Classic

DOG FLOWER modified

Time for a little update on recent worries, memes and phobias. Lord knows, there’s no shortage.

First, Brexit. Hope you don’t own property in London. It’s already shaping up to be what the ‘remain’ guys forecast – an economic and financial challenge for little, isolated Britain. This week the IMF offed its projection for global growth, thanks to the weird decision UK voters made last month. Recession is coming, said the international body, unless Britain can forge some new trade deals. Fast.

But for individuals, fallout is tangible. Plunging British bond yields have resulted in a drop in annuity payments for retirees, meaning they must now live on about 4% less than before the vote. Worse, the seven-year-long real estate boom in London is now in serious jeopardy, says Société Générale. First commercial properties were nailed (investors found REITs locked up with plunging values and no redemptions), and now residential values are at risk.

“While in recent stress tests the major UK banks were assessed with declines of about 30% in commercial real estate prices, we fear that London residential could experience an even more severe downturn,” says the company. “We see a classic housing bubble in London and Brexit as the trigger for the correction … Given the current ratio of prices to incomes in London, a price correction of even 40-50% in the most expensive London boroughs does not seem impossible.”

Yikes. A 50% decline? The typical London house costs $805,000 in C$ – about the price of a beater garage in Burnaby – which is 12 times the average London income. Because Brexit is expected to hollow out the City’s financial sector, shock at the top of the real estate market there could ripple downwards fast, affecting everyone.

So, a bitter win for voters. Lower pensions. House equity erased. And soon a passport to visit Scotland and get pickled in scotch.

Could something like that happen in YVR, where the average detached house costs 24 times the average household income because it’s twice as good as London? Or will all that foreign investment capital hold prices aloft because, ya know, everybody wants to live there?

To determine that we should figure out why prices have gone ballistic. So it’s handy the Royal Bank has just done exactly that. This is RBC’s conclusion on why prices have gone up 162% in Vancouver since 1999, and 140% in Toronto…

First, cheap money. No surprise there. Because people can borrow a ton more when rates are low, and they have zero discipline, that’s exactly the outcome. So 40% of the Toronto price romp and 34% of that in Van is because of this, says the bank.

Second, higher incomes over that 16-year period are responsible for another 29% rise in Toronto and a big 40% in YVR. Next is the willingness of people to commit way more of those incomes to mortgage payments, to which 17% of the price increase in Toronto is attributable, and 4% in Vancouver. And finally, the Bank of Mom. That’s boosted prices 5% in both cities.

The bottom line (says the bank): between 85% and 90% of our own bubbles are attributable to these factors, with the final amount coming from land restrictions and other factors, like dudes from China. In fact, the bank suggests the influence of foreign buyers is more at the bottom and middle of the market, not the top.

Hmm. What does this tell us? Either the bank has been vaping too much or (a) people in Vancouver who think Chinese guys are the reason nobody can afford a home are plain wrong, (b) locals have created 85% to 90% of this problem, and (c) things are a lot more precarious than anybody imagined.

DEBT modified

This points to Canadian homeowners doing exactly what this pathetic blog has repeatedly suggested – over-extending, over-borrowing and over-reaching, pushed into extreme leverage by cheap money, a diminished fear of debt and FOMO created by a wild exaggeration of the impact of foreign money. This is not good, because when market sentiment turns (it’s starting) lots of worried, debt-sautéed Canadians will push up listings and pull down prices. Classic behaviour. Because it isn’t different this time. It never was. Vancouver is not Paris. Toronto ain’t London. Even Winnipeg is not Singapore, as much as that surprises.

Every market in Canada will be affected by the reset ahead. However a great many folks will miss the early stages, blinded by their own misjudgment of the situation. They’ll buy into the teeth of a storm or miss harvesting a never-to-be-repeated tax-free capital gain.

Lessons of this summer (Brexit, Nice, Trump, Dallas, Turkey) are simple. Love liquidity. Shun debt. Interview the average 26-year-old. Do the opposite.

