2015 in 604

BIKER modified

Let’s say your family earns $71,140. If you live in BC, the take-home is $56,261 and your marginal tax rate is just a tad less than 30%. That’s under $4,700 a month, for housing, food, clothes, booze, lottery tickets, insurance (same thing), savings, car, gas and a trip home once a year to see your bewildered folks in Estevan.

So, could you afford a house worth a million?

Hardly. It’d be a miracle to swing a place costing half that, since the mortgage payments and property tax alone, after a 10% down, would be $2,700 a month, or 57% of your total net income. That’s for a $500,000 house.

By the way, $71,140 is the median family income in Vancouver. It’s among the lowest of any major Canadian city

This week residents of our most delusional province will receive little letters from the BC Assessment people telling them the average house on the East side (where the poor people live) is now worth $993,000. On the West side, the average is $1,812,000. Prices in the latter are up 12.4% in a year, and in the slummy bits, ahead 11.3%. The average assessment for all houses in the entire region increased over the past 12 months by 11%, says the government (guaranteeing healthy future property tax increases).

Over the same period average wages in BC grew by 3.1%, while inflation was 2%. But when houses jump 11%, or six times the cost-of-living increase, it makes you wonder where the money is coming from. The bigots and deniers will tell you this boatload of cash is from China. But that makes no sense. There were about 28,000 real estate transactions in Metro Vancouver last year and the best numbers available indicate that over 90% of all the buyers were locals.

Instead, this is the source of funds:

DEBT

The average two-bedroom apartment on the West side is now $616,000. BC Assessment says houses in the suburban and exurban Sea to Sky region bloated by 15%. Commercial real estate gained 13%. Recreational lands, says the province, swelled 20%. And with each tick higher, the whole thing smells more and more like Phoenix, circa 2004.

The bubble called the Lower Mainland – now that Calgary is deflating fast – is being set up for a tough mudder of a year. Mortgage rates will be rising after the Fed moves, the Hot Albertan Money is gone, and China’s growth is sub-par while real estate prices from Singapore to Saudi Arabia are falling. Even in the US, where economic growth is about double that here, 2015 is expected to be a flat one for both prices and sales.

In short, Van is a classic overbought market, fueled by cheap money, unrepentant house-pumping lenders like Vancity, and nurtured by a local culture of real estate obsession. People in 604 are happy to blame others (like the Chinese) for absurd prices, while then plunging into debt believing even more offshore cash will make their dumb decision pay off.

But this is destructive behaviour, and is already dooming Van. For example, without fat cash gifts from their cash-strapped parents, it’s impossible for young people to break into the local housing market. No wonder more people between the ages of 25 and 44 moved out of Vancouver to other provinces over the last three years than moved in. In fact, in every quarterly report now done by the province, the net migration within Canada is negative for BC.

And widely circulated last week was an article – carried in the South China Morning Post and internationally by Reuters – stating the obvious: doing business in Vancouver costs too much, because houses do. “Housing prices are a concern for that exact reason,” said an economist at the Business Council of British Columbia. “It makes it more challenging for younger people starting a family.”

No kidding. In fact, I’ve run into $200,000-a-year lawyers recruited by Van companies who refused to leave Toronto, despite the crappy weather and lack of joy, simply because they’re unwilling to pay seven figures for a beater house in the wrong hood.

But, all this will change. As it did in Calgary, Ottawa, Regina, Winnipeg, Halifax and most other markets. There’s always been a premium for real estate on the west coast, but it’s never been this great, nor the disparity between incomes and prices so extreme. With the years of cheap loans coming to an end, and the national economy stalled, with BC families falling further behind the debt curve and commodity prices ebbing, selling would be smart.

But that’s not how we do things in this country. First the crisis, then the reaction. Followed by the surprise.

Lots of that coming.

211 comments ↓

#1 Jimmy on 01.04.15 at 7:10 pm

First!

#2 crowdedelevatorfartz on 01.04.15 at 7:16 pm

Spoke to a developer in a Vancouver pub last night. He’s building a 4500 sq ft , 7 bedroom, 5 bathroom house in the burbs on spec. Figures when its finished in June he’ll get 1.75-2 million for it. He’s marketing multigenerational families to buy it. Grandparents, parents and kids all under one roof.
I’ll keep an eye on that monstrosity to sell what it sells for.

#3 jas on 01.04.15 at 7:16 pm

I smell a recession.

#4 john on 01.04.15 at 7:17 pm

Garth you constantly say that a 30% correction is not in store but when I look at Vancouver prices, they look way overvalued.

Really if you divide any Vancouver property by half you get its actual value.

#5 Sebee on 01.04.15 at 7:18 pm

BC is just funny.

#6 zee on 01.04.15 at 7:20 pm

Hi Garth

Why are you assuming that oil prices will stay low. In a few months low oil prices will not be a discussion any longer as it would have rebounded. Prices are being manipulated for Political reason.

#7 Doc on 01.04.15 at 7:20 pm

It’s nutty in the Okanagan as well. Bare lots were 236K on my street in 2007 and fell yearly to 191K by 2013. One house on my street sold in 2014 after two years on the market and based on that sale only I am informed by BC Asessment that lots are now 246K on my street. Of course when they were 236 taxes were 1700 per year. At 191 they were 1800 per year. Now that their 246 I get a computer generated warning that taxes will be going up. It’s nuts. We don’t even have sewer.

#8 pathcontrolmonk on 01.04.15 at 7:21 pm

If we were to apply Kubler-Ross’ DABDA model, YVR still seems stuck in stage #1.

#9 Gary on 01.04.15 at 7:22 pm

We had coffee in Kerisdale today and there were no other white folks. Tell me that this market isn’t being driven by Asian money. No one else here doubts it. Sure some where born here but the fact that the median income is only 70k just shows the money is coming from elsewhere …

#10 Washed Up Lawyer on 01.04.15 at 7:23 pm

Good post. 30 years ago when I was attending law school in Vancouver with Garth’s BFF, the Rt. Hon. Kim Campbell, I would ask classmates if they were interested in starting their careers on the prairies. They would look at me as if I was from Mars. I had to return to the prairies after experiencing a December in which there was 24 hours of sunshine (three 8 hour days).

About 15 years ago I started to notice a trickle of Lower Mainlanders into Calgary. Hmmm? A few weeks ago I struck up a conversation with a lovely young gal from Vancouver who was serving me at Moxies in Ft. McM. Her day job was as an apprentice plumber. She will do well. This is not isolated.

WUL

#11 SWL1976 on 01.04.15 at 7:28 pm

Great pic. Been there, done that, just never on pavement.

Great post. I don’t know why it is so hard for the masses to see this? Oh that’s right people really only see what they want to see, and house prices always go up. Right, lalalalala-lalala

Assessments up again. Really? Sounds like one last gasp to squeeze some more tax dollars from the already tapped out

I honestly don’t understand how people can sleep at night with income to debt ratios like in the chart above, but I am definitely not most people

To each their own. Gonna be interesting to watch it all unravel and I don’t just mean Canadian real estate bubble

#12 Happy Renting on 01.04.15 at 7:29 pm

Good grief, those are some crazy house numbers.

#13 Hexagon on 01.04.15 at 7:36 pm

The thing is, no matter how statistics are read, the average family in Vancouver does not buy an average home or even a small one for that matter. Yet transactions are still up year over year, so people are still buying homes there. If the ones buying are not the locals because they can’t, who are the buyers then? Who are those “first time buyers” necessary to keep his market going up?

#14 Garth is my enabler on 01.04.15 at 7:38 pm

Things move fast these days

News from underground:

Major Banks in Toronto are planing further IT staff reduction, encouraged by recent BoNS firing of bulk 300 people…

It is estimated that in Q1 about 1000 IT people
will be without jobs coming this spring…

I thought Banks are doing good, Garth.
Why are they experimenting with this?
Does bonuses for few CEO’s matter more than
our national Banks that are rock solid ?
Or we just believe that…

that they are..

#15 Uh Oh Canada on 01.04.15 at 7:39 pm

What’s fueling BC’s economy? Drug.Money. The govt just turns a blind eye as it really is the driving force in the economy. This was told to me by a Vancity bank worker.

#16 RealistvsExtremist on 01.04.15 at 7:41 pm

By the way, $71,140 is the median family income in Vancouver. It’s among the lowest of any major Canadian city
===============================

This number is irrelevant. Everyone knows how much the “new immigrant” population does “cash everything” and cheats on taxes. I see it everywhere. Never a card. Always cash…….

That does not even count all the daily “wires from asia” to buy Beemers, houses and other expensive crap.

#17 Craig on 01.04.15 at 7:43 pm

OK – I’ll make my first ever teensy criticism of Sir Garth. Garth, if you nerd the housing numbers in Sea to Sky like my friends and I do (see vancouverpeak.com) you will notice that for nearly two years now the y-o-y for Whistler, Sea to Sky etc has been negative. In fact, Whistler has tanked so much it’s now coming up again. What we have is a classic case of cratering – price declines from the edges in to the middle. It’s just reaching Horseshoe Bay and the northern gulfs, which will probably have a crappy Spring market. Whether it goes further in to downtown Van remains to be seen and is linked to the variables you adduce. And without dipping nary a toenail in the seething waters of where all the money comes from, let me make this observation: if I’m Russian and I come to London and pay 5x more than a house is worth – once – what stops the beneficiary of my largesse from buying two or three smaller places for 2x more than they are worth? this is more or less what’s happened in Van: one overblown foreign Tx has allowed four or five locals to do their own thing further down the food chain. You will ask for evidence, and I have it, but names will not be divulged to protect the guilty.

In all of this, I’m just pointing things out: I am a daily reader, agree with you about almost everything you’ve written on and think your broad views on Vancouver are spot on, if — in these two details — very slightly (and unusually for you) a little misplaced. with respect, Craig

Fair comment, but the Sea to Sky number I gave is simply that of BC Assessment. — Garth

#18 nonplused on 01.04.15 at 7:43 pm

Garth, Garth, Garth.

I’ve said this before and I’ll say it again. BC’s chief export is pot, and the chief purpose of the BC realty market is to launder pot money. It’s not HAM’s, not hot Calgary or Alberta money, not the cost of houses compared to the average wage. None of those factors weigh in strongly. BC houses cost as much as they do because it’s a way to launder drug money so long as you keep it under $10,000 a month.

If you have planted a little patch up Copperhead Road and want to reintroduce the money on the “legit” side, how do you do it? You can’t carry the cash around the cops hate that. You can buy yourself a nice place and pay for that and then buy (outright) a few rental properties and actually give the tenants the cash they need to pay you.

The whole BC economy is oil in the north (ack) and drugs in the south.

That said I think pot should be legal even though I don’t use it myself. It’s a nuisance drug, not a societal issue.

#19 TurnerNation on 01.04.15 at 7:43 pm

Steering wheel input/feel on a Kia is number than Smoking man after a bottle of JD.

#20 sentry on 01.04.15 at 7:45 pm

There seems to be a disconnect from reality with the house humper generation.But with the media constantly repeating the big lie over and over(is global and ctv owned by REMAX)one can almost understand.Would a Liberal government put a BS muzzle on the real estate floggers…..and media puppets ?Personally,I get my info from BBC,Sydney Herald,AlJazerra,CBC,then try to distill a bit of truth from it all.There are many sources warning of the impending doom in the real estate dream world,but it seems the cheap money available is indeed the opiate of the masses.

#21 Financial Poodle on 01.04.15 at 7:50 pm

People are complaining now about HAM? Chinese are smarter than that. Especially wealthy Chinese. Wait until real estate prices “in the nice neighbourhoods” begin to drop. Wealthy Chinese (as well as any other smart, wealthy person looking for a nice place to live, Caucasian or otherwise) will begin to vultch. It’s what the wealthy do!

#22 not 1st on 01.04.15 at 7:52 pm

#6 zee on 01.04.15 at 7:20 pm

—-

I guess coming up with crazy conspiracy theories is easier than looking at the supply-demand curve.

#23 ozy - why don't we bet on 01.04.15 at 7:53 pm

why don’t we bet – who looses pay fro drinks next DEC 28, 2015

my bet is vonkuver prices will be up 4%, only half of the real inflation

#24 Mocha on 01.04.15 at 7:55 pm

Who’s really the “denier” here?

#25 not 1st on 01.04.15 at 7:55 pm

Garth plays with the definition of ‘chinese’ Of course there aren’t chinese people flooding the market. They can’t because they are still in china and cannot get out to even do such a thing.

BUT, many second and 3rd generation Canadians of Chinese descent have business and family ties back their home country and thats how the money is coming in.

Show us. — Garth

#26 Obvious Truth on 01.04.15 at 7:56 pm

45 North. Very good comments. It’s the decision makers not the people doing the work. They have to do it whether they agree or not.

Could see a 4 on oil this week. This looks like it will be long and drawn out. Looks worse than gold.

85 looked like a good resting spot for cad. But it broke hard instead of bouncing. Garth referenced some analysts looking for 70. This is crazy stuff but anyone getting in front of oil and cad just gets steamrolled.

Canadians are going to wonder what the heck happened by spring time. This is all moving very fast.

#27 not 1st on 01.04.15 at 7:57 pm

Garth, a little known fact about estevan – highest number of millionaires per capita in canada.

