Jonathan and his wife entertained some out-of-town friends in downtown Vancouver this past weekend. “We strolled around the False Creek and the Yaletown area before the Canucks game,” he says. “Outside one of the waterfront towers was an agent, so we chatted with him for a minute. The unit he was showing that day had been on the market I think for over 2 years, never lived in, bought at 1.3 million, current price 1.0. He said the owner has a 2.0 million unit in the building next door, same deal never lived in, bought on pure speculation, can’t sell it.”
Concludes Jon: “It’s amazing how many stupid people have lots and lots of money.”
Meanwhile in Toronto, some arresting news about glass spires full of boxes. In the first two months of the year condo sales plunged by 59%, even as work progressed on more than 100 new towers across the GTA. This comes on top of an overall drop in housing sales of almost 30% last month, and 24.8% for the first two months of 2012.
This is precisely the danger this tedious blog has bleated on about, month after tortuous month. House horniness has led to a surge in supply, while price escalation and debt fatigue have whacked buyers. The average SFH in 416 is now a withering $840,000. The average GTA home is $502,000. In Vancouver – where sales are also tanking – half a mill buys you a seedy garage and all the used condoms you’ll ever need. Hell, sales are falling in Calgary, where they labour under the delusion that oil prices grease real estate.
Even the rich people are zonked.
For example, here’s the Ritz Carlton, that swishy, pointy thing thrusting its way up in downtown Toronto. There’s a five-star hotel below, and luxury condos above which were supposed to break the $1,000-per-foot barrier, turning Hogtown into a veritable Paris-on-the-Don.
Well, forget that.
Since marketing started in the summer of 2011, there have been a mere seven sales. There’s now a 2.5-year supply of unsold units on MLS, amid universal suspicion the developer is holding back a bunch more. Worse, even the uber-luxe part of the market is awash in supply. Two more prestige buildings (Shangri-La and Four Seasons) will be coming on stream in a year, which means prices will be traveling south from the $750-a-foot apex they’re now at.
My, oh my. How can this be good? Sales falling off a cliff among the proletarian buildings. Rich people on strike. Tens of thousands of new units under construction, about to flood the market this year and next in Toronto, Vancouver and Calgary. At the same time, bidding wars and flash mob buying frenzy, as we grow closer to tighter mortgage regulations, chastened banks and higher mortgage rates.
Does this sound like a balanced market to you?
Only if you’re a realtor. Then the world makes astonishing sense because Canada has no bubble, never was a gasbag, and never will get property bloat. It’s different here! And to prove that point a direct mail campaign has started, leading to a fair chance you might get this in your mailbox:
The flyer should be put on trial for murdering the truth. For example, here are three reasons given why this blog tells you nothing but lies.
(1) We have stricter lending standards than the United States.
(2) Mortgages are full recourse loans.
(3) We tend to seek conservative mortgage options.
Of course, Canadian banks have been lending up a storm lately and even handing over deposits to those unfortunate enough not to have one. The average downpayment is 7% and nine of every ten new originations are high-ratio, requiring government insurance to protect the banks. How is this not sub-prime? We have liar loans (stated income), teaser rates (2.99 Special) and 100% financing (cash-back). Besides, if the banks could actually be trusted, why did their regulator this week form new rules to beat them back?
Recourse mortgages? Another lie. Alberta doesn’t have them. Neither does Florida, where real estate values have collapsed 40%.
And as for Canadians being conservative borrowers, every day comes more evidence this is false. Our debt levels equal those when US real estate wobbled and sank. Mortgages, at $1.1 trillion, are off the chart. Half of us have no savings, no retirement investments. Four in ten have trouble paying monthly bills. A third of retirees struggle with mortgages. And yet 70% have houses – which explains where all the money went.
Yesterday I did radio interviews in Halifax, New Brunswick, Ottawa, Toronto, Windsor, Winnipeg, Edmonton, Regina and Vancouver. Every day links and comments from this pathetic blog show up in the MSM. Falling sales volumes speak volumes of where we’re headed, especially now that the message is ubiquitous.
The last ones to clue in will be those fools standing in a condo line.
At least they’ve learned bladder control. Hey, that’s something.