158 comments ↓

#1 Melania Maxwell on 07.19.16 at 6:15 pm

First!

#2 TurnerNation on 07.19.16 at 6:20 pm

A major problem I have with Kevin O’Dreary, his first book states early 70s was when he crashed his Mom’s BMW car.

But the book picture shows an wrecked early 1980s BMW (3-series) instead!

I could never trust someone misrepresenting a car.

Signed,

A. Cager.

#3 C me rent for a while on 07.19.16 at 6:23 pm

On the edge of my seat as this story unfolds.

#4 Hotdogs from Heaven on 07.19.16 at 6:25 pm

I have met the ultimate indicator that Toronto’s bubble will pop soon.

On the weekend I met a lovely young lady who works in the city’s commercial sex trade. She has been an escort for years but went out on her own a couple of years ago so all of the money made is hers with no need to pay an agency. At her rate of $240 an hour she said she makes about $15,000 a week in cash.

I have no idea if she pays any kind of taxes on it, but even if she did she would definitely be in Canada’s 1%.
Here’s the kicker:

She is retiring from the business this autumn when she finally gets her real estate license. She wants to make “really big money” as she said. I was dumb founded.

This is a sign if ever I saw one. Then end is near, no matter what the other real estate shills say in the main stream media.

#5 Johnny D on 07.19.16 at 6:28 pm

This talk of “reset” and downward pressure on house prices goes down the drain if the BoC cuts rates. Depressing thought but even I’m starting to believe we’re stuck in this low interest rate, high inflation, bad economy loop.

#6 dsw on 07.19.16 at 6:28 pm

Garth said:

“Every market in Canada will be affected by the reset ahead. However a great many folks will miss the early stages, blinded by their own misjudgment of the situation. They’ll buy into the teeth of a storm or miss harvesting a never-to-be-repeated tax-free capital gain.”

Aside from Garth’s doomerism, a more probable scenario is that house prices flat-line, and over 5-10 years, incomes slowly catch up.

Augmenting the slow rise in incomes, during that 5-10 years, equity markets continue to balloon, in turn making housing increasingly affordable for more folks due to the wealth effect, at which point, house prices will start increasing again.

It sounds boring of course, and probably isn’t very controversial, but its likely that is what will happen.

#7 Renting in YVR on 07.19.16 at 6:32 pm

Worth repeating…

Ok everyone, after you sell your house and starting renting a place, make sure you DO NOT sign a lease agreement with a Fixed Move-Out date:

http://www.cbc.ca/news/canada/british-columbia/west-end-apartment-owners-using-loophole-to-jack-up-rent-say-tenants-1.3199432

The renter in this story was unaware he signed an lease with a fixed move-out date. After the lease had expired, he was forced to either move out as per the agreement, or sign a new lease with a 20% increase.

#8 ole Doberman on 07.19.16 at 6:33 pm

Garth can you elaborate on this “reset”?
No one knows what you mean by it

#9 Nelley on 07.19.16 at 6:35 pm

I don’t get the political obsession with pretending that Vancouver is not an ethnically Chinese city-that is what is actually is-nothing scary about that-should we pretend that Brampton is not an Indian city? Why is this so important?

#10 Frank on 07.19.16 at 6:38 pm

The same IMF who called Canada housing a bubble last year and predicted a correction that turned into a 11% national gain. More like read their press release and do the opposite.

#11 El President Trump on 07.19.16 at 6:42 pm

#1 Melania Maxwell on 07.19.16 at 6:15 pm

First!

Cribbed of the first order.

#12 Let's Get House Horny on 07.19.16 at 6:46 pm

A lot of fear mongering there Garth….

But for those of us that have kept our heads when all around are losing theirs, have stayed debt free, prudent and cautious our day of salvation is near at hand. A little bit of schadenfreude is in order I do believe….

Do not agree with you regards Brexit though- smartest move the UK has made in a very, very long time. Just in the nick of time actually before Turkey disintegrates into civil war and social chaos.