They are more qualified to live in vancouver than people already living there.

#28 Smoking Man on 01.04.15 at 7:58 pm

#204 Retired Boomer – WI on 01.04.15 at 6:53 pm
#201 Smoking Man

Have you ever given thought toward running for local elective office?

I think you might be an interesting candidate. Certainly more interesting than some of the personalities I read about in the MSM.
……

Not a chance, my min for tax farm slavery is 250k per year. don’t think the PM even makes that…

My twilight of days of Mr happy, strangers, rentals under scrutiny…

Can’t pay me enough to give that up…

When he’s totally dead, I might consider it.

#29 Mark on 01.04.15 at 8:00 pm

Makes you wonder about the future of Vancity. I personally believe it will eventually be a subsidiary of one of the big-5 Canadian nationally chartered banks as the bubble pops and their loan book goes bad. The big risk to the big-5 shareholders is that many of these “acquisitions” effectively will be shotgun weddings as the government seeks to avoid an even larger crisis of insolvency.

#30 Former vancouverite on 01.04.15 at 8:00 pm

I have family in lower mainland working in construction and assessments. You cannot discuss income vs housing values. They just don’t want to discuss fundamentals because once you are in the market the elevator only goes up. My relative is under 40 with 2 kids in a 5 bath house valued at 900 000 and a second rental house that he couldn’t sell because the house can’t accommodate a rental suite.

#31 Confused on 01.04.15 at 8:02 pm

If immigrants are not driving housing, where did the 64% of Vancouverites that were born overseas come from? Yes 64%. Maybe they live in the streets?

#32 Mark on 01.04.15 at 8:02 pm

“That does not even count all the daily “wires from asia” to buy Beemers, houses and other expensive crap.”

Actually it does. As the evidence is that debt, not cash or foreign investment, is being used to fund the Canadian consumptive lifestyle.

A small handful of Asians may receive significant funds from overseas, but overwhelmingly those “Beamers”, and other expensive “crap” is bought by Canadians, using either the proceeds of credit, or the proceeds of participation in credit-intensive sectors of the economy.

#33 Roman on 01.04.15 at 8:03 pm

If you’re interested, here is Reuters article that Garth mentioned
http://www.reuters.com/article/2014/12/28/canada-housing-vancouver-idUSL2N0TO02F20141228

Indeed, why would anybody on earth stay in delusional Van when there is Seattle with ok real estate prices, higher salaries, much bigger job market and lower taxes?
Not to mention places like North Carolina where one can build a _custom_ 5000 sqf house for as much as 400k?

Ah, Van folks gonna miss smell of dumplings in the morning.

#34 Financial Poodle on 01.04.15 at 8:03 pm

#16 RealistvsExtremist

So you’ve just described the student/child (or just a really smart person) of *any* wealthy family in another country. I know many Chinese that came to Canada and also are very wealthy. They are here because their hometown sucks and they can afford to be here. So what??
I also know many more (WAY more) Chinese back in China that can’t afford to come to Canada (anywhere in Canada) for a better life because they just can’t afford it.
I’m sure the people of Central America look around and say “These goddamn Canadians are driving up the real estate market! I’ll never be able to afford a house now!”.
Full disclosure, I’m a Caucasian.

#9 Gary
Then find an Asian Greater Fool, cash out, and leave. Or, smarter yet, rent if you love it so much there. Our ancestors were the HAM as people flooded the country so many decades ago.

Deal with it, people.

#35 JSS on 01.04.15 at 8:04 pm

If house is paid off by age 45, is it still okay to go out and buy a bigger and better house with more mortgage, expecting to pay off by age 60? Or live in the existing paid off shack and keep investing in the ol diversified portfolio? Existing house is 15 years old, will likely need new roof, paint, sidewalk crack repair, hwt, flooring etc somewhere in the next five years. Has anyone done a life cycle cost analysis on this? Analysis should somehow account for spouse being influenced by friends showing off their new estate home on Facebook. I’m serious here.

#36 Helen on 01.04.15 at 8:05 pm

Looked up the 2015 assesment for the house we’re renting in Van Metro. The value went up 16% to 1.3M. Seriously, where’s my barista gonna live? Let alone doctors, nurses, policemen, teachers…

#37 Smoking Man on 01.04.15 at 8:07 pm

Gartho you keep flogging dept to income you silly Fool.

Sales, real estate sales are not based on logic, emotion, status, and give it hard to my land Lord are what inspires the herd.

Shit Man, when I’m I going to get through to to you. You never did any door to door knocking, selling shit, did you.

#38 KIAs Krush Harleys & Hummers on 01.04.15 at 8:11 pm

“The average two-bedroom apartment on the West side is now $616,000.”

OMG, OMG, OMFG!

2 lousy bedrooms. $616,000.

Totally incredible.

That terrible number tells me terrible things are about to happen,

#39 Robert Henry on 01.04.15 at 8:19 pm

Thanks for the improved legibility of graphs in your blog. Best wishes for the New Year.

On this blog you get exactly what you pay for. – Garth

#40 asp on 01.04.15 at 8:31 pm

Your median Vancouver family pays 20% in income tax, not 30%.

Marginal tax rate? Why is that relevant to anyone without a political axe to grind?

The marginal tax rate of 29.7% is the amount one pays on each additional dollar of income at that level. We have a graduated system. — Garth

#41 valleyrenter on 01.04.15 at 8:31 pm

Great post tonight Garth. Not to take away from how out of touch home prices are here, but I figure the amount of secondary income suites in most all new builds out this way is artificially propping up prices also. In my humble neck of the woods, home prices seem to reflect that.

Figure a $500,000 house with a 2 bedroom suite enables the borrower to go all in on what the bank says they can afford. Rented at $800-$1000 a month lets the indentured carry an extra $100,000-$200,000 in mortgage amount when it costs about $500 on $100,000 of mortgage. Realistically, they could only hack about $300,000 in mortgage without a suite.

Seems like you can “own” your house, just need renters in the basement. A suckers deal if I ever heard one. People think basement suites are a good thing, they’re not. Artificially inflates home prices, and not a sign of a healthy economy.

#42 Tim Anderson on 01.04.15 at 8:34 pm

We have 2 businesses and cleared $300,000 last year and we have $4,500,000 in retained earnings in equity, shares in our own private businesses.

We also have $4,000,000 in RRSP’s, RESP’s, IPP’s, TFSA’s, non-registered joint accounts, trusts with a modest house worth $350,000.

We refuse to have any money in equities, stock market where we don’t control the businesses as we believe they are too richly valued right now.

We have over the years put all this money in GIC’s, bonds, strips ranging from low as 3.10% to as high as 5.6%.

Our goal is to simply replace the $300,000 a year we can make from our businesses and that is it.

In 7 maybe 8 years, we will be easily doing this.
Who needs 7% a year anyway.

#43 Smoking Man on 01.04.15 at 8:40 pm

So I have a heart to heart with my saved son, the guy who was going to jump of a bridge last year.. The drug addict. The nice kid that realized last year humans are bastards and wanted no part of it.

He was pissed at his mom, years ago she told him he would be a low life factory worker his entire life.. Jump of a bridge she said.

Well she said that to me about 30 years ago, I showed the bitch.

Well now that he has his trios obidance certificate he’s trying to council me on addiction…

We are doing this through writing texts, not verbal.

He meet Smoking Man tonight..

Wow…. I’m a hero again, I’m never going back to that real name, the real me..

I’m smoking Man, changing my name on my birth certificate next week.

This blog has done such great things for me.

#44 Mukadi on 01.04.15 at 8:46 pm

Even retirees who flocked to BC because of the weather are returning home in droves.

Here you go:

“British Columbia youth leaving for greener pastures”

http://beaconnews.ca/blog/2013/09/british-columbia-youth-leaving-for-greener-pastures/

#45 Mr.Hulot on 01.04.15 at 8:50 pm

Ok, Garth. So it’s not the Chinese, It’s not their incomes. it’s not drug money. So what is it? How have Vancouverites been paying their mortgages for the last five years against all your predictions? Please do tell.

#46 Freedom First on 01.04.15 at 8:51 pm

Thanks for your Post today Garth. Loved your summary…………surprise. Lots of that coming. Exactly like the inept unskilled insane motorcycle driver in the picture who didn’t even see that he himself is the problem……..Surprise!

#47 Daisy Mae on 01.04.15 at 8:53 pm

“This week residents of our most delusional province will receive little letters from the BC Assessment people telling them the average house on the East side (where the poor people live) is now worth $993,000.”

******************

And while they experience euphoria, they lose the property because they can’t pay the property taxes….

#48 the Jaguar on 01.04.15 at 8:57 pm

“There were about 28,000 real estate transactions in Metro Vancouver last year and the best numbers available indicate that over 90% of all the buyers were locals.”
What exactly does “local” mean? Recently landed immigrants, foreign students on student visas, or non permanent residents of Canada living & working in Canada with valid work visas? They all bought homes in metro Vancouver. Lots of them. Define “locals”, please.

Oh, please. — Garth

#49 Retired Boomer - WI on 01.04.15 at 9:08 pm

Interesting post, Garth. Sorry, but I can NOT relate to the numbers. $71,140 AVERAGE Van family income (gross).

After the Canadian TAX job it shrinks to $4700 a month without tax avoidance strategies… AND a 2 BR Apt on the west side averages $616,000.

OK, why would any SANE person be there, let alone buy there? They must be sampling the Copperhead Road.
While I have been to Seattle and the sound area, not been to YUR. Close enough, as they say.

Wonder how long it takes of high housing prices to drive out business enterprises? What bends first? Employment or house prices?

Glad I am not there to find out.

#50 rk usa on 01.04.15 at 9:10 pm

re: #42 Smoking Man on 01.04.15 at 8:40 pm

you’re rambling again

please set up your own personal blog rather than ride this one

then see how much attention you get

like zip

#51 Mark on 01.04.15 at 9:12 pm

“We have 2 businesses and cleared $300,000 last year and we have $4,500,000 in retained earnings in equity, shares in our own private businesses.

We refuse to have any money in equities, stock market where we don’t control the businesses as we believe they are too richly valued right now.

Earning $300k on $4.5M implies a P/E ratio of 15. Which is similar to what you can buy the contemporary stock market, through a broadly diversified index fund such as XIU. Which is probably a lot less risky overall than your single business.

So I don’t see why you would come to the conclusion that equities are overvalued. If anything, they’re cheaper than your $4.5M worth of shares in your own private business.

Fell for that one, didn’t you? — Garth

#52 kommykim on 01.04.15 at 9:17 pm

RE: #35 JSS on 01.04.15 at 8:04 pm
If house is paid off by age 45, is it still okay to go out and buy a bigger and better house with more mortgage, expecting to pay off by age 60?

I feel pretty stupid for “moving up” 5 years ago and plunking another 200K cash into RE. I’d kill myself today at 48 if I had mortgaged to to that.
Bigger is not necessarily better. Do you want a bigger house to paint, clean, repair, and pay taxes on? Stay in the current place if it meets your basic needs. Just think of all the repairs you can do for the price of the double Realtor commission and property transfer tax.

#53 Smoking Man on 01.04.15 at 9:18 pm

I’m now different sort of.

In school they teach, fire avoidance, be this, be that. But don’t be him.

Life’s not like that, arsonists everywhere, they should teach, how to walk through fire, not fire avoidance..

How can they, there never seen a lighter or lit up a Smoke.

I have so much to teach, but as a ragging lush. Screw all of you idiots. Figure it out you’re selves.

#54 ShawnG in TO on 01.04.15 at 9:20 pm

Most people there can realistically afford their mortgage, so why did the banks lend them the money? Easy, CMHC, of course.

I just got an idea, since Harper likes to attach his name to things so much, why don’t we call it Harper’s CMHC? When it blows up we’ll know who’s contribution it was.

#55 I love real estate on 01.04.15 at 9:30 pm

#37 Smoking Man

Expressed a little differently, your point to Garth is spot on.

Realtors don’t call clients the herd or any such thing, but market sentiment or emotion is a powerful reason major markets will keep going up. Emotion is a huge reason Toronto is the place to be for the next decades.

Those who are negative on real estate keep missing this, over and over again. I pity them.

This is why we are forecasting Toronto real estate to average 8% annual price gains for the next five years.

It is also estimated that the GTA will grow by about 200,000 annually over that time.

This is a long term demographic trend that will catapult house prices much, much higher. Especially with cowtown refugees coming here soon.

Buy now if you can, or be sidelined with the envious, is my best honest advice.

Hoping for even a modest overall decline, let alone the crash most doomers here project, is just silly. Those who do so will have their hearts crushed by reality. I have seen it so many times before.

#56 Smoking Man on 01.04.15 at 9:31 pm

#50 rk usa on 01.04.15 at 9:10 pm
re: #42 Smoking Man on 01.04.15 at 8:40 pm

you’re rambling again

please set up your own personal blog rather than ride this one

then see how much attention you get

like zip
……

Are you celebrity, should I just bend over, be like the schooled.. I have my own blog, I post once a month, get about 500 or so views a month, this pathetic blog gets millions.

I’m going to be pushing a book one day, why would I do something that stupid.

So I’m trying to scalp some of garthos base.

Is that a crime or God damn, door to door salesmanship.

