live in starting on the first day. I don't have the luxury of having second, third, back up houses to stay in. I have only one place to live. I could buy that $50,000 house, but then I have to put time and effort into fixing it (with skills I don't have, meaning I have to hire someone to help me do it) and in the meantime, continue living where I am now, continue paying a significant portion of my income toward a landlord while also putting a significant portion of my income toward the bank that bought the house for me and the third party helping me turn the burned out shell into a home. It would be good for you, but it doesn't make sense for me.

In my neighbourhood, we have 150 homes in a single unused building right across from a shelter that fits 150 homeless people on cold nights. The building is now sitting empty because the owner, someone like you, is waiting for the homeless shelter to be relocated so that people who already have homes can buy those homes and rent or sell them to other people who already have homes but want second or different homes. It seems strange to me.

[misher]

Should be a large boost in purchases if rates drop from 1.75 to 1.25 and the stress test drops 0.4-0.6%. Currently cheapest 5 year fixed is about 2.8% so a 0.5% drop leads to a 18% decrease in interest payments which is huge. At least this should help homeowners and business owners in the short term with affordability.

Bank of Canada Should Cut Overnight Rate to 1.50 Percent Next Week and to 1.25 in April: C.D. Howe Institute Monetary Policy Council

A countervailing theme in the comments of many members was downgrades in their assessments of the Canadian economy’s potential growth rate. Negative supply-side impacts of Covid 19 were a consideration here. So were Canada’s recently demonstrated vulnerability to transportation disruptions. Several members cited continued evidence, exemplified by Teck Resources’ cancellation of its Frontier oil sands project and captured in a weak capital and repair expenditure survey from Statistics Canada this morning, of weak business investment, with ominous implications for future productivity growth. In the near term, some members noted that slower potential growth implies a smaller output gap, and thus less room for policy rate cuts, than would be the case otherwise. Looking further out, however, slower potential growth would lower the level of the policy rate that is consistent with steady growth and 2 percent inflation.

Further tempering influences on the group’s overall desire for a lower overnight rate target over time was the current strength of the Canadian housing market, and solid growth of employment and wages. Combined with the possibility that some factors contributing to weak growth in late 2019 and early 2020 were temporary, the group tended to feel that the Bank of Canada need not cut more than 25 basis points next week, and that it could await confirmation of some of the negative influences from abroad before cutting further.

https://www.cdhowe.org/council-reports/b...and-125-april-cd-howe-institute-monetary

All signs point to a crazy April market.