Entries from May 2014 ↓


HICKS 1 modified

Enough about the snooty people in Toronto and Vancouver, with their Lambos and Land Rovers. What’s happening in the real world?

Not much, as it turns out. Most Timmy-swilling citizens in other parts of this nation seem to have already decided only idiots would be buying real estate at historic highs. There’s a dramatic and growing gulf between the fairytale stats being turned out by local boards in Calgary or the GTA, and reality on the ground in many other cities. As Capital Economics wizard David Madani said the other day (in predicting a 25% price decline), the rot begins at the edges.

Examples abound.  Here’s Kingston, for example, a robust university city in Ontario full of restored stone buildings and buckets of culture. House sales last month were down almost 6% from a year ago, which included a 6.1% drop for SFHs and a 19% plop for semis. For all of 2014 so far, fewer than 2,000 properties have changed hands, 6.6% under a lacklustre 2013 performance.

Prices? Also dropping, off about 4% so far.

Down the 401 and across the line, Montreal is the second-largest market in Canada, with four million people (that equals everyone who lives in Alberta). Pas de realtor joy there, either. It now takes an average of 113 days to sell a condo and 91 days for a detached home, and sales are on the slide. In April another 9% drop, for the fifth consecutive month of declines.

“Given the increase in the number of listings and the decrease in the number of sales in recent months, buyers are regaining bargaining power,” says realtor boss Diane Ménard, “particularly if they’re shopping for a condominium, as market conditions clearly favour buyers in most areas.”

For Quebec as a whole (more people live there than BC and Alberta combined), sales have fallen in six of the last seven quarters, and are running 2% below this time last year. Meanwhile things are no better in Halifax, the biggest market in Atlantic Canada. Listings have started to balloon and realtors report a drop in activity of at least 30%. Sales in Halifax are running 12% below last year’s levels, and prices have declined 3%.

In Winnipeg (population 730,000, the 7th-largest city), sales are down 2% and listings have swollen by 11%. Last month there were a lonely five sales of properties listed over $750,000 and zero above $1 million. Year-to-date sales are running 4% below the 10-year average.

Sales are down 6.7% in Lethbridge. In Regina, April was the first month of the year when sales passed 2013 levels. But houses are getting cheaper. “Residential property values have actually declined in Regina over the past year – the decrease is evident in all housing types,” says the local board in its official release.

Outside Toronto, in horsey Caledon, it’s not uncommon for listings to sit now for an entire year. In Muskoka, realtors report sales of cottages are running 18% below 2013 levels.

Hmm. See what I mean? For millions of Canadians in cities and towns across the country, some kind of real estate correction is already taking place – despite the fact mortgage rates have declined and the mainstream media continues to pump sunshine up the orifices of an entire population. Even the Globe and Mail has apparently succumbed, mandating that a reporter turn out real estate porn daily, whether it’s news or not. “Sales of high-end real estate soaring”, shouted the latest effort, citing “affluent buyers regaining their confidence.”

“A number of markets across the country are seeing a strong pickup in the number of high-end homes that are selling,” reports the Globe. “Real estate industry players say they think it’s because people are less worried about the housing market’s future.” The sources for this story? A real estate marketing company (Sotheby’s Realty of Canada) and a real estate agent with a $28 million listing (Barry Cohen). Duh.

And apparently Mr. Cohen has his fingers on the pulse of the market. It’s all so simple. “You’ve got low interest rates feeding the lower end of the market, and those sellers become the next buyers for luxury.” There ya go. One day you’re closing on a one-bedoom, 450-foot shoebox overlooking fumes on the Gardiner and the next day you’re moving into $1.8 million digs in Moore Park. Bingada-bangada-boom.

Well, let’s face it. The economy is weak. Incomes are stagnant. Jobs are scarce. Debt’s huge. There’s no credible information.

Apparently they’ve figured this out in most places. And we can’t all be right.

The straw man

SWIM modified

A few days ago Vancouver’s version of Brad Lamb, but shorter and hairier, upset the locals. Bob Rennie said house prices are high in that delusional city because it’s a global destination. So get used to it.

This is a familiar theme. Other local house-floggers, like Cam Good (the bogus yellow helo guy), have claimed in the past that people in Vancouver should stop bitching about foreigners buying up real estate, and compete with them. Three years ago he famously said:

“If you suffer from real estate impotence, don’t blame Chinese people. Besides, getting all worked up about it will only make it worse. Have a glass of wine. Relax. Stop feeling sorry for yourself and pick up the phone to call a realtor or a mortgage broker, either of whom will be more than happy to show you how easy it can be to get your real estate groove on. Real estate is the best investment you’ll ever make.”