#57 Washed Up Lawyer on 01.04.15 at 9:32 pm

Smoking Man:

For some unfathomable reason I looked up some essays by H. L. Mencken today. A fave of mine, he was a prominent American journalist, essayist, critic etc. (1880 – 1956). Some said he could sway a Presidential election with one article.

You have been accused of being derivative of Hunter S. Thompson. Now I know where you got your views on public education.

Mencken wrote:

“The most erroneous assumption is to the effect that the aim of public education is to fill the young of the species with knowledge and awaken their intelligence, and so make them fit to discharge the duties of citizenship in an enlightened and independent manner. Nothing could be further from the truth. The aim of public education is not to spread enlightenment at all; it is simply to reduce as many individuals as possible to the same safe level, to breed and train a standardized citizenry, to put down dissent and originality.”

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[…] Source: http://www.greaterfool.ca/2015/01/04/2015-in-604/ […]

#59 MD on 01.04.15 at 9:40 pm

Garth can u eleborate how must prices will fall in west Vancouver for the average income family. I am just curious as me and my wife making 125k can barely afford a 500000 house with 20 percent down .

#60 X on 01.04.15 at 9:51 pm

Can rates please begin to normalize so we can get on with RE reality again. The pendulum has swung far one way with low rates, and will swing back to normal when we are not experiencing emergency rates any more.

#61 debtified on 01.04.15 at 9:52 pm

Garth, the “Buy America” worked out great for me in 2014. What do you think of “Buy Eurozone” in 2015?

Also, I am looking to replace the Yamaha Vmax I wrecked; what do you think of the Harley V-Rod Night Rod Special? :)

Thank you!

#62 Smoking Man on 01.04.15 at 9:53 pm

#57 Washed Up Lawyer on 01.04.15 at 9:32 pm
Smoking Man:

For some unfathomable reason I looked up some essays by H. L. Mencken today. A fave of mine, he was a prominent American journalist, essayist, critic etc. (1880 – 1956). Some said he could sway a Presidential election with one article.

You have been accused of being derivative of Hunter S. Thompson. Now I know where you got your views on public education.

Mencken wrote:

“The most erroneous assumption is to the effect that the aim of public education is to fill the young of the species with knowledge and awaken their intelligence, and so make them fit to discharge the duties of citizenship in an enlightened and independent manner. Nothing could be further from the truth. The aim of public education is not to spread enlightenment at all; it is simply to reduce as many individuals as possible to the same safe level, to breed and train a standardized citizenry, to put down dissent and originality.”

Dude I’m original, I don’t read, it’s painful for a dyslexic.. Reading other people’s shit.

I tried down loading an app that will read books back to you… It said not available in your country..

The bastards… Anything I type is from the UCC.. The armpit of knowalkage fr Shit to hammered to post..

Figure it out..

#63 east van on 01.04.15 at 9:58 pm

Bought condo in east van late 2000 for 134,500. Sold early 2011 for 363,000. 2014 assessment on that condo was 371,000. 2015 assessment 403,000.

Put condo money in conservative investments and made about 6% per year.

Now rent similar place for 1000 per month (good deal), and don’t pay 300 per month for maintenance fees, or any property taxes or any repairs.

#64 Shredder on 01.04.15 at 9:59 pm

Already started on Van Island

Talked to an investment buddy who lives there, an apartment that went for $600K a couple of years ago just sold for $250K
And no, it wasn’t a grow-op piece of mould

#65 JO on 01.04.15 at 10:02 pm

Canadian rates are more likely this year to diverge from the us rates. Already are different- check the Canada 10 year vs US. We are cheaper by about .40

I do think this will continue for at least 12-18 months
5 yr mortgages at 2.5o or less by August

CAD under 80, maybe low 70 s by end of year

RE in Canada is silly overvalued and will come down eventually but what if it holds up

I am betting we drop 5% by October in Toronto area

Sick and tired of seeing financial illiterates inflate the cost of my housing far above what they should be able to afford if CMHC and BofC were not engaging in these disgusting actions

This RE bubble is a tax and wealth transfer from the ” middle class”. Beauty of the system is they fool these average people into thinking they are getting richer when in fact they are being taxed.

When the bust comes and the loan losses pick up, the politicos will simply add the bailout costs onto the national debt but the Finance and RE senior execs get to keep the massive bonuses. Your property taxes will explode even higher along with user fees and other taxes. Those govt pensions will be cut away via currency debasement and for the young workers add in direct cuts to benefits promised.

While your home drops in value steadily. All these promises were made on the back of this fake wealth which was simply a massive money illusion

Welcome to Kanadstan 2020- Neo Liberal paradise

#66 Dave on 01.04.15 at 10:03 pm

I take issue with using the median income for this analysis.

Approximately 70% of Canadians own real estate….”typically” the remaining 30% of the population that are renters are also the ones that have much lower income then the homeowners.

The lower income of most renters drags down the median income. I guarantee you, the median family income of homeowners is much higher then the $71K listed here.

The point Garth makes of homeowners being overstretched and taking on extreme leverage is not lost though…It’s just not quite as extreme as this article portrays.

#67 onlyinbc on 01.04.15 at 10:05 pm

don’t forget the thousands of people who will pay no or little taxes based on BC Assesment granting farm class,
brother in law has a couple of goats and a few hens on his Surrey 2 acre property. his assessment is less than $100,000. will pay 1/5th of a condo tax bill. only in bc

#68 Bobby on 01.04.15 at 10:10 pm

I once read that if California passed Propostion 19, the legalization of marijuana, the price of BC bud would fall by 90%. With that fall, 10,000 BC homes would immediately go on the market and 20,000 people would be out of work.
Somewhat telling I think.

#69 Vanecdotal on 01.04.15 at 10:13 pm

#17 Craig

Absolutely 100% agree, and very diplomatically and respectfully put I might add. I’ve lived in Van City proper and in the Lower Mainland my entire life, and this is the most accurate assessment of what I’ve both seen and experienced first-hand in recent years in our RE market. This is the phenomena driving prices exponentially higher, as it’s neither entirely locals loading up on cheap credit, nor entirely HAM (or other foreign $) snapping up every property in town. It is absolutely a meritage of both causative factors, but this massive bubble would not be occurring unless BOTH of these symbiotic factors were in play simultaneously like they have been for @ 10 years now. I’ve seen this scenario play out over and over and over since I’ve been following the market here. It’s why the Vaincity Kool-Aid is so freakin’ powerful. Fear of “buy now or be priced out forever (by the insinuated or perhaps legitimate – depending on neighbourhood – foreign money purchaser), drives the locals to take on as much debt as the banks will give them, backstopped by CMHC, to close the deal. That now over-priced-by-local-incomes property transaction then becomes the new normal – the comparable referenced for the next sale. And so on…

#18 nonplused

Very. Valid. Points. Relevant to both the local RE market and the broader Lower Mainland / BC economy. Pretty much common knowledge among most locals. The extent to which this influences broader markets has never been quantified, only estimated. I would like to see those numbers as it’s all conjecture, but there is a substantial influence imho, and the only way to get those is to legalize, tax, and regulate. (Collect and aggregate the data).

#41 valleyrenter

Also totally agree, this is another variable to add to the prev. posters’ hypotheses that is absolutely another primary driver of local RE prices. I have lived in more than several different regions of Van / Greater Van heavily suited SFH areas (mix of legal and illegal suites) where it’s standard practice what you describe, and I’ve gleaned this from dealing directly with landlords, talking to neighbours/peers/colleagues, as well as friends in the RE and banking business who have all corroborated exactly what you have so eloquently pointed out. This equals both skewed valuations and debt-servicing ratios, but seems to have become the norm all across Greater Van. for buyers (buying with locally generated incomes) reaching to get their feet on the property ladder any way possible, whether multi-generational or a young couple starting out. It’s all about the “Mortgage Helper(s) in the dwelling.

Going forward, as lending criteria continues to tighten in a rising rate environment, and CRA starts taking a close look at all the undeclared income (from vast numbers of illegal suites) this is another factor that will cause downward price pressure in coming years in addition to other broader economic factors.

#70 Juno on 01.04.15 at 10:20 pm

#9 Gary on 01.04.15 at 7:22 pm

We had coffee in Kerisdale today and there were no other white folks. Tell me that this market isn’t being driven by Asian money. No one else here doubts it. Sure some where born here but the fact that the median income is only 70k just shows the money is coming from elsewhere …
=============

I was in a pub yesterday and man nothing but white folks. I think were getting invaded by white guys here in van city.

Man get a grip guy, I most schools in vancouver, white kids are as rare as big foot sitings!

#71 Andrew Woburn on 01.04.15 at 10:28 pm

#196 bdy sktrn on 01.04.15 at 3:08 pm
————————————-
how can i get a Chinese govt job?
—————————

Somewhere in the Nineties, a Shanghai-born business associate asked me to help him put together China-Canada trade deals. He explained he had good contacts with senior government officials in one of the PRC’s larger
provinces. They were approaching retirement age and facing meager government pensions. They had noticed the newly emerging business class was growing wealthy and they wanted “their share” before it was too late. After all, they were highly trained mandarins, not just vulgar traders.

He then called to say that, if we could source highway traffic signs, we could have the contract for the entire provincial highway system. I asked how we could be so sure of getting the business. He said his partner was the Minister of Highways for the province.

Was there actually a Chinese word for corruption, I wondered? As I had read of numerous instances of Chinese officials being shot for whatever “corruption” means in China, I asked why he wasn’t worried. He said only people who take more than their boss get shot.

Keep this in mind when you make your job application.

#72 Jan on 01.04.15 at 10:29 pm

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#73 Obvious Truth on 01.04.15 at 10:30 pm

#55. You’re a total salesman. Just like SM. But I hand it to you. Not many could hang on this long in light of what is going on.

To that end emotion has many faces. Look at the chart. Now factor in the state of the economy. You are Slovakia trying to beat canada. They can tell themselves they can win right till the last minute. But they won’t. They are in over their heads. Even coach poloz has thrown in the towel. (Ok. Ukrainian descent)

I love great homes in beautiful settings with great character as much as anyone. But people that have accumulated money are by their very nature prudent and thrifty. They aren’t trading it in. They know the value of it. They are way lower. We can wait for the chart to correct. There is less risky money to be made elsewhere. And lots of good to do.

The kids are looking good. Grinding those Slovaks.

Canada russia tomorrow. Battle of the oil exporters.

Maybe Putin flies in. Shakes hands with harpo. Harpo brokers a deal and oil prices rise. Or do we get shades of the Cold War. Maybe the eagle can drop the puck. Does anyone know where he is?

Toronto fans are horrible. Cheering let’s go canada. It’s go canada go. Love these kids. They can’t wait to get a hold of those Russians.

#74 CanadaGeese on 01.04.15 at 10:31 pm

With every drop in the loonie’s value vs the USD we get a little closer to BoC raising rates. Not there yet, but we are probably no more than five cents drop away. Unless of course oil turns around and heads for $100 again by spring. Not very likely.

#75 hohoho on 01.04.15 at 10:32 pm

> … as the Canadian economy deflates and the CAD$ surges?

who would want to exchange, for example, USD for CAD when the Canadian economy is circling the drain? maybe for people who hold USD but owe CAD debt, but I don’t think there are too many of those?

#76 West Coast on 01.04.15 at 10:44 pm

http://www.vancouversun.com/news/metro/Property+values+plummet+Mayne+Saturna+islands/10701271/story.html

No, my lovies it’s the fairies, I mean the ferries…..read on….caution… this is the land of 250 not 604…, but close enough

#77 devore on 01.04.15 at 10:45 pm

#40 asp

Marginal tax rate? Why is that relevant to anyone without a political axe to grind?

It is the most relevant number in most economic discussions, because if you wish to increase your income, such as to be able to afford Van RE, that is the rate you will be paying.

#78 Jan on 01.04.15 at 10:46 pm

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#79 canuck on 01.04.15 at 10:48 pm

#42 Tim Anderson on 01.04.15 at 8:34 pm

“We have 2 businesses and cleared $300,000 last year and we have $4,500,000 in retained earnings in equity, shares in our own private businesses.” zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

Did you have a point to make or just bragging?

#80 PeanutBunner on 01.04.15 at 10:55 pm

Perfect timing, Garth! Have been postponing purchasing a condo for a year, when a couple of friends just purchased condo’s in December. It’s the “slow” period, so they “must” have gotten a great deal. Feeling the itch and have been saving up.

When are you back in the 604? I just got married and need to talk to a real money pro – not my buddy who works at WFG, who haggles me to join (I bought their UL)… I can’t seem to make sense of MLM that would be financial experts – ??? perhaps I am ignorant. And [email protected] won’t shut up about their RRSP/GIC/TFSA specials.

Please be in town soon! At least there is no snow here!

#81 devore on 01.04.15 at 10:57 pm

#41 valleyrenter

Figure a $500,000 house with a 2 bedroom suite enables the borrower to go all in on what the bank says they can afford. Rented at $800-$1000 a month lets the indentured carry an extra $100,000-$200,000 in mortgage amount when it costs about $500 on $100,000 of mortgage. Realistically, they could only hack about $300,000 in mortgage without a suite.

Which Vancouver $500,000 houses have a suite that can bring in $1000 monthly? $500k buys you a 2bd condo (no suite), a teardown on the outskirts of eastvan, or half of a duplex (maybe some crawlspace).