Chin up my friend, do not despair – instead rejoice !

#13 Cirdt on 07.19.16 at 6:46 pm

In any auction it only takes one person to set the price. As in the person that wants it the most. As such, expectations were pushed up by the Asians fleeing their country, which is more than enough to push prices up beyond the local means. Greed then cements the new price, rinse and repeat. Fear will reverse the process.

#14 MSM-Free Zone on 07.19.16 at 6:48 pm

“…We see a classic housing bubble in London and Brexit as the trigger for the correction … Given the current ratio of prices to incomes in London, a price correction of even 40-50% in the most expensive London boroughs does not seem impossible….”
_________________________

…in the most expensive London boroughs?

I doubt average Londoners will shed any tears toward the wealthy as average home ownership returns to affordability. Ditto toward greater fools who gassed the bubble in their pursuit for fake equity as well.

#15 gaben on 07.19.16 at 6:50 pm

Link to cited RBC study ?

#16 Aggregator on 07.19.16 at 6:51 pm

CIBC sells negative-yield bonds for 1st time

The CIBC bonds are doubly appealing, because they are what's known as covered bonds. That means they are backed by Canadian mortgages, so investors in the bonds have the right, theoretically, make a claim against those mortgages in the unlikely event the bank ever defaults on its loans. That gives investors two layers of protection, both in the bank's creditworthiness, and from that of the underlying assets — the mortgages themselves.

This is nuts. If investors are willing to pay for the privilege of lending money to Canadian banks (as awkward as that sounds), then this market still has a ways to go. But here's the catch: Remember when F said Canadian banks can no longer use CMHC insurance in covered bonds? What he forgot to tell everyone is they can still use Genworth bulk mortgage insurance, which is 90% backed by the Government of Canada. Let's be real, Genworth is just an extension of CMHC.

And so the party continues…

#17 We're all millionaires on 07.19.16 at 6:52 pm

DELETED

#18 TnT on 07.19.16 at 6:53 pm

I do appreciate all you do Garth – sold for 51% more than I bought – signed a 1 year lease for a 2 million (soon to be less) 3 story Victorian house rental next to the subway downtown Toronto.

Found my Greater Fool – Check!
Rental = better than sold house – Check!
Got wife hooked on ETFs – Check!
Everybody Happy – Check!

Pass the popcorn and let’s start the show!

#19 crowdedelevatorfartz on 07.19.16 at 6:54 pm

“Interview the average 26-year-old. Do the opposite.”

But anyone under 30 has to be told their “special” at least 3 times a day to enhance their self esteem..

#20 London is no YVR on 07.19.16 at 6:54 pm

Your parents grandparents extended family can’t immigrate as easily to the Uk like they can to YVR.

#21 MSM-Free Zone on 07.19.16 at 6:55 pm

Trump’s Art of the Deal ghostwriter feels ‘deep sense of remorse’ for contributing to ‘sociopath’s’ fame:

“Tony Schwartz, the book’s ghostwriter, who spent 18 months in the 1980s interviewing and shadowing Trump, says that it is really a work of fiction.”

“If he could do it over again, however, Schwartz said the book would be titled “The Sociopath.”

“I genuinely believe that if Trump wins and gets the nuclear codes, there is an excellent possibility it will lead to the end of civilization.”

He described Trump as a painful interview subject who could not handle questions that required any depth to answer and who had little recollection of his youth. When pressed, Schwartz said, Trump would grow fidgety, angry and sometimes quit despite the fact that they were ostensibly working together on the book. He had no attention span, Schwartz said.

“If he had to be briefed on a crisis in the Situation Room, it’s impossible to imagine him paying attention over a long period of time,” Schwartz said of Trump’s inability to focus.”

“Lying is second nature to him,” Schwartz told The New Yorker. “More than anyone else I have ever met, Trump has the ability to convince himself that whatever he is saying at any given moment is true, or sort of true, or at least ought to be true.”

http://news.nationalpost.com/news/world/trumps-art-of-the-deal-ghostwriter-feels-deep-sense-of-remorse-for-contributing-to-sociopaths-fame

#22 dsw on 07.19.16 at 7:05 pm

@4

And yet he is still far more trustworthy than Hillary, at least according to the polls.