Without a doubt, untold squads of dank, damp yet horny house seekers have been driven into a buy-now-or-buy-never frenzy by fears of yellow peril. Local realtors and developers have for years used the spectre of massive Chinese investment as a prod to induce otherwise sane people into paying insane prices for houses they can only afford by inviting strangers into the basement. And it continues.

The latest ‘proof’ of the Asian invasion comes from, of all places, the New Yorker magazine, wherein a column on globalized real estate investment mentioned Vancouver as a key destination for offshore moolah. Van writers, xenophobes, moldy basement-dwellers and people with Kits-lust sooo believe this stuff. No matter that the mag used a real estate company survey (duh) as the key source of statistical data, or a meaningless study on energy use suggesting lots of condos are dark.

Vancouver Sun columnist Barbara Yaffe ate it all up. She just wrote this: “Vancouver is one of the world’s new “superstar cities” — on par with London, Paris and Milan. And so, locals seeking a roof over their heads no longer are bidding only against other locals. They are confronting a global marketplace, with all the challenges that implies.”

London, Paris, Vancouver? What kind of bad sushi are they serving on Robson these days?

“I think local realtors are being disingenuous blaming high prices on foreign buyers (and not low interest rated and excessive borrowing) because it suits their needs by making people feel it is inevitable and permanent that they will need to pay more than they can afford for real estate,” writes blog dog Joe. “If enough people buy that argument, it won’t become self-fulfilling, but I think it could practically lead to more people making bad financial decisions in the near term (buying at the peak of the market when interest rates will inevitably rise). That’s worth trying to forestall.”

You bet. Along with the racism that is so evident in this pathetic blog’s comment section from people who blame every poor Asian guy from Surrey or Burnaby for unaffordable houses. This realtor-fed myth that homes cost too much because of Chinese money has governments actually considering controls on real estate ownership – a massively dumb idea. The last thing our stuttering economy needs is less international investment, or to send out an isolationist message.

Besides, Canadians have nobody to blame but themselves when crap houses in East Van sell for a million bucks. Below is an interesting piece of data just published by Straight.com, showing non-resident occupancy levels for various Van hoods. You will quickly note that in the vast majority of the city it’s between 0% and 7.7%. Some invasion.


Vancouver (and to a lesser degree Victoria) have always carried a real estate premium because of geography, climate and the hemming-in by mountains and sea. This started to bloat about the same time housing prices erupted in other centres, like Toronto. We all know why. After the GFC of 2008-9, freaked-out governments brought in emergency interest rates, then experimented with zero-down payments and 40-year mortgages. They gave us new first-time buyer tax incentives, sweetened RRSP home-purchase withdrawals and doubled the cash CMHC threw on the property bonfire. Meanwhile banks loaned indiscriminately, started offering cash-back bribes and financed a condo explosion.

Real estate became a mania, then an obsession. The home ownership rate soared, and mortgage debt along with it. Suddenly everyone piled on, because we all love to buy high and sell low. And when prices had been forced into the realm of fools, we blamed the rich Chinese guys buying houses 99% of Canadians couldn’t afford anyway. It’s called the straw man argument. It’s a fail.

Ironically, of course, the market is turning. Fred sees that. He sold his DT condo, rented a place, got a baby and is now looking for bigger digs.

“The plan was to rent first, then wait for the Garth predicted decline in prices,” he says, “but the latter may be coming sooner than I thought it would.  I am a diligent searcher of the local MLS listings and a year ago, if you tried to search for a house that had a minimum of 5 bdrms and minimum of 3 bathrooms, with a mortgage helper of some sort (we would either rent it, or move one set of boomer parents in to it) in Coquitlam, Port Coquitlam or Port Moody under $600,000K, nothing sane could be found on there.

“Yesterday that same search yielded 9-10 options and a few of them, just by looking at the pics, are actually places that would appeal to us.  Could it be that the plummet is coming even before the rate hikes?  If it is, what Armageddon awaits when the rate hikes do kick in?  Moreover, my good friend has been one of these speculative buyers, who did well with one buy, is drowning with another buy and is about to have a third come online, which he is resolved to renting at a loss, cause flipping it now that the building is done could wreck him.  So when it comes to articles like these, I wonder where this data is coming from and wanted your thoughts.”

And you have them. Vancouver’s been punked.