In any case, rental income doesn’t have much pull when qualifying for mortgage.

Realistically, a young couple may be able to afford the condo, with family help. Otherwise, they’re renting, or moving elsewhere.

#82 Piccaso on 01.04.15 at 10:58 pm

#79 canuck

It was to make 95% of the posters here feel like have nots.

#83 Chris on 01.04.15 at 11:11 pm

The underground economy is just fine.

#84 p on 01.04.15 at 11:15 pm

went shopping today, reluctantly. It isn’t just the houses creating that pile of debt. At one time, 50″ TVs were the big TVs. Now, they are the demarkation row between the good TVs (50″ up to 90″) and the row of embarrassing peasant TVs, under 50″. Stacks of TVs with price tags of 3000 dollars. A lot of people looking at the 60s, 70, 80 inchers. Everybody looking at the monthly payments, not at the cost. Discussions about can we make the monthly. These were all working class people, not tony high class types. So, maxed mortgage, maxed car or truck payments, add maxed TV payments. Canadians have gone mad on credit. The repo man’s heaven is arriving with job losses, interest rates rising, credit tightening. What will it take to get people to quick taking out more and more credit to buy stuff they won’t be able to afford if anything changes?

#85 RealistvsExtremist on 01.04.15 at 11:15 pm

#18 nonplused on 01.04.15 at 7:43 pm
Garth, Garth, Garth.

I’ve said this before and I’ll say it again. BC’s chief export is pot, and the chief purpose of the BC realty market is to launder pot money. It’s not HAM’s, not hot Calgary or Alberta money, not the cost of houses compared to the average wage. None of those factors weigh in strongly. BC houses cost as much as they do because it’s a way to launder drug money so long as you keep it under $10,000 a month.
+++++++++++++++++++++++++++++

So your suggesting that 1 million Asians/South Asians (or whatever new name CKNW gives them these days) in the lower mainland of which a LARGE portion do not even speak a word of English…..are all drug dealers?

Why can’t we just agree that the HAMcouver economy is a combination of drugs, corrupt govt, HAM and other new immigrants who “cash” everything and don’t pay taxes or have their house paid in “cash” from an overseas wire.

Either way…..this “median income” of 71K means absolutely nothing…….

And until Govt forces businesses to utilize technology this will not stop and obviously obscures Vancouver for everyone else born and raised there and wishing to be honest Canadians.

#86 WHAT IS A PROOF on 01.04.15 at 11:18 pm

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#87 SWL1976 on 01.04.15 at 11:19 pm

I found something quite interesting that some of you dogs might find interesting as well. Turns out there is a PDF file that is a blueprint for a world government

For the dogs who care… google search Bureaudetudes.org and view or download the PDF file

Interesting indeed

#88 worried realtors on 01.04.15 at 11:22 pm

The realtors on this blog are even more stupid then the masses could ever dream. Do people not see they don’t even have high school education. They talk about the immigration of people who can barely qualify for a rental without assistance from a sponsor. With job losses ,reduced hours and a major drop of oil profits now hitting Canada like a hurricane this will and is spilling into the FIRE sector. Without CHMC RE would drop 50% overnight. Anytime the government tries to make changes to CHMC the RE shills scream like wild animals . Canada is nothing but a house of cards that’s falling apart now. Did you really think the big US hedge funds that run the world would place a huge short Canada bet and not expect to win?

#89 RealistvsExtremist on 01.04.15 at 11:25 pm

What exactly does “local” mean? Recently landed immigrants, foreign students on student visas, or non permanent residents of Canada living & working in Canada with valid work visas? They all bought homes in metro Vancouver. Lots of them. Define “locals”, please.

Oh, please. — Garth
================================

In fairness he can’t. Our Govt is too bloated and stupid to utilize technology where it is needed most. And when they do try to use it…..they piss it away with things like the 1 billion dollar gun registry. You would NEVER have seen that much money spent on a piece of software to register firearms in the private sector. Oh…..and in today’s “actual” 5% a year inflation…..that’s about 2 thousand million dollars (2 billion). For a registry to put in your name, address and the firearms you own. Something LESS complicated than most apps today on your smart phone. FAIL GOVT.

#90 loquat on 01.04.15 at 11:31 pm

People here in the 604 really seem to have bought into the, now outdated, provincial slogan “Best Place on Earth” slogan.
Sure it’s nice, but it’s not $993,000-1,812,000 nice.
But what do I know.

Maybe I should drink the Buying-is-forced-savings,-BC is-the-best-place-on-earth,-you’re-richer-than-you-think Kool-Aid

#91 RealistvsExtremist on 01.04.15 at 11:32 pm

#40 asp on 01.04.15 at 8:31 pm
Your median Vancouver family pays 20% in income tax, not 30%.

Marginal tax rate? Why is that relevant to anyone without a political axe to grind?

The marginal tax rate of 29.7% is the amount one pays on each additional dollar of income at that level. We have a graduated system. — Garth
++++++++++++++++++++++++++++++++++

Not even close when you add in:

Carbon Tax
Gas Tax
GST tax
Environmental tax
Toll Bridge tax
PST Tax
Fuel Surcharge Tax
MSP Tax

Not to mention the rise in:

MSP tax
BC Hydro fee
Food Price increase (not included in STATS CANnot)
Smaller Packaging
Ferry Fees

And I a sure these lists are much longer……try closer to 60% for the average working family in TAXES, FEES, LEVIES or whatever theft name the GOVT puts on it….

That was embarrassing. The marginal rate is as I stated. Maybe you should think before you type. — Garth

#92 Sheik Yerbouti on 01.04.15 at 11:39 pm

#57 Washed Up Lawyer on 01.04.15 at 9:32 pm

Let me guess, you just watched the Hunger Games and your friends call you the mockingjay lawyer.

#93 RealistvsExtremist on 01.04.15 at 11:39 pm

#34 Financial Poodle on 01.04.15 at 8:03 pm
#16 RealistvsExtremist

So you’ve just described the student/child (or just a really smart person) of *any* wealthy family in another country. I know many Chinese that came to Canada and also are very wealthy. They are here because their hometown sucks and they can afford to be here. So what??
I also know many more (WAY more) Chinese back in China that can’t afford to come to Canada (anywhere in Canada) for a better life because they just can’t afford it.
I’m sure the people of Central America look around and say “These goddamn Canadians are driving up the real estate market! I’ll never be able to afford a house now!”.
Full disclosure, I’m a Caucasian.
+++++++++++++++++++++++++++++++++

And your suggesting distorting the tax system so that people born and raised here will be poor forever cuz everything is so high and foreigners pay much lower (illegal) taxes because of un-declared income is good?

You certainly put the pee into provincial. — Garth

#94 TurnerNation on 01.04.15 at 11:42 pm

NoName I don’t think a Kia 2.0l turbo diesel engine can generate 296ft/lb of torque. A small block V8 would be pressed to.

#95 mjeff45 on 01.04.15 at 11:42 pm

Garth is at it again with the same bull about offshore buyers and real estate in Vancouver. A family earning 72K per year has little chance of getting a mortgage without substantial family help in the form of a huge downpayment. We know many young families with very moderate incomes who have bought places on the “family plan”. With regards to offshore buyers, I urge Garth to drive around the west side of Vancouver, through the area near Trafalgar school, along 25th between arbutus and cambie, and in areas of point grey to see the houses with curtains drawn, no sign of life or activity… absentee owner living who knows where. Everyone here knows that it is foreign buyers who have been purchasing the 2K and up properties, driving the whole market up for all of us. Since Garth has been ignoring these clear trends for years, his credibility is really called into question. I don’t see Vancouver prices reverting to the mean in my lifetime. If the market looks stagnant, all the gov’t needs to do is change the immigration poilcy a little with regards to rich foreign investors to put the air back in the balloon.

Are you buying in Point Grey? — Garth

#96 Bobby on 01.04.15 at 11:47 pm

For #42 Timmy,
Much of your equity is the perceived value of your medical practices. Here in Victoria, many Dr’s cannot sell their practices as they contemplate retirement.
You are not richer than you think!

#97 WHAT IS A PROOF on 01.04.15 at 11:47 pm

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#98 Snowboid on 01.04.15 at 11:53 pm

Obama is coming to Phoenix this week to talk about the new (old) programs to make homes more affordable.

Hints like low down payment Fannie Mae and Freddie Mac loans (3% is rumoured).

This all sounds like a replay of the start of the downward spiral from eleven years ago, what are they thinking?

P.S. Beast filled with premium yesterday at .65 CAD a litre!

#99 Mr. Reality on 01.04.15 at 11:54 pm

“#15 Uh Oh Canada on 01.04.15 at 7:39 pm

What’s fueling BC’s economy? Drug.Money. The govt just turns a blind eye as it really is the driving force in the economy. This was told to me by a Vancity bank worker.”

And imagine what happens when a state across the border legalizes it….the flow of pot has already reversed. The drug related recession in BC is just starting.

Mr. R.

#100 CBC on 01.04.15 at 11:57 pm

Lower mainland listings are already at a 6 year low and about go below 10k. Sure, listings are always lower in winter, however the significance is that this december has lower listings than the previous 5 decembers. November sales of detached is 60% higher than november 2013. With demand massively crushing supply, its hard to argue price drops from an economic standpoint.

http://www.rebgv.org/news-statistics/metro-vancouver-home-sales-remain-strong

Someone will argue the stats are manipulated by the rebgv so it take it for what it is

#101 kommykim on 01.05.15 at 12:07 am

RE: #94 TurnerNation on 01.04.15 at 11:42 pm
NoName I don’t think a Kia 2.0l turbo diesel engine can generate 296ft/lb of torque. A small block V8 would be pressed to.

Diesels develop a lot of torque for a given displacement:
http://en.wikipedia.org/wiki/Hyundai_R_engine
Not quite 296ft/lb on the 2.0L but the 2.2L exceeds it.

#102 Paul T on 01.05.15 at 12:31 am

“The bigots and deniers will tell you this boatload of cash is from China. But that makes no sense. There were about 28,000 real estate transactions in Metro Vancouver last year and the best numbers available indicate that over 90% of all the buyers were locals.”

It’s only cost 300k to immigrate to Canada. In some cases even less. in then you will become local.

” In fact, in every quarterly report now done by the province, the net migration within Canada is negative for BC.”

seriously. Have you even walk or drive in Van in the last several years at all?
It’s full of people just everywhere, in the mall, in the streets everywhere. Get real!

#103 Van Isle Renter on 01.05.15 at 12:32 am

Enough HAM already!!!!

Think about it logically for a second: You are a kleptocratic billionaire Chinese Communist Party official. You want to live someplace else. Your choice is a $2 million 1400 sf bungalow near UBC or a $2 million 7,000 sf mansion in Malibu. Hmmmm… which would you choose? If you need to think about this for a nano-second you cannot be a real kleptocrat.

GT is correct; we are the authors of our demise on this issue. Our insatiable appetite for debt is killing us.

#104 Joe2.0 on 01.05.15 at 12:33 am

Canada is a drop in the bucket population wise.
Asia is huge with thousands of millionaires who want and will come to Canada as is India, Iran…
The majority of people who can’t afford houses are originally from Canada.
Immigration is pricing the average Joe out.

#105 Vanecdotal on 01.05.15 at 12:36 am

Some relevant, Kool-Aid-Free highlights from the local ‘hood (Suburban Van – South-ish Surrey) BC Assesment Data just released:

1) In the immediate area, $1 million SFH average price change: unchanged or – @3% over last assessment. I suspect these will slide down to the current CMHC-friendly financing limit this year.

3) ***Homes values here, including those that rose in value up to 5% in the last year (high-end of increases) are not keeping up with inflation for at least 4 years now. do not believe the RE Cartel B.S.™ – “Bastardized Statistics™”

4) For the first time EVER, in all but a few SOLD transactions up to July 2014, all recent buyers paid over THIS year’s assessed values(!), out of @ 12-15 SFH sales. Holy disconnect batman. The Kool-Aid is still STRONG in the herd, but not for much longer. There are several sales in which the buyers assessed home value is > $100 k LOWER than what they paid less than 8 months ago, even when factoring in the recent (and inflated for tax purposes) increase in assessed value. This is new and interesting, first noticed this happening just 2 years ago, and it is continuing and becoming more common to the point of being the norm now. Those new owners are probably surprised that they slightly, or largely, overpaid for their new home. Word will get out, that RE does NOT go up forever, but it is a hard concept for most to grasp thanks to recency phenomena. How will these folks re-finance when their mortgage resets? The low down payment buyers may already be underwater, in the course of less than a year. Scary.

In this small neighbourhood snapshot, on average SFH values been sideways, marginally down or marginally up (difference of less than 2% either way) for at least the preceding 4 years. When you account for the actual rate of inflation, I have not seen one property that is even keeping up with the posted rate of inflation over the last 4 years, (never mind whatever the “actual” rate may be). Anything assessed over the magic CMHC $ 1 million mark is now solidly trending doooown. Every home here is shrinking in actual value year-over-year simply by erosion, never mind property taxes (another + 3% increase this year coming), maintenance costs and lost opportunity costs on the capital. That is a defined downward price trend, otherwise known as prolonged slo-mo-cratering from the edges folks, as another poster pointed out. Van city will not be immune. I really hope future buyers are reading Garth’s blog and taking notes.