That seems to say a lot more about Hillary than Trump.

#23 RayofLight on 07.19.16 at 7:06 pm

My TFSA just hit 6 digits to-day. My wife’s got there about 3 months ago. Her’s is larger because I didn’t do many trades on it. An interesting outcome.

#24 bdwy sktrn on 07.19.16 at 7:07 pm

Vancouver is not Paris

——————
well thank FSM it is not.

van air is pure clean sweet ocean-purified moisty goodness.

paris smells like pee.

#25 Heisenberg on 07.19.16 at 7:09 pm

The government and the banks have no interest in letting the real estate market drop. It would be disastrous for the economy.

Let’s take a look at some actual facts we can all agree on:
-House prices in the hotspots of Canada (Vancouver and Toronto) are still at all time highs.
-Interest rates are at all time lows and dropping.
-The Canadian dollar has been dropping (for the most part) since 2011:
http://finance.yahoo.com/chart/CADUSD%3DX

There’s other factors that have contributed to recent price spikes, and these are arguable:
-Foreign capital (makes sense considering the weakening dollar). And no, not every house is being bought with foreign capital, but if the most expensive 5% of all properties are, then that will pull all the lower prices up.
-Newly rich from selling their YVR houses and moving to suburbs
-People with FOMO. I think these guys are buying condos and the cheaper houses.

The main conflict on this blog is whether RE prices are going to drop and whether buying is better than renting.

It doesn’t matter what you believe, the fact remains the “bubble” hasn’t popped and trying to determine when it will pop (or slowly deflate) is impossible.

I’m on the ground in Vancouver and suburbs and all I see is RE prices going up and monster houses being built and condos being built and entire blocks of houses being sold to build more condos. Development is everywhere. They’re being built fast and crappy. Chipboard sheets and parallam beams everywhere. Structures meant to fail so the builders can reap more work in the future.
I don’t see any slowdown in the construction industry or the sales of houses.

When you think about BC’s economy, construction is pretty much the only thing it has going for it. More reason for banks and governments to do what it takes to keep this machine rolling.

Believe what you will. Everyone has an opinion, but the facts mentioned at the top are still facts.

#26 Air Transat pilot on 07.19.16 at 7:11 pm

Hey there Garth!

I’m unexpectedly considering a career change this week, and would appreciate your advice. Seems some employers and their customers get their hair in a dander when employees get just a lttle tipsy. Don’t these people realize planes these days fly themselves!?

Anyway, we know you drink a lot when you work, especially when reading your comments, and so would really appreciate your informed input.

Any thoughts on what careers and employers in Canada would be more amenable to our affinity for tasty liquor on the job? 420-friendly would be a great bonus, too! :)

Right now, my partner and I are thinking of maybe going into the mortgage approval business. We like the vibe there, seems like our kind of people!

Whaddya think?

#27 BobC on 07.19.16 at 7:20 pm

Some things are more important then money. If it results in prices being reset to fair market value all the better. Short term pain for long term gain.
Much better then losing your country.

#28 Lea on 07.19.16 at 7:22 pm

#8 ole Doberman

The reset in my Los Angeles neighborhood meant that a house bought for $999,000 sold for $699,000 18 months later.

#29 Nemesis on 07.19.16 at 7:26 pm

…”…higher incomes over that 16-year period are responsible for another 29% rise in Toronto and a big 40% in YVR…” – HonGT

#I’llGoWithVapingBankers…

[VanSun] – B.C. income growth worst in Canada: Analysis

…”OTTAWA — B.C. experienced the worst income growth — in fact, incomes declined — of any province in Canada during the 2006-12 period, according to an analysis of Statistics Canada data by an Ottawa think-tank.

