Here’s something to chew on. Not a single detached new home was sold during September on the west side of Vancouver. Until just weeks ago, this was arguably the hottest housing hood in the nation.
Of course, BC’s great HST flip-flop has something to do with that. Now that the province has announced it will kill the tax, which applies to new builds over half a million (for that, in VanCity, you get an ‘It’s My Potty” and an empty Best Buy box) construction has all but stopped as buyers wait for the levy to disappear. But that’s more than a year away. As you might imagine, it’s a disaster.
However, we’re talkin’ Van west here, where shacks on so-so-lots get $2 million and particle board McMansions have commanded twice that. Does a horny rich, jet-lagged Asian laying down four mill really care about a few hundred thousand more in tax? Or was all that HAM hype of last Spring just that? Realtor-created, media-infused, jingoistic marketing crap?
That’s what this pathetic blog alleged at the time, giving the razzberry to that Key Marketing nimrod in Vancouver who hired a copter, loaded it with ethnic Chinese realtors from Richmond and then conned the media into thinking it was Air Beijing. When it buzzed White Rock, Global TV had an orgasm.
But enough about Vancouver and the Lower Mainland. We’ll all get more interested in it as the body count rises.
Instead, a few words following up on yesterday’s post on the astonishing discrepancy between real estate values here and in the States. (By the way, I chuckled all day as I saw realtors and house-humpers attack the chart showing average Canadian prices and median American ones. These folks need to get out more.)
You may have noticed the gap narrowing on Friday, thanks to the Canadian dollar collapsing another cent. In a scant period of time our currency has lost an astonishing seven cents against the greenback, and it now looks like there’s more peeling to come. This instantly made Canadian real estate more affordable to Bill Gates and Lady Gaga. For Canadians, not so much.
This dollar thing is of great interest. Also on Friday came news that the economy grew in the latest monthly period (a surprise) and is now expanding at an annual rate of 2.3%. Not bad compared with America or Europe. But despite that, the loonie bled to death when such news should have bolstered it.
Why? Commodities. The price of the stuff that supports this economy – oil, base metals, wood products and precious metals, for example – is cascading lower. Oil is back below $80 a barrel, almost 30% lower than a few months ago. Gold has lost $300 an ounce, which is a bitch if you bought on the taunting advice of the metalheads who once came here (now too embarrassed). Copper – demand for which is considered a bellweather of economic growth – has collapsed.
Because Canada’s a resource exporter, with a stock market heavily weighted in mines and energy, our currency’s being laid low as global demand withers and economies flatline. Add to that the fact worried money flies into US dollars as the safest of havens, and the value of both commodities and the loonie suffer.
Of course, a 95-cent dollar is a heckuva lot more positive for exporters, tourist operators and anyone who sells stuff into the American market, than a dollar at $1.06. But with US demand weak and falling, and the absolute turmoil of a presidential election year looming – when the most powerful guy on the planet will be hobbled and skewered daily – there’s no reason to expect change. America could likely spend a chunk of 2012 in recession. Since we sell 70% of our exports there, currency traders are cutting the loon loose.
What does this mean on your street?
Well, a dollar that loses ten per cent of its value is not a good thing. Imports get more expensive, and food will take the biggest hit. Inflation will be pushed higher, and we will get a lot closer to the Bank of Canada budging rates higher. But more profoundly, falling oil and metal and lumber prices hurt the whole economy, costing jobs and halting new investment – most notably in the oil sands industry.
Falling national income is not a positive. Combined with record household debt levels and a near-saturation of real estate ownership, it suggests we’re closer to reversing house prices than at any time since the autumn of 2008. As I said here some days ago, this is now the most dangerous asset class in the nation.
Stocks and bonds, preferreds and REITs, small caps and big caps – they may all gyrate and take skill to master. But they’re liquid. Tradable any time. Saleable in 15 minutes. Turned into cash in three days. And destined to pay handsomely when the buds come out again.
Think about where risk dwells. Now say a little prayer for Van west.