Yes, it’s suburban Van, but it’s an area popular primarily with fresh Van City-Ex-Pat commuters and boomers still in their original “estate” homes, (yet more future downward price pressure as these guys start downsizing in droves in coming years), that is being heavily rezoned urban residential (from former rural acreages) and rapidly densified. (Read: new attached = already OVERBUILT and many unsold, with more in the pipe). This is actually considered a “desirable” area (as far as the burbs go). A barometer for many other areas of Van in the near future imho.

The correction is already here, however as it’s an election year I expect the obfuscation of reality will continue as long as possible. I think post-election we may see real acceleration in price declines.

It would be interesting to hear from any other Dawgs noticing similar trends in the Lower Mainland, to see if this observation can be corroborated, or if is localized.

#106 Mark on 01.05.15 at 12:46 am

“who would want to exchange, for example, USD for CAD when the Canadian economy is circling the drain? maybe for people who hold USD but owe CAD debt, but I don’t think there are too many of those?”

The Canadian economy is not ‘circling the drain’, and the CAD$ will be bought to:

a) Repay CAD$ denominated debt.

b) As a savings instrument in a currency that is a claim against a significant surplus of domestic industrial production.

Debt and credit are cyclical. Go study Japan if you want a good case study as to why the CAD$ is probably going to go up significantly in value as the credit bubble deflates.

You can intuitively think of every time someone takes out a loan, to consume, to buy a house, etc., as a ‘short’ on the CAD$. After all, they’re borrowing CAD$ and then immediately selling CAD$ for their debt-funded trinkets of choice. Now, when this ‘shorting’ slows down and stops, ie: credit expansion slows/stops and inevitably reverses, guess what happens? As any stock trader should tell you, the outcome is that of a “short squeeze” — usually very significant, often spectacular reversal, often with momentum-driven overshoot.

#107 valleyrenter on 01.05.15 at 12:51 am

#81-devore

Read my handle, then read my post, pay special attention to the last sentence in the first paragraph. Take as much time with this to figure it out. If you need to, check home prices in the valley east of Langley to see what I am talking about. Nowhere did I say you could buy a house in Van for $500,000.

#108 Chuckie on 01.05.15 at 12:55 am

With all the industry moving out of Canada, we have a lot more than house prices to worry about. Our economy is still in the tank, so don’t expect interest rates to follow the US any time soon.

#109 Vanecdotal on 01.05.15 at 12:58 am

#99 Mr. Reality

Excellent point. I think this alone may be the final straw to legalizing in BC sooner rather than later. Our broke BC Govn’t trying to save face by creating an “innovative, eco-friendly Hey! – It’s Green!” tax revenue stream in time for the next provincial election bag of carrots. Hopefully whom so ever is at the helm federally by then also sees the sense of this in the near future.

In the meantime, only time will tell what kind of direct impact this hit to the underground economy will mean for BC. Likely quite substantial.

#110 HJD on 01.05.15 at 1:08 am

I live in Victoria (Saanich) and the assessment on my home just increased by 9.6%. I assume this increase is based on an objective analysis of property value. What’s going on? I thought Victoria real estate was heading in the other direction.

#111 stage1dave on 01.05.15 at 1:11 am

Great column…& timely…my dad could never figure out what was driving the mainland market either, & he lived there for almost 30 years.

I’d like to add my two cents here…back in the 70’s, a guy writing under the pseudoneum of “Adam Smith” wrote a couple of entertaining books about economics for the laymen, & in one of them he had a lighthearted chapter about the then-crazy LA real estate market.

Back in an era where you had to stuff 30-50% down, these houses were appreciating by 800-1000% in a 15 yr span. (he was dealing with an era from ’57-74, at the end of the initial oil price runups)

After his initial shock at the galloping value of housing in the area, he consulted several RE salespeople & several sales managers. The most reasoned reply reply he got to his enquiries about “who can afford to pay these prices?” was: “someone who just sold their house & is upgrading”.

(that being said, a lot of the agents were obviously clueless…after informing one agent that very few couples could realistically afford $4500/mt to amortize a property, the reply was “that they both would have to work”…”at what?” he replied)

He had lived in Brentwood in the 50’s, so he had some area expertise. He also thought the offshore migration was a fairly small influence on prices. (as did the the local RE pros) I don’t remember any references to “funny money” & it’s role, but it was the 70’s; so it probably wouldn’t have been a subject openly discussed in a book like this.

(Im flyin’ on TTBOM memory here, btw)

In conclusion, it seems that very little housing-market-wise makes sense in this country right now…the wife & I are right around the “average Vancouverites income” & are quite happy in our $1000/mt hovel while we do a bit of investing & saving; the thought of living in a million dollar house would scare the hell out of both of us!

(Actually, I’d be OK with livin’ there, it’s the payin’ for it part I don’t like)

In a country where the cast of Duck Dynasty appears to be running the Dept. of Foreign Affairs & the Air Farce might as well be handling CMHC & domestic economics, I suppose the income/house price ratio on the left coast makes perfect sense!

#112 Setting the Record Straight on 01.05.15 at 1:22 am

“In short, Van is a classic overbought market, fueled by cheap money, unrepentant house-pumping lenders like Vancity, and nurtured by a local culture of real estate obsession. People in 604 are happy to blame others (like the Chinese) for absurd prices, while then plunging into debt believing even more offshore cash will make their dumb decision pay off.”

Well since Canadian cities share all these elements influencing their real estate markets, why did Vancouver real estate prices get so far out in front? Oh wait there is one factor which influences Vancouver but not others. Right?

Clearly VanCity gets the credit for all this.

#113 Mean Gene on 01.05.15 at 1:27 am

Real Estate feeding frenzy, no logic to it.

#114 eric on 01.05.15 at 1:30 am

So if a 200k lawyer refused to leave Toronto, doesn’t it mean it is more affordable and less affected by the general RE downturn in the country? I can’t see how prices fall by much with so much demand here. Just look at the downtown core where detach and semis are in high demand.

#115 B Riding on 01.05.15 at 1:33 am

Smoking Man…

Next time your in Vancouver let us know, you have fan following that would love to pound back some JD with you and see how crazy you are in person.

Fan of yours, but a little scared of you.

#116 villagemoron on 01.05.15 at 1:50 am

Boom. Done.

#117 Tim Anderson on 01.05.15 at 2:09 am

To Mark #51

If you think that we are going to make $300,000 every year and grow that too in the next 7 or 8 years then you are dreaming.

This is our best year so far and we averaged about $255,000 clear a year from our 2 businesses over the last 15 years.

It is a pretty good, long term track record.

This is going to be more realistic longer term. Our retained earning will probably be around $6,300,000 in 7 years.

This means it is be about 24 to 25 times PE ratio. The last time in 2007 to 2008, after the financial, economic meltdown, I believe U.S. stock markets were 23 to 24 times.

Did you ever hear about reversion to the mean?

This is where equities are all going. This is true with the Federal Reserve artificially boosting equity prices with ultra low interest rates and bond buying.

We all know this is not a truly strong economic, financial recovery like back in the 1990’s.

#118 Rabbit One on 01.05.15 at 2:22 am

>#41 valleyrenter

re: Basement / legal separate suite in Van

I’ve also seen many new builds in Van West – 3,000 to 4,000 sq foot house in 33 ft lot with 2 addresses (not duplex).

Not to mention more and more Lane house in new builds.

Checked ctaigslist rental housing section, you only can find very few decacthed “whole house” for rent, Van West, Van East.

Van East, not renovated “upper part” of the house, 2 + den, shared laundry goes for $2,200.
Separate entrance basement suite for same house rents for $1,700 – this is insane rental price for East Van, lots of greed and desparation here.

#119 Tim Anderson on 01.05.15 at 2:31 am

To Mark #51

We have $800,000 each so $1,600,000 in capital gains tax exemption, tax free capital gains and more control and experience over our 2 businesses.

#120 Dollar approaching 83 cents on 01.05.15 at 2:34 am

The Gov and BoC will not raise rates. They will let the currency crash all while saying there is no inflation.

The greatest thing the devil ever did was convincing the world that he does not exist.

#121 Ronaldo on 01.05.15 at 2:36 am

Fell for that one, didn’t you? — Garth

The $4,000,000 in RSP’s was a dead giveaway.

#122 broadway skytrain (on the 'slummy' side!) on 01.05.15 at 3:31 am

Seems like you can “own” your house, just need renters in the basement. A suckers deal if I ever heard one. People think basement suites are a good thing, they’re not. Artificially inflates home prices, and not a sign of a healthy economy.
———————————
sorry, you are dead wrong here.

where might the tens of thousands of musty basement dwellers going to live then?
we are building condos FAST as possible, we’d need the entire ft mac workforce for 2 years to build new places for all of them them too. they have to live somewhere. if you want to live on the doorstep of beaches/mountains/beauty and you make less than that 70k avg, you live in an older apt or a “sweet” (sic), usually “ground level”. homeowners get an easy 1-2k (+200 for a guard dog if u want) to buy BCadventure ,drugs, ETFs or smoking man quickserve rentals.

perhaps you have not walked the city lately but i have seen hundreds of laneway houses, all newer than 2/3 yrs. the mayor wants 3 units basement/upstairs/backyard on house lots and it is already happening. ergo – lots are now worth even more.

condos are cheaper . saw an ad for new condo on commercial (where the old theater was and it took 3? years to convert) said “IF YOU MAKE 55K YOU CAN OWN HERE”

west of cambie IS like tokyo/manhattan/sfo/hk – a globally desirable place which is extremely land constrained has a shrinking supply ceiling. supply/demand intersection goes non linear. it has. it will continue. it shangra-freaking-la to not only china, but to many other countries full of shitty dirty cities and Bring Cash will remain the rule. (since the 70’s)

but on the bright side, hell we now have RETAIL stores all over town now, like 50 new ones from a handful last year for quality weed at a decent price. med of course ;)

BC product mostly gets smoked here though so not a big export driver. Cali law will have zero effect. WA/OR/CO/AK all have already gone over to the green side, cali will make it a full west coast sweep. cali was growing the bomb long before the BC brand existed

the taxes in WA are so high i estimate 75% stays undercover.
25us (legal) in WA or 10cdn(quasi legal) for same bag. (7$ old black mkt price)

van will be just fine. NO bust west of COQ.

#123 Edward on 01.05.15 at 4:14 am

In the last 3 years, about 2500 homes in West Vancouver have sold. There are only about 10,000 homes. The vast majority are single family homes. Many of these homes are older homes being torn down and a new much larger home being built on the lot.

The vast majority are being built by owners of Asian descent. You can call me dilusional or a racist, but I’m simply stating a fact that anybody who lives in West Vancouver or sells real estate will tell you. I don’t know if these people are offshore owners or Canadians somehow. All I know, is that they’re ethnically Asian and the demographic shift in West Vancouver is just as huge as the increase in property values.

Take a quick peak at the new assessments of the homes in the new parts of the British Properties. They average between $4 – $7 million. A drive through the neighborhood will quickly reveal the ownership mix. Almost exclusively ethnically Asian.

The average condo in the Lower Mainland hasn’t increased much in the last few years. But single family homes in West Vancouver, Point Grey, Kitsilano, Shaugnessy and the Endowment lands are not being bought by the avearge Vancouverites with a household income of $75,000.

These single family neighborhoods are becoming almost exclusively and visibly Asian (maybe just ethnically). Oil maybe taking a dive, Chinese property slipping, interest rates set to rise and Canadian debt soaring, but these areas won’t be affected. Single family homes in these areas are an endangered species. They’re comparable to fine rare art, the values do just keep going up.

If Putin starts world war III or a big earthquake hits BC, maybe I’ll change my mind. But until then, hold your home if you own in one of these areas, you won the lottery.

#124 broadway skytrain on 01.05.15 at 4:40 am

oil to 51.45 while u sleep
dooooown baby.

big buy in low 40’s

#125 deepblue on 01.05.15 at 6:30 am

Easy way to tell if that Vancouver SFR has a drug money / corrupt money connection- does it have a massive brick and iron fence in front.
How many people reading this blog grew up in a house with a fence out front- less than .01% I bet. It suggests dstrust of people in general- probably cause you know how you made your money!
Say what you want but Ive noticed parts of Van has more of those brick and iron fences than any area I’ve ever walked around, even more than East LA or east Palo Alto

#126 Chinese invasion on 01.05.15 at 7:51 am

I hire a lot of students every year, we interview about 20 students. Most of the time 90% are asian.
Then I follow their progress through life.
Majority of this kids buy homes not one but two.
Recently I had dinner and asked how on a dual income of $150,000 can you afford two houses
The answer was simple mom and dad live in China, the kids were born in China but are local or in other words Canadian citizens. Mom and dad paid cash for the houses. Either large down payments or full price.

I am not clear how in 50 years China went from poorest country in the world to one that now buys houses in Canada. But Chinese love houses, so that’s my take on it.
oh by the way I have talked to Many former students all asian all with similar stories.

Following your former student hires through life. That’s a plausible story. — Garth

#127 Jophn on 01.05.15 at 8:59 am

Garth,
You just presented all the facts that Vancouver residents can not support the current house prices: negative net immigration, low family income, prices continue to increase. You continue to deny the offshore money theory in the face of your own evidence.