B.C.’s inflation-adjusted median income fell 2.4 per cent, from $29,917 per tax filer to $29,200, during a period when Canada’s overall employment income grew by 3.5 per cent. Median income is the midway point between the lowest and highest incomes.

Ontario, with a manufacturing sector devastated by the 2008 recession, suffered a 1.7-per-cent decline and was the only other province to suffer negative growth.

The bleak performance was particularly striking in B.C. cities, with Metro Vancouver employment incomes falling three per cent, Victoria’s 4.8 per cent, and Abbotsford’s 5.1 per cent.”…

http://www.vancouversun.com/business/income+growth+worst+Canada+analysis/10749375/story.html

#BonusVaping,Or… #HighFinanceKitsilanoStyle…

https://youtu.be/CWxgfTMLtc0

#30 For those about to flop... on 07.19.16 at 7:30 pm

I could of swore I read a blog post just like this one written by Michelle Obama a few years back…

M42BC

#LPstrong

#31 Let's Get House Horny on 07.19.16 at 7:34 pm

#6 dsw on 07.19.16 at 6:28 pm

That is the classic, fairytale Goldilocks scenario which is embraced by the overly indebted in hock up to their eyeballs.

The Irish et al also were in love with that kind of philosophy until the whole thing collapsed on top of their heads.

The Monkees had a smash hit years ago to describe your condition…

Here it is for your education and benefit.

https://www.youtube.com/watch?v=W83InivbUSQ

Enjoy !

#32 Conspiratard on 07.19.16 at 7:44 pm

I am very concerned a terrorist plot may be afoot – anyone else?

Just think: A large enough nuclear bomb dropped on Cleveland this week could raise America’s median IQ by at least 20 points.

That would wipe out buying of precious metals and real estate there, spilling across the border.

Be very suspicious of anyone who’s renting and shorting gold. Their other hand may be on the nuclear trigger. Do not hesitate to contact your local authorities.

Coincidence? I think not.

I think not.

#33 Nodebt on 07.19.16 at 7:51 pm

Hey Garth, do you have a stock portfolio that’s 7 figures?
Thx

#34 Up, up, and away... on 07.19.16 at 8:00 pm

#6 dsw, I agree with your scenario, at least for the GTA….

probably some fireworks in YVR though, maybe a
widely reported collapse in London will light the fuse there….

emergency rates (why not call a spade a spade) will continue for a looooong time….but the Feb should really sneak in another quarter point rate increase at this month’s meeting, what with the all-time market highs… another bullet or 2 will help when the next recession hits….and we’ve all learned that any shock is simply a reason for the markets to levitate so no one will really mind a lowly 25 basis points, eh….

#35 Renting in YVR on 07.19.16 at 8:01 pm

#5 Johnny D on 07.19.16 at 6:28 pm

This talk of “reset” and downward pressure on house prices goes down the drain if the BoC cuts rates. Depressing thought but even I’m starting to believe we’re stuck in this low interest rate, high inflation, bad economy loop.
———————————–
I disagree that any rate cut here in Canada would do anything to our housing market. leaving rates unchanged would be the same, which is exactly what they will do.

A 5yr fixed mortgage on 500K at 2.24% only reduces the monthly by $60.00. Hardly worth going crazy over.

Anything under 3.00% keeps us at status quo.

The tipping point will be when… HAM goes away completely (or the notion of), the 5 year fixed goes back above 3.00%, negative GDP happens, or Christy Clark puts her house on the market.

Perhaps all of these things will happen at once. I’m ready for it to happen tomorrow.

#36 Randy on 07.19.16 at 8:02 pm

I’d still like to “do” the average 26 year old but unfortunately don’t have enough money to join “SeekingArrangements.com”.

#37 Nelley on 07.19.16 at 8:04 pm

#21-Tony Schwartz loved Trump when Trump paid his bills-now Tony Schwartz is slaving away for whoever (Goldman?) is paying his bills now.

