A good thing I stopped caring what people think. That happened years ago when (during a period of temporary insanity) I held public office. The doors of the House of Commons elevator I was riding in opened onto the main corridor where the media cabal was hanging out. Hey boys, I said. The doors closed and we continued on our way upstairs.
The next day there was a large photo on the wire with the caption, “MP Garth Turner never goes anywhere without two blonde, female aides.” Not having any Amazons at that time, I looked hard at the picture and saw I was indeed flanked by two women – both of them House of Commons internal couriers.
Not long after, a story appeared in the Globe about how “millionaire Parliamentarian Garth Turner” had purchased a unit in an exclusive downtown Ottawa condo where rock stars (Alanis Morsette), dilettantes (Belinda Stronach) and hockey heroes (some big, scary dudes) lived. I was insulated by wealth, obviously, from the concerns of working stiffs while sucking off a government wage.
But, I rented. It was cheap. Unlike other MPs living it up in hotels and putting it on their expenses, I never claimed a dime. So I concluded (a) people will believe whatever they wish to be true about others and (b) the hell with them.
Lately you may have noticed on this blog how some folks like to dispute whatever is said. Why they don’t just leave is an interesting question. But a fav topic is the extent to which Canadian housing affordability has been destroyed by foreign buyers. My position is simple: of course offshorers influence some prices in Van or Toronto, but not enough to move the entire market. Instead, it’s locals who do that, hopped up on cheap money, fueled by FOMO and whipped into a speculative frenzy by Global, the Globe and an army of hungry realtors.
When data supports this long-stated belief, it’s trashed. When some junior UBC prof writes a paper quoting ill-researched media reports decrying Chinese, it’s a party. Once again, people believe what they want, and nothing will change that except a market decline.
Now it looks like they may get one. As the tide goes out, we’ll see who’s left holding the bag. I doubt it will be thousands of guys from Guangzhou. As I wrote here and in the HuffPost the other day (more flaming), rising prices on thinning sales volumes is not a good sign. As you also know, sales of homes in June tumbled from May (not an uncommon event) but have fallen seriously from year-ago levels – up to 40% in some hoods. Third, the sales-to-listing ratio now clearly peaked a year ago and has been declining since. One realtor last week declared the tony Westside to be “a buyer’s market.”
Now we have new analysis from indy housing analyst Ross Kay suggesting the tide’s already receding, with the flow of capital into the Vancouver market massively diminished. Says he: “When we warned of the perfect storm, this is what we were talking about. The $4 billion in capital that entered Vancouver between February and March to support house price gains had dropped to just under 1/2 billion in June. That was the most volatile reduction recorded in the history of Canadian real estate.”
What that means in practical terms is this: insane increases in selling prices are coming to an end. Kay says the market is now entering “its first phase of correction” which will continue unless the Bank of Canada loses its mind and chops the trendsetting rate once again. Price gains are forecast to drop by more than half, and “the average selling price in the second half of 2016 is forecast to be 11.35% lower than in the first half of the year.” More significantly, the analyst says, “a 20% correction could very well be recorded by June 2017.”
As you know, that would shave about $350,000 off the value of the average detached in YVR (where 91% of all houses are assessed at over a million). Finally, this: “June of 2016 recorded the highest number of closings reported across Canada and the mortgage debt assumed to make those deals happen is about to be reported by the Banks and StatsCan. It appears Canada’s housing bubble may very well be cracking the moment household debt tied to mortgages sets a new record.”
Kay, by the way, disagrees with me about foreign cash and its impact on the market. He argues it is now the withdrawal of that capital which will cause an unstable, wobbly, entirely speculative pyramid to topple – because it’s not supported by economic fundamentals. In other words, locals (who still make up 95% of all trades) have been over-reaching, over-borrowing and buying beyond their practical means to grab a piece of the pie they perceive is slipping away.
This will probably end in the tears of those who borrowed excessively to buy too much, and the regret of many more who watched the biggest windfall of a lifetime pass them by. As I said at the outset, people will believe what they want to believe and these days the V in YVR stands for “victim.” The howls as this all deflates will be deafening.
Above is a crack house. “I’m totally pro-RE,” says blog dog Alex, “but even this is getting a little ridiculous. Lol.
“This is a 3 bedroom rancher that was a grow op and meth lab and flop house for all sorts of delinquents in the worst part of Maple Ridge, a suburb of Vancouver that takes an hour to drive to (two hours in rush hour). This house was declared derelict, boarded up and had all utilities physically removed due to the above mentioned enterprises that were run from it. It is located across an empty lot that was one of the worst “tent cities” for the homeless in the city.
The lot is less than a quarter acre, and it is by all accounts a tear down. I should know, I’ve had the chance to look at this house extensively in person, inside and out. It was bought at a foreclosure auction at the end of 2015 for $300K. It is now for sale for $1.3 million. Wow. Now THAT’s crazy ….and it’s now been removed from the MLS. Could be sold?
I rest my case. Get out.