Over 90% of buyers are locals. Look at the debt chart. Come to your own conclusion. — Garth

#128 Tim Anderson on 01.05.15 at 9:19 am

To #121 Ronaldo

I guess you always read just the first few words of a post and not the whole post.

Now, I know why people get stuck where they are. They don’t have the time and patience to actually know what they are doing!

#129 Sam Joyer on 01.05.15 at 9:43 am

Get ready for interest rate shock in 2015

Consumers with high levels of debt to be most affected when Fed, Bank of Canada raise rates

“Despite the low interest rates we’ve had for years, no one seems to have worked away at their debt levels. It will be a wake-up call for many consumers,” Purda told CBC News.

http://www.cbc.ca/news/business/get-ready-for-interest-rate-shock-in-2015-1.2882895

#130 Mike in Toronto on 01.05.15 at 10:04 am

#38 KIAs Krush Harleys & Hummers

“That terrible number tells me terrible things are about to happen”

You can carry it for $3g/mo, which puts it slightly more expensive than a nice apartment.

Prices won’t budge unless we have a job problem or interest rates. The way things are going, Harper et al, would rather see our savings inflated away than people have to cough up the money for their houses.

$616 for a small house is going to seem like genius when the dollar is $.50USD and we’re all earning $200k/year… by then it’ll run $1.6M

I don’t believe it will happen, but then I never believed this would go on as long as it has.

#131 Kalergie on 01.05.15 at 10:10 am

Quote from #126: Chinese invasion “I am not clear how in 50 years China went from from poorest country in the world to one one that now buys houses in Canada”

Try hard work, balls and good decision making. And don’t forget embracing change….but surely not envy, xenophobia and undeserved sense of entitlement.

#132 john on 01.05.15 at 10:12 am

O the chart!
90% local buyers with offshore money and 10% with borrowed money to skew the dept chat. Based on the facts you provided, offshore money is the only explanation for the Vancouver and Toronto real estate prices.

#133 Kenchie on 01.05.15 at 10:15 am

“Property values plummet on Mayne and Saturna islands”

http://www.timescolonist.com/news/local/property-values-plummet-on-mayne-and-saturna-islands-1.1704457

#134 worried realtors on 01.05.15 at 10:18 am

The realtors on this blog are high school drops out. Their understanding of economics is comical and their tales of millions of rich immigrants with millions coming to Canada also proves their ignorance. Btw we could see oil hit under $50 today.

#135 valleyrenter on 01.05.15 at 10:30 am

#118-Rabbit One

The rental numbers for East Van you found got me thinking. Figure the $ amount would carry $800,000 in mortgage. Houses in EV are in the $900,000 range, could this be a case of a Boomer taking out equity in their primary residence to fund a rental property?

In this R/E crazed market it wouldn’t surprise me, say $200,000 taken out of primary, plunked down on a rental. Property produces close to $4000 per month, with a mindset that other people pay the mortgage, and the home keeps appreciating so they can cash out when they retire, hoping to get enough so they can still eat at Baci once a week.

I seem to remember a story in one of the Van fishwrappers a few years back focused on a lady that was doing just that. It went on how she was devastated that her bank was downgrading how much mortgage she would be approved for in regards to her rental income, as she really didn’t have much of an income for herself at all. Her whole retirement plan was that she would continue taking out equity in price appreciations and buy another property, wash, rinse, repeat. Doesn’t Garth recommend not going all in on one asset?

That sure would point to not relying solely on R/E to fund ones retirement. It would however be interesting to see in reality how many are doing pretty much the same to one degree or another. Myself, I rent from professionals.

#136 fancy_pants on 01.05.15 at 10:37 am

Cdn govt gloating about how they diverted the financial crisis back in 2009 due to national greatness. Satisfied the myopic sheeple. Perhaps chickens coming home to roost…

The US lowered rates to correct a crisis, the minions on the hill followed suit but the effect instead morphed a future crisis. RE in the US played the lower rates card and had their correction. Problem for us is we played the card as well, but have not had the correction.

Now as they rise from the ashes and slowly begin to raise rates, what card are we left to play? Couple the low oil prices and now we have a real problem.

Some little pecker is rolling in his grave. The other ran off to Britain. The fallout is ours to bear.

#137 Not 1st on 01.05.15 at 11:00 am

Over 90% of buyers are locals. Look at the debt chart. Come to your own conclusion. — Garth

—-

Garth you need to separate the address of the buyers from the source of the cash then you will understand Vancouver. The buyers always have a canadian citizenship but the cash is sourced from abroad. Those nifty little stats can’t catch this one but that’s the reason right there.

Please provide proof. Any proof. — Garth

#138 Samantha Fox on 01.05.15 at 11:08 am

Cheaper oil will benefit Canadian economy says RBC.

https://ca.finance.yahoo.com/news/cheaper-crude-oil-might-actually-benefit-canadian-economy-090016103.html

the cheaper the better.

oil down big time today, should I sell my energy companies?

#139 Fred Smith on 01.05.15 at 11:57 am

Lots of real estate activity near the fringes and outside GVRD. Condos going up all over the place in Langley. That commute downtown to Metro Van is hell though.

#140 Doug in London on 01.05.15 at 12:13 pm

@Edward, post 123:
Yes, if you have a house in the Lower Mainland you bought years ago and have seen it appreciate greatly in value, you have won the lottery, no doubt about that. However, you have to cash in the ticket to claim your winnings. I know I would.

#141 Harbour on 01.05.15 at 12:27 pm

TSX trading volume 20% higher than normal, down 372 points

Oil $50… down $2.50

#142 Henry Rearden on 01.05.15 at 12:38 pm

LOVE living in Nova Scotia! Moved here two years ago (Garth – I believe you spend time here also). Beautiful scenery, friendly people, and house prices are lowering by the day – just check out price changes on viewpoint.ca. I’m renting dirt-cheap, and love being liquid and free. Nothing beats it!

#143 Please provide proof. Any proof. — Garth on 01.05.15 at 12:44 pm

Proof?

like gov and big biz are really going to set up stats to capture this. The people of YVR are not stupid. Please don’t insult us Garth.

So, none? — Garth

#144 Uh Oh Canada on 01.05.15 at 1:01 pm

Let’s face it, nothing in life is singular but usually a combination of things. For Vancouver Real Estate, it’s some HAM, some locals, some criminal activity, and lots of greed.

How many grow ops in Vancouver vs. the rest of Canada? A lot. How much is the pot industry alone worth? I’d say in the billions per year. This money has to go somewhere, and what better place than in real estate where higher values means higher property taxes.

#145 Harbour on 01.05.15 at 1:07 pm

Snowbirds have made 15% just on the exchange rate on that Phoenix bungalow.

#146 Pre-Retiree on 01.05.15 at 1:08 pm

House bubble and crashes

#147 Pre-Retiree on 01.05.15 at 1:10 pm

House bubble and crash:
Oh, oh!
There is now on the CBC a talk show about housing bubble. You know what I always say: When it is in the news, it has already happened.
Hold on to your hats.

#148 not 1st on 01.05.15 at 1:13 pm

Garth, have you considered the possibility that people save a few hundred a month on gas and then put it toward their mortgage and house prices go up even more?

#149 Kenchie on 01.05.15 at 1:20 pm

On the topic of Vancouver housing…. (which supposedly has a high correlation with China’s GDP growth)

“China’s Slowing Housing Market and GDP Growth”

https://www.kansascityfed.org/publicat/research/macrobulletins/mb14Nie-Cao0825.pdf

#150 Edmontonian on 01.05.15 at 2:08 pm

As we see consumers plunge into unsustainable debt, we should look at Governments in power now to blame….

Look at the joke of a job the Conservatives of Alberta have done, a trillion dollars handed out to foreigen interests! http://www.huffingtonpost.ca/2014/01/11/oil-fund-norway-millionaires_n_4576887.html

#151 jess on 01.05.15 at 2:20 pm

They are wondering the same thing in Ireland

unregulated “mortgage vultures”.

http://www.independent.ie/business/irish/banks-doing-as-little-as-possible-on-mortgage-arrears-crisis-30880041.html
=========

Indicator- Risky tax behavior?
Claims on the balance sheet that the IRS may reject – “uncertain or unrecognized tax breaks”
http://taxprof.typepad.com/taxprof_blog/2014/12/wsj-how-google-ge-and-us-firms-.html

The argument
https://medium.com/bull-market/luxembourg-tax-document-leak-leaves-pwc-and-its-multinational-clients-vulnerable-ea797055ed66

#152 Leaside on 01.05.15 at 2:21 pm

Canadian bond yields are tanking. 5 year is at 1.27%. I predict 5 year mortgage rates at 2.3% by the spring. Note that USA bond yields are up.

Smoking Man, huge run up in prices in the GTA coming.

Low rates coupled with Immigration and CMHC = Up, Up, Up.

#153 Musty Basement Dweller on 01.05.15 at 2:30 pm

See link below. So the Gulf islands properties in the banana belt, retirement mecca of Canada have been falling in the last four years. (the time of all time low interest rates and most generous lending policies via CMHC /taxpayers).

What will happen when market reality sets in from interest rates return to normal and lack of government /CMHC generosity? Doesn’t seem like rocket science.

http://www.vancouversun.com/business/Property+values+plummet+Mayne+Saturna+islands/10701271/story.html

#154 :):( Ying Yang on 01.05.15 at 2:31 pm

#14 Garth is my enabler on 01.04.15 at 7:38 pm
Things move fast these days
News from underground:
Major Banks in Toronto are planing further IT staff reduction, encouraged by recent BoNS firing of bulk 300 people…
It is estimated that in Q1 about 1000 IT people
will be without jobs coming this spring…
I thought Banks are doing good, Garth.
Why are they experimenting with this?
Does bonuses for few CEO’s matter more than
our national Banks that are rock solid ?
Or we just believe that…

that they are..
…………………………………………………………………….

Just got back from a month of business in Hong Kong. Even in Hong Kong they job out IT bank stuff to cheaper Asian countries like India. My brother was the head code monkey at a major bank in Hong Kong and told me he was part of the team they put together to eliminate high cost IT staff. He has since moved on to a new higher paid position in Singapore. He said North American banks are lagging behind in this case and its only a matter of time. The banks are in the business of making money, not losing it! They squeeze every penny out of you or their workers. He said when he first started out working at RBC in Vancouver they started eliminating full time staff first and making them part time, then they started contracting out positions to cheapo companies that would do the work for pennies on the dollar. Now they are starting to go Asian for tenths of pennies on the dollar. So whats next? He said watch out for African IT guys who will do the work for a tenth of a tenth of pennies on the dollar. He said the African IT industry is rife with corruption though so nobody can be trusted at this juncture! He said it is coming though! So move over IT guys cheapo Africa Man is coming!

#155 :):( Ying Yang on 01.05.15 at 2:34 pm

By the way I flew out of Hong Kong on Christmas Eve and we stopped over in Hawaii. Man I could sure as hell live there but the real estate pricing is crazy there too!

#156 Debtfree on 01.05.15 at 2:35 pm

@150 E…. The biggest difference is that very few of the seat warmers in Ottawa would have enough credentials to be elected to any office in Europe . Plus our broken democracy . First past the post is a path to dictatorship . P.R. Is the answer that most have clued into . There’s a reason people don’t even bother to vote . All we get is one dictator after another . Search the credentials of european leaders . I don’t think you’ll find a mailroom boy leading a country in Europe .

#157 Doug in London on 01.05.15 at 2:41 pm

@Samantha Fox, post 138:
Please tell us you’re joking. With oil being down, selling oil companies now is like locking the gate after all the cattle get out. Energy companies are ON SALE now!!!!! Is there a future for oil? I don’t know, but I am going out shortly and will think about as I drive around in my GASOLINE fueled car. My friend is coming home from Bangkok in 10 days. I can’t imagine him coming home on a plane that runs on JET FUEL, can you?

#158 straight six on 01.05.15 at 2:46 pm

in the land of Lions, the Ogopogo and rose colored glasses..
A typical 3 bdrm house in Vancouver’s Pt Grey went for 40K back in 1973, which grew to $60K by 1978.. to well over 2 million a mere 35 yrs later.

and so kids.. that’s why they call it Super Natural BC!

#159 Daisy Mae on 01.05.15 at 2:51 pm

What’s with all the Web Guard ads?

#160 not 1st on 01.05.15 at 2:56 pm

#154 :):( Ying Yang on 01.05.15 at 2:31 pm

I don’t think coders from africa will be a long term trend. In 5 years computers will code themselves. There some that already do. Watson, Google search, Siri, etc all learn as people use them more and as they do more iterations. We make them smarter just by using them and they incorporate the improvements.

People have no clue whats coming down the line.

#161 bdy sktrn on 01.05.15 at 2:57 pm

159 – virus?

And for everone else I hope you kept all that new tfsa in cash.