#38 Westbank on 07.19.16 at 8:06 pm

How can their be a “reset” when in Calgary there was a Jobs apocalypse and prices have barely budged ? No forclosures or panicked sales or son stories in the news. There will be no panic selling because people will make their mortgage payments in 604 …. End of story, you yourself have said prices are “sticky” on the way down.

#39 Nelley on 07.19.16 at 8:07 pm

#22DSW-they should poll the US public and ask them who is more trustworthy-Crooked Hillary or Bernie Madoff.

That was below your usual questionable standard. — Garth

#40 AK on 07.19.16 at 8:10 pm

“Second, higher incomes over that 16-year period are responsible for another 29% rise in Toronto and a big 40% in YVR. ”
====================================
Have incomes really increased that much over the past 16 years?

#41 Blacksheep on 07.19.16 at 8:17 pm

Lots oh RE doom. Get out….get out.

WTF. I’ve been in Cabo for a week and shit comes unglued.

Did unemployment spike, 2% nationally?
Did mortgage rates increase, 2% nationally?
Did Canada block foreign buyers?

Did the banks run out of cash to lend? (for Mark )

More importantly, who believes the system will sit on it’s all powerful collective hands while its’ only Golden Goose RE, gets its neck wrung, ala an American style crash?

Don’t forget Garth, both you and I were friggen certain the end was nigh 8 short years ago to the point I liquidated my primary res and rented. (my choice, no one else’s)

Not this time, do as do, not as they say…..

#42 Renting in YVR on 07.19.16 at 8:21 pm

#18 TnT on 07.19.16 at 6:53 pm

Got wife hooked on ETFs – Check!

————————–
How did you do that!!? It’s not like eating chocolate or watching ET. Better warn her about market peaks and valleys… don’t panic and sell… EVER!

#43 espressobob on 07.19.16 at 8:28 pm

Long term investing just demonstrates how hard it is to outperform mr. market. Noise is what it are.

The emotional suffer. Enjoy.

#44 crowdedelevatorfartz on 07.19.16 at 8:28 pm

@#24 bdy skytrn
“van air is pure clean sweet ocean-purified moisty goodness….”
********************************************

Apparently you missed the Burns(appropriately named) Bog smogfest last week.
The ONLY reason the local fire depts snuffed it out after 3 days was due to the incessant rain we’ve been having.

#45 nonplused on 07.19.16 at 8:30 pm

I am not sure Winnipeg would even be there if the Canada Revenue Agency wasn’t. It wouldn’t be bigger than Lethbridge. A place so big the spell checker can’t even recognise it. Maybe Swift Current. There simply isn’t anything in Winnipeg outside farming and collecting taxes. And the odd flood. And huge mosquitos. And terrible winters. Winnipeg might be the one place on earth where you could run an outdoor hockey league. They do produce some nice girls of polish decent though.

#46 Nero on 07.19.16 at 8:32 pm

#38 Westy,
However, Home equity lines of credit are the real BIG nasty hiding in plain sight.

Remember Cripsy said” We must protect home owners equity”, cause if it blows the BC Government is on the hook for the Credit Unions deposits 100%

Pass me my fiddle….

#47 Andrew Woburn on 07.19.16 at 8:36 pm

#75 Ex-Cowtown on 07.18.16 at 9:50 pm

You need to get your head out of the Green Glory Hole. Germany is rapidly scaling back on renewables, which are causing bankruptcies in some of their largest utilities

England has slashed support for renewables and just dismantled their Department of Energy and Climate Change.
====================

I can understand why someone from “Cowtown” would not be a fan of renewables but I am not a fan of global warming hysteria either.

Europeans are not abandoning renewables but they are cutting the subsidies for them because they are no longer needed. Despite its confusing name, the Department of Energy and Climate Change is mainly concerned with decomissioning old nuclear plants and its function has simply been transferred to another department.

The solvency problems of European utilities have been created by the failure of chaotic political policies, not the failure of green technology. Politicians seemed to be unable to grasp that renewables need a totally reliable base load generator like coal, gas or nuclear to back them up when there is no sun or wind. This means you have to have duplicate generating capacity which sits around idle a lot of the time. Guess what, electricity costs more. Then as green energy cuts into the revenues of conventional generators, their long term business model is destroyed and insolvency looms.

As usual politicians want to show their ignorant voters that they are “doing something”. Germany got into ridiculous subsidy rates for wind and solar and then had its domestic solar industry destroyed by Chinese competition. After Fukushima, the Germans panicked and stomped on nuclear power. Now they have to burn nasty brown lignite coal just to keep the lights on. They cannot come up with a sensible stable plan for energy production so utilities cannot plan or finance their requirements. The crazy subsidies produced so much wind power that sometimes they have to pay other countries to take it. Meanwhile the cost of renewables has fallen so fast they are approaching the point where they are as cheap as conventional power and little subsidy is required.

Britain has virtually banned future coal production but they subsidize power plants which burn wood pellets shipped all the way from North America because it must be OK to emit GHG’s if the source material is renewable. Let’s not talk about the carbon footprint of long distance transportation. The UK is now trying to build an insanely expensive nuclear plant if they can get China and France to finance it. Meanwhile UK power engineers are worrying about electricity brownouts in the mid term before it can ever come on line.

The global warming alarm has led to energy policy disasters in many countries, but the actual technologies are rapidly moving into disruptive, unsubsidized competition with conventional energy production. No they won’t replace carbon technologies overnight but they are already having a major impact.

#48 We're all millionaires on 07.19.16 at 8:52 pm

DELETED

#49 Gregg on 07.19.16 at 9:04 pm

Ha Ha @ #21 MSM-Free Zone. He calls himself (herself??)that and then pastes AND links a story from the National Post!

#50 Dirty Seconds on 07.19.16 at 9:08 pm

@ #4 Did you fail math?
15000 / week @ 240/ hr = 60 hours / week = no thanks

Just saying

#51 greyswan on 07.19.16 at 9:09 pm

Why did you sensor information posted by myself?
….does not agree with your view on foreign ownership?

South China Morning Post article on Vancouver real estate dated July 8th 2016.

Posted several times. — Garth

#52 Mark M. on 07.19.16 at 9:14 pm

Garth, you never fail to surprise in your support for big government waste. If the EU is so great why don’t we join?

China’s not in the EU, they have trade agreements with Europe and everyone else.

Switzerland and Norway aren’t in the EU. Must be the third world over there, with scores of migrants desperate to get to the promised lands of Latvia, Estonia, Bulgaria, Romania, Greece, Portugal, Slovenia, Lithuania, Croatia and Slovakia.

The EU is a failed experiment, just like fiat currencies and Central Banks, the other disasters you foolishly think we can’t live without.

#53 Ronaldo on 07.19.16 at 9:17 pm

”They’ll buy into the teeth of a storm or miss harvesting a never-to-be-repeated tax-free capital gain.”

Same as they do with everything else then bitch and complain afterwards. Gold, Silver, Stocks, USD, etc. Besides, they are to busy chasing Pokemons right now to realize what is happening around them. Strange world we live in.

#54 Hawk on 07.19.16 at 9:19 pm

I was in London a week ago (Hammersmith area).

An average house there would be more like 805,000 Sterling rather than Cannuckistani dollars. Leashold flats averaged 500,000 quid. And any old house over there, that’s not had a modern renovation undertaken is really in poor shape.

Now London is a very large city and I expect that cheap places on the absolute boundary could bring down the average, but if we were to take any part of London that is reasonably central to Westminister (say 30 – 40 minutes away as Etobicoke is to downtown) than London is way more expensive than Toronto, as indeed it should be.

Brexit will hurt Londoners more disproportionately and so we can expect them to see some tough times ahead.

#55 Ronaldo on 07.19.16 at 9:23 pm

”At her rate of $240 an hour she said she makes about $15,000 a week in cash.”

——————————————————————–
Whew. That amounts to about 9 hours per day. Busy girl.