#162 bdy sktrn on 01.05.15 at 3:00 pm

159 definately a virus

Try goog for tech questions silly girl

https://www.google.ca/url?sa=t&source=web&rct=j&ei=tt6qVOCrJMOsyATDiYGgAw&url=http://malwaretips.com/blogs/remove-web-guard-ads/&ved=0CB4QFjAA&usg=AFQjCNG42ZAVGa8KdQtMnd2TZhYmCF-GZg&sig2=1jZ_nF-jJwtm_JLbQVZz7Q

#163 RealistvsExtremist on 01.05.15 at 3:02 pm

156 Debtfree on 01.05.15 at 2:35 pm
@150 E…. The biggest difference is that very few of the seat warmers in Ottawa would have enough credentials to be elected to any office in Europe . Plus our broken democracy . First past the post is a path to dictatorship . P.R. Is the answer that most have clued into . There’s a reason people don’t even bother to vote . All we get is one dictator after another . Search the credentials of european leaders . I don’t think you’ll find a mailroom boy leading a country in Europe .
+++++++++++++++++++++++++++++++++++

The whole of the world is gripped with this “broken” democracy right now. Why do you think the Media is NOT REPORTING the many riots and protests going on everyday. They are told not to by govt and bankers. They don’t want to give “us” any ideas. World Civil War I is coming. And for the most part it will be non-violent. And I believe we will use technology and the internet to voice our opinion to the vast MINORITY of dictatorial rulers and their public sector minions. The easiest way for change will be non-compliance. You can do this without violence.

#164 bdy sktrn on 01.05.15 at 3:07 pm

Three minute job to kill it if u are savvy. Regedit is your friend.

ALL anti Virus software is for babies and ignorants. Same as paying for insurance for untied shoelaces.

Exactly What were you downloading?

#165 TheManwhoStaresatSheeple on 01.05.15 at 3:11 pm

Latest Baker Hughes Report on the oil rigs:
http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-rigcountsoverview

Canada – 208 oil rigs:
– down 48 or 19% compared to the latest one from Dec.29,2014;
– down 74 or 26% compared to Jan 5, 2014 (one year ago)

Drill baby, drill
====================================
and this is in reply to #158 (straight six)
Direct result of the funny things that happened just a bit earlier (in 1971)

#166 Rational Optimist on 01.05.15 at 3:12 pm

I laughed out loud yesterday at crossbordershopper’s and Ret’s commentary about Hamilton. Hamilton is the type of city that drags outsiders further to the right politically than they ever thought possible. The absolute most bleeding hearts can be hardened after a while after enough power chair jockeys knock them off the sidewalks. Ret’s count the scooter game is a common pass-time.

Yet Hamilton is expecting to be the best-performing housing market in the country this year: http://www.cbc.ca/news/canada/hamilton/news/boom-town-hamilton-housing-predicted-to-stay-hot-in-2015-1.2883809 Sure. I guess the city can hang its hat on being able to dupe enough Torontonians into believing it’s a good place to live.

#167 Daisy Mae on 01.05.15 at 3:26 pm

home – rate – lottery – Canadian – the money – bloated. First ad appears above the blog pic. All referring me to dumb sites. I’m doing a Avast scan. So far, so good. Result: clean.
Weird. ??

#168 Sheane Wallace on 01.05.15 at 3:29 pm

https://ca.finance.yahoo.com/blogs/pay-day-/steady-growth-expected-for-canadas-housing-market-185530709.html

Everything is rosy with our housing market, prices will keep going up, folks.

As people would be afraid to miss out on the “healthy, steady growth” in a “balanced market”.

#169 Brad Roberts on 01.05.15 at 3:32 pm

British Columbians who are thinking about buying real estate in Vancouver should consider data from Washington State when determining whether or not Vancouver residential real estate is in a bubble. Many factors that influence real estate prices in both urban and suburban areas in B.C. and Washington are very similar (i.e., large immigrant populations, beautiful scenery, weather, family incomes, etc.). Arguably, house prices in Washington cities and towns should be considerably higher than they are in B.C. cities and towns because a) income (and overall) tax rates in Washington are generally lower; and b) one can deduct mortgage interest in the US whereas one generally cannot in Canada.

In Gig Harbor, for instance, the estimated median family income in 2012 was $US 62,000. And yet, this is what $889,000 will buy you currently:

http://www.realestategigharbor.com/index.cfm?fuseaction=detail&startrow=2&cfid=28171095&cftoken=87683097

How much do you figure a piece of property like that would go for anywhere near Vancouver?

#170 Sheane Wallace on 01.05.15 at 3:41 pm

#152 Leaside

You could be right, apparently here are “smart investors” making “a killing” on 1.27 % bond yearly yield, 6 % total nominal return for 5 years while it is almost certainly guaranteed that Ca dollar will tank bellow 80 cents this year, so all the ‘gains’ is certainly guaranteed to evaporate in few months.

As the house prices are measured in crap currency they could keep rising.
Black is the new white these days, There was article today that falling oil prices are actually beneficial for the economy.

#171 Ronaldo on 01.05.15 at 3:49 pm

#138 Samantha Fox –

”oil down big time today, should I sell my energy companies?”

Would you please?

#172 rosie "moving forward" in the knowledge that, "this won't end well" on 01.05.15 at 3:49 pm

Wonder what tar sand crude will be worth?

http://www.marketwatch.com/story/some-traders-are-betting-on-20-oil-2015-01-05?link=MW_home_latest_news

#173 miketheengineer on 01.05.15 at 3:49 pm

How do they do it…multiple families or singles – living in one address. Multiple incomes, paying off debt.

Or

Some kinda “fishy” stuff going on, let your imagination go wild.

Dat is how Dey ..Do…Dat kinda stuff.

Make them “re-qualify” when the mortgage expires…see what happens….might be interesting to see the results.

Happy New Year!

#174 NoName on 01.05.15 at 4:07 pm

How Often Does the Stock Market Correct?
http://goo.gl/EEtwKb

how to haggle: tips and advice
http://goo.gl/81Bx90

#175 liquidincalgary on 01.05.15 at 4:08 pm

Daisy Mae on 01.05.15 at 2:51 pm

What’s with all the Web Guard ads?

==========================================

sounds like you have some malware issues

#176 Mike in Toronto on 01.05.15 at 4:11 pm

157 Doug in London

“…ON SALE now!!!!!”

Problem with this attitude is that:
– it ignores careful, planned, scheduled rebalancing
– it means you had cash reserves out of the market
– buying at the bottom is just as futile as selling at the top

#177 cjlizzard on 01.05.15 at 4:19 pm

Garth while i agree that the consumer is getting the benefit at the pump it should also be pointed out that falling oil prices are NOT an overall positive to economic growth. The negative impact to economic growth from the decline in oil prices are quite considerable, in the US almost 40% of all jobs created since 2009 have been in energy related industries, by guess is that it is even higher in Canada.

Furthermore, many of those jobs are in the highest wage brackets which lead to more consumption and further job growth in other areas of the economy (ie the boom in Calgary). In fact, for each job created in the energy sector there are nearly three jobs created elsewhere in the economy. Once you factor in the negative economic consequences of the decline in oil prices, any perceived positive impact from lower gasoline prices,by the consumer, will be quickly negated. This is going to be especially evident in Alberta in the weeks and months to come.

#178 David M on 01.05.15 at 4:20 pm

Hey Gartho, you smarter than a housing analyst?

See if you are here: http://news.buzzbuzzhome.com/2015/01/big-data-with-big-ben-smarter-than-housing-analyst.html

#179 Oil under $50. Alberta to crash on 01.05.15 at 4:23 pm

RE to crash first in Alberta and the dominoes will fall all the way to the GTA. Realtors who lack a high school diploma will spew their nonsense of immigrants and rich foreigners with lots of money that want to live in one of most overvalued RE in the world. Rich people are stupid like realtors as realtors here want you to believe.

#180 Pete on 01.05.15 at 4:25 pm

Sorry, meant to post this to todays blog not yesterdays….
———————————————————
Signs of significant overbuilding here is Oakville, particularly at the high end ($1.5-3M), in areas which are not quite prime. Take this as an example (there are lots more like this), sitting empty since being completed some time ago.

http://www.realtor.ca/propertyDetails.aspx?PropertyId=14913426

There seem to be having a real struggle moving this property, in spite of open house upon open house throughout the fall and winter.

First notice the price $2,888M. It is amazing how many high end houses here have the magical 88 in the price. Franky as a sales tactic this is laughable, except that the careless assumption that a whole ethnic group will make multi-million dollar decisions based on a contrived sales price borders on being racist (IMO).

These agents also left a big black Maserati parked on the driveway for a few weeks as a prop – then it got covered in snow and was taken away – guess that didn’t work.

The next problem with this house is that it is located about 10 feet from Lakeshore Road. So you can be lounging around your pool, listening to the constant drone of traffic just outside the fence, punctuated by the roar of batches of Harleys driven past by Garth and his pals. Not my idea of a multi-million dollar experience.

I think if many of these types of houses don’t move in the Spring we are in for a bloodbath…

#181 Matt Gamon on 01.05.15 at 4:28 pm

I’m afraid a balanced portfolio won’t protect you from what’s coming

#182 Cod Loins on 01.05.15 at 4:43 pm

Did the Americans pay off the debt or write it off?

#183 Josh in Calgary on 01.05.15 at 4:44 pm

#42 Tim,
The part you are missing is that your private businesses ARE equity. Anyone who owns their own business probably doesn’t need to load up on equity in the markets unless you have boat loads of extra cash and want to diversify. Playing it safe with your savings by putting it in fixed income is the way to go (in TFSA and RRSP of course). Depending on how you value your companies you are probably still 70-30 equity to income.

HOWEVER, once you sell your business then it would be completely reasonable to place some of the proceeds in the equity markets (divedend paying). Maintain a nice balanced portfolio somewhere around 50-50 with geographic and sector diversity. Sounds complicated but you can do this with only a handful of ETFs or mutual funds. You can even do it with one or two if you don’t mind paying a little extra in fees.

#184 @musty basement dweller on 01.05.15 at 4:47 pm

Interest rates are at the new normal in Canada. What fantasy land are some people in when they think rates are going to 5%?? Seems like wishful thinking rather than reality.

#185 RealistvsExtremist on 01.05.15 at 4:53 pm

#150 Edmontonian on 01.05.15 at 2:08 pm
As we see consumers plunge into unsustainable debt, we should look at Governments in power now to blame….

Look at the joke of a job the Conservatives of Alberta have done, a trillion dollars handed out to foreigen interests! http://www.huffingtonpost.ca/2014/01/11/oil-fund-norway-millionaires_n_4576887.html
++++++++++++++++++++++++++++++++++

Really? It’s amazing how many times the same thing needs to be said….

Canada has one of the largest, bloated, most inefficient govt’s in the world. You don’t see 3 levels of bloated govt in other small population countries.

#186 Jimbo on 01.05.15 at 4:54 pm

109 Vanecdotal on 01.05.15 at 12:58 am
#99 Mr. Reality

Excellent point. I think this alone may be the final straw to legalizing in BC sooner rather than later. Our broke BC Govn’t trying to save face by creating an “innovative, eco-friendly Hey! – It’s Green!” tax revenue stream in time for the next provincial election bag of carrots. Hopefully whom so ever is at the helm federally by then also sees the sense of this in the near future.

In the meantime, only time will tell what kind of direct impact this hit to the underground economy will mean for BC. Likely quite substantial.
.
***************

14 years ago lived in Vancouver, a fiend fell into the so called easy path of growing pot, got connected with a local group of like minded folks who rented and brought real estate in the richer neighborhoods (where no one would think of looking for grow ops – at least at the time- things have changed since then). Grow ops were established with live in friends who monitored the grow ops. They even had a lawyer on retainer just in case.

Being born and raised on Vancouver Island it’s hard not to be privy to the marijuana industry. All walks of life are involved not just the gangs. People use it to subsidize income. Here’s the kicker – when US states started to grow their own, the price of pot has fallen from approx 2800 (premo-indoor) to 1200 a pound. It has been that way for quit some time, I am sure there are some continued success stories but most likely just talk. It is only a matter of time before the cash strapped – ideologicial turncoats need the cash and come to an epihany and tax the crap out of it.

As for Vancouver, freind just informed me that every 4th store on Robson street if for lease… He said it was astonishing. Van is all about looking and playing the part.

Oh well…I like dealing in reality some don’t…We’ll see what happens.

#187 bdy sktrn on 01.05.15 at 5:03 pm

As for Vancouver, freind just informed me that every 4th store on Robson street if for lease…
————————–
when exactly was he there?

there are very few empty right now, very few.
at least as of a week ago.

#188 Vanecdotal on 01.05.15 at 5:07 pm

For some reason, the first part of my previous post @ #105 got mixed-up and lost in the ether. Should read:

1) In the immediate area, greater than $1 million SFH average price change: + @4% over last assessment.

2) Sub $1 million SFH average price change: unchanged or – @3% over last assessment. I suspect these will slide down to the current CMHC-friendly financing limit this year.

#189 bdy sktrn on 01.05.15 at 5:07 pm

#167 Daisy Mae on 01.05.15 at 3:26 pm
home – rate – lottery – Canadian – the money – bloated. First ad appears above the blog pic. All referring me to dumb sites. I’m doing a Avast scan. So far, so good. Result: clean.
Weird. ??
———————
nope
technically its malware, not a pure virus, scanners will miss it

did i mention antivirus s/w was a ripoff scam for the most part?

#190 IKnow on 01.05.15 at 5:09 pm

Over 90% of buyers are locals. Look at the debt chart. Come to your own conclusion. — Garth

—-

Garth you need to separate the address of the buyers from the source of the cash then you will understand Vancouver. The buyers always have a canadian citizenship but the cash is sourced from abroad. Those nifty little stats can’t catch this one but that’s the reason right there.

Please provide proof. Any proof. — Garth

——————

I mentored a young graduate at work, he and his fiance were from China.
Both came as students and then got immigrant status.
His fiance parents were middle class so no multi-millions shadow money.
Nevertheless the parents sent forth enough money for the couple to buy a townhouse in Richmond.

Say that that family as average, so some chinese immigrants are poorer, while some have wealthier ties.
Not hard to extrapolate to see how much money might have been brought in.

Is this a proof enough?

You mean just like the parents of kids born here? Very scary. — Garth

#191 jess on 01.05.15 at 5:15 pm

Fraud detection tool – crosscheck purpose to eliminate double voting

Voting twice is a go-to-jail federal crime—and Crosscheck has tagged SEVEN MILLION Americans as “potential duplicate” voters. Yet this year, not one was arrested. Why? Read and find out.

…”What we discovered was that Crosscheck was no more than a massive list of common names: John Jackson, Juan Rodriguez, David Kim and so on. Using sophisticated database analysis (assisted by a crew of the experts who have done this work for EBay and American Express), we found that the lists’ “matches” were bogus. Example: one out of four suspects had MISMATCHED middle names. Typical: JAMES ELMER BARNES JR. of Georgia supposedly voted a second time, in Virginia, as JAMES CROSS BARNES III. Mr. Barnes Jr. told me he has never been “Cross” or “Third.”

And while press releases promised names were matched by Social Security numbers and birthdates, NONE were.”

http://www.hillmanfoundation.org/thesidney/backstory?utm_source=Master+List&utm_campaign=f7eff46b02-December_Sidney12_10_2014&utm_medium=email&utm_term=0_f29e31a404-f7eff46b02-185989925

On the eve of the 2014 elections, officials had begun to purge voters based upon Interstate Crosscheck, voter fraud prevention software. More than 40,000 voters were dropped from the rolls in Virginia alone.”

Interstate Crosscheck is computer system that officials claim can identify anyone who commits the crime of voting twice in the same election in two different states. While the current list of seven million “suspects” did not yield a single conviction for double voting, Crosscheck did provide the grounds for removing the registrations of tens of thousands of voters in battleground states.

http://projects.aljazeera.com/2014/double-voters/index.html
http://www.gregpalast.com/

#192 Mark on 01.05.15 at 5:19 pm

“You could be right, apparently here are “smart investors” making “a killing” on 1.27 % bond yearly yield, 6 % total nominal return for 5 years while it is almost certainly guaranteed that Ca dollar will tank bellow 80 cents this year, so all the ‘gains’ is certainly guaranteed to evaporate in few months.”

It is most certainly not ‘guaranteed’ that the CAD$ will continue to go down. In fact, people are buying those bonds, at the horribly low yields, precisely in a prediction of the opposite. The CAD$ is hugely undervalued, and as the deflation deepens in Canada, and the US stays on a less deflationary/more inflationary trajectory, the CAD$ could easily end up at heights unimagineable, even without oil returning to its halcion days levels.

#193 Blacksheep on 01.05.15 at 5:25 pm

“So, could you afford a house worth a million?”

“Hardly. It’d be a miracle to swing a place costing half that, since the mortgage payments and property tax alone, after a 10% down, would be $2,700 a month, or 57% of your total net income. That’s for a $500,000 house.”
—————————————————–
This is the “proof” that median income, plays no role in Vancouver home prices.

This leaves ‘alternate sources’ to fuel RE.

Old money, foreign money, drug money, speculative money, martian money, all combined with a large % of people that bought years ago leads to the crazy valuations we see today.

My brothers home in North Van would sell for more than three times what he paid for it 12 years ago. He could not afford to purchase his home again at current valuations, even with 120k annual income, but your can bet, someone else more flush will.

If Van house prices actually had to rely on median income, values would be 1/3 of were they are today, like those in the Fraser valley.

#194 RealistvsExtremist on 01.05.15 at 5:27 pm

Garth you need to separate the address of the buyers from the source of the cash then you will understand Vancouver. The buyers always have a canadian citizenship but the cash is sourced from abroad. Those nifty little stats can’t catch this one but that’s the reason right there.

Please provide proof. Any proof. — Garth
++++++++++++++++++++++++++++++++++

It’s too bad the Govt did not require the Banks to “prove” where cash came from to buy houses and publish those stats. I mean……we are always hearing about KYC/AML terrorists everywhere hiding behind every rock !!. So. where does the cash come from? Surely the banks know with all the KYC they do. Where are the stats? Oh I forgot….. we are talking about the Govt now……

#195 bdy sktrn on 01.05.15 at 5:29 pm

#179 Oil under $50. Alberta to crash on 01.05.15 at 4:23 pm
————————
its gonna be a naaaaasty crash.

#196 bdy sktrn on 01.05.15 at 5:31 pm

#181 Matt Gamon on 01.05.15 at 4:28 pm
I’m afraid a balanced portfolio won’t protect you from what’s coming
—————-
elaborate please.

#197 Vanecdotal on 01.05.15 at 5:46 pm

Argh, clarification to last post’s “clarification”… (*puts down crack pipe):

1) Should read: SUB $1 million SFH average price change: + @4% over last assessment.

2) OVER $1 million SFH average price change: unchanged or – @3% over last assessment. I suspect these will slide down to the current CMHC-friendly financing limit this year.

I.E. SFH’s valued under 1 million $ increased slightly. SFH’s valued OVER 1 million $ decreased or stayed the same in value.

Sorry for confusion!

#198 Toronto_CA on 01.05.15 at 5:47 pm

Happy New Year, Blogdogs!
Oil just sunk below $50/barrel. Who the heck saw that coming (aside from possibly Garth)? How low can it go? As I understand it, as Canada is a net exporter of oil this hurts our GDP growth.

#199 TurnerNation on 01.05.15 at 6:03 pm

#181, REITa MacNeil and Treasury Blondes are doing just fine lately.

#200 Mark on 01.05.15 at 6:14 pm

“I’m afraid a balanced portfolio won’t protect you from what’s coming”

Of course it will, but some portfolios are more ‘balanced’ than others. Deflationary environments are very good for the precious metals and their miners. Yet most ‘balanced’ portfolios have almost zero exposure to either, as the asset class is almost universally hated by investment advisors, financial institutions, etc.

History tells us that bonds (ie: fiat money), and gold bear inverse correlation, and similar long-term returns (ie: the rate of inflation). With this being the case, and it being the case that a balanced portfolio almost always includes bond exposure, would it not be prudent to have at least a small exposure to gold/gold mining? Most people don’t, hence, ‘balanced portfolios’ which exclude the precious metals really aren’t as balanced as they may seem, particularly if the bond component is entirely invested in fiat currency.

#201 rosie "moving forward" in the knowledge that, "this won't end well" on 01.05.15 at 6:27 pm

Now if the PTB would do this to the Brad Lambs in this country the housing situation would not have occurred.

http://www.theglobeandmail.com/report-on-business/industry-news/the-law-page/bc-man-fined-43-million-for-false-stock-promotion/article22293359/

#202 $20 oil is coming on 01.05.15 at 6:28 pm

Large as in massive $30 put option contracts bets being make. Alberta is going to get hit so hard they will be lucky if the RE bubble just crashes 50%. Canada is going to get hit hard!!! The RE bubble is over

#203 Mark on 01.05.15 at 6:28 pm

“Nevertheless the parents sent forth enough money for the couple to buy a townhouse in Richmond.”

You do know that the definition of ‘buy’ has been warped, over the years, to now mean strictly the act of signing a sales contract. And nothing more. I think the older crowd has the sort of idea that ‘buying’ something actually meant that real equity was being brought to the table, which, in Vancouver, we have oodles of stats indicating that its mostly only credit.

For all you know, unless you specifically saw the details of the transaction involved, the overseas Chinese family probably came up with the required 5% CMHC subprime down-payment, and nothing more. On a townhouse, that’s what, $30k-$50k at worst?

#204 bdy sktrn on 01.05.15 at 6:35 pm

#192 Mark on 01.05.15 at 5:19 pm
“You could be right, apparently here are “smart investors” making “a killing”…
. In fact, people are buying those bonds, at the horribly low yields, precisely in a prediction of the opposite. The CAD$ is hugely undervalued, and as the deflation deepens in Canada, and the US stays on a less deflationary/more inflationary trajectory, the CAD$ could easily end up at heights unimagineable,

——————————-
us rates go up , ours don’t is going to help CAD how?

#205 the Jaguar on 01.05.15 at 6:59 pm

#194 RealistvrsExtremist

Good question. Can some knowledgeable person on the blog please weigh in on foreign wire payments? I think there were some changes to the reporting of wire payments this very month, i.e. doesn’t Revenue Canada now get tipped off? Garth? This is your old stompin’ grounds….what say you?

#206 Doug in London on 01.05.15 at 7:15 pm

@Mike in Toronto, post @176:
Problem with this attitude is that:
– it ignores careful, planned, scheduled rebalancing
– it means you had cash reserves out of the market
– buying at the bottom is just as futile as selling at the top
—————————————————————
– You don’t know ahead of time when any asset is will be sale, so rather than wait for a scheduled time to rebalance, why not do so when sales occur?
– By having some cash out of the market, you can take advantage of any sales that come along unexpectedly. If you don’t have cash on hand, you could sell investments that have had a good run up in value. That’s called rebalancing, isn’t it?
– Are you telling me buying at the bottom is futile? Since you don’t know when the bottom will be, and you won’t know until it has gone by, why not get some exposure to something that’s on sale now (like oil), and buy even more if it gets cheaper? There’s the old saying buy low, sell high. It’s the BEST investment advice I’ve ever heard, but in order for it to actually work you have to buy low first. So tell me, were you also afraid to buy REITs and preferred share ETFs when they were on sale in the last quarter of 2013 because you thought, just like now, that buying low is futile?

I just came back from going out in my gasoline fueled car and, contrary to what I expected, I saw cars going in and out of petrol stations. Were they in there asking for directions? I can’t imagine anyone actually goes into those antiquated stations (other than me) anymore to actually refuel their cars.

#207 SamnMad on 01.06.15 at 12:56 am

Why would anyone stay in delusional Vancouver? Because it’s the best place on earth. People are willing to pay 50%of their income towards housing because we don’t need to take vacations, have cottages, etc. We’re in a constant state of vacation. Go to work, come home, have dinner, then get out and play. By the way, I just sold an $875,000 knock-down on the North Shore. My mortgage was $800 biweekly at 2.25%, so very affordable. Now we are renting a small townhouse for … $2500 per month, while we await the completion of our new condo. I can afford a mortgage here, but I cannot afford to rent. Yeah, it’s pretty backwards!

#208 sthrendyle on 01.06.15 at 2:22 pm

Until we really get this whole foreign investment thing (whether it’s Revenue Canada or whoever snooping into bank transactions) – I think it’s safe to assume that there are maybe even TENS OF MILLIONS of people from around the world waiting to buy in the property hedge that is Vancouver. Seriously, folk… what do any of us know about the Chinese/South Asian economy? Or Mexico, Brazil, Russia? NOTHING, other than that a few people hold a ton of money that they want to safely invest. Vancouver is pretty much close to ground zero for this, and you can throw up all the restrictions that you want, the housing bubble isn’t going away unless there is a massive earthquake. Is Vancouver an exception? Yes, it is.

You folks are so cute. — Garth

#209 A Mongol on 01.07.15 at 5:08 am

DELETED

#210 TheAwakenedOne on 01.07.15 at 12:47 pm

“In short, Van is a classic overbought market, fueled by cheap money, unrepentant house-pumping lenders like Vancity, and nurtured by a local culture of real estate obsession” – Garth
————–

I agree with you on this. I know of at least 2 local business guys who own more than 8 houses each! They rent them out as income sources; the renters pretty much pay their mortgage!

And these are long timer local Vancouverites, not some new rich millionaire from Hong Kong or China either.

As objectively looking at Vancouver, I do see solid evidence that the local Asian culture is quite obsessed with real estates (no racist statement here folks: I am Asian myself – but grown up in the prairie of Winnipeg… and moved here 7 years ago): They talk about it, they pride themselves as owners, and they participate in fuelling the positive feed-back vicious cycle…

A local realtor friend has told me on numerous occasions that most of his houses are bought by new rich Asian immigrants… mostly bought right out by cash, often through a bidding war.

He boldly announces and believes that ” Vancouver houses will NEVER go down in price, only up! ” (perhaps a self-serving statement – as this is one of the guys above who own 8-10 houses!)

Do you think these have anything link with Vancouver being a “hedging heaven” and the unbelievable price range presently ???

Disclosure: I’m still a renter… in a small bachelor pad (a converted rear entrance one bed room of a Vancouver-special style house). The landlord’s modest salary is about 35K /year as a factory worker; about one third of my income as a young professional. But he bought his house back in 2000’s periods. Such irony.

#211 Doug in London on 01.08.15 at 1:03 pm

Further to my above comment #206, now would be a good time to sell some of those REITs you bought when they were on sale in 2013 (you were all scooping up those dirt cheap REITs back then weren’t you?) and now buy dirt cheap oil and gas ETFs.