#56 Looney Baloney on 07.19.16 at 9:26 pm

@ #4
Did she also say she was half Polish? I met someone with a similar story recently, and damn, that babe was hot. All she has to do is move to oil country and make ads like the one below, she’d be selling houses by the truckload.

https://youtu.be/z78XE3p45E4

#57 Rexx Rock on 07.19.16 at 9:29 pm

If the 5 year or 10 year fixed rate goes below 1% we will still see price increases.The BOC still feels Canadians need to get into more debt to keep our economy going strong.

#58 Ronaldo on 07.19.16 at 9:33 pm

#6 DSW

”Aside from Garth’s doomerism, a more probable scenario is that house prices flat-line, and over 5-10 years, incomes slowly catch up.

Augmenting the slow rise in incomes, during that 5-10 years, equity markets continue to balloon, in turn making housing increasingly affordable for more folks due to the wealth effect, at which point, house prices will start increasing again.

It sounds boring of course, and probably isn’t very controversial, but its likely that is what will happen.”

————————————————————–
That sounds pretty rosy. The level of debt in this country by individuals is such that any increase in income will be absorbed in interest costs. They will be paying mortgages that are worth far more than what the house will be worth and the stock markets will correct and you can say buy buy to the wealth effect. Ain’t going to happen. Individuals are pickled in debt. We are heading down the same path as the U.S. did 10 years ago. This party has gone on far too long and we have yet to pay the piper.

#59 Yuus bin Haad on 07.19.16 at 9:41 pm

Has everyone already forgotten that the Arctic sea ice is melting, the oceans are rising, and we’re all going to die?

#60 Aggregator on 07.19.16 at 9:47 pm

#38 Westbank – How can their be a “reset” when in Calgary there was a Jobs apocalypse and prices have barely budged ? No forclosures or panicked sales or son stories in the news.

Simple. If you have insurance, Genworth or CMHC will pay your mortgage or restructure the amortization.

Genworth Advisory

Lender Update

 

Genworth Canada expresses concern for the residents of Fort McMurray, Alberta, and recognizes the impact the current wildfires and resulting evacuations is having on the community. Through our proactive Homeowner Assistance Program we are committed to working with our lenders to help our insured homeowners facing setbacks that temporarily impact their ability to meet their mortgage obligations. To address the current situation, Genworth Canada will support our lender’s assistance programs by enabling lenders to offer up to six (6) months of relief to their Genworth Canada-insured borrowers in Fort McMurray. This collaboration will provide time to help borrowers rebuild their lives and their community.

In other words, free mortgages for six months until the government's stimulus fund arrives, that will offer unemployed oil men a new career in flipping flapjacks.

Maybe people aren't getting the message yet. This isn't likly going to end in a housing crash. This is the making of a soverign debt crisis, which is largely negative for the CAD.

#61 Say What? on 07.19.16 at 9:48 pm

#4 Hotdogs from Heaven on 07.19.16 at 6:25 pm

She’s not really changing careers at all. Just methodology.

#62 WalMark of Sadkatoon on 07.19.16 at 9:57 pm

I just got 1.4% on a 1 year term with the orange guy. I might need the money next year if I decide to redo the kitchen.

That’s pathetic. What is that? A $1000 kitchen redo? Buying a microwave?

#63 cto on 07.19.16 at 10:08 pm

I agree with #25 Heisenberg. I used to believe that our government and central bank genuinly had an interest to control the debt out there, but by now I clearly believe that there only interested in kick the can down the road.
This will ultimatly end in disaster,…eventually,…maybe in time for my six year old son to buy a house when he’s 20….if I have any money left as the government will let it reach catastrophic proportions and its devistation will likely damage most of my local investments.

#64 God Help America on 07.19.16 at 10:08 pm

It’s official, Trump is the official GOP Presidential nominee. Scary stuff, see for yourself !

https://www.youtube.com/watch?v=epSUNsZ7RNo

#65 rainclouds on 07.19.16 at 10:19 pm

#38 Westbank ” prices are “sticky” on the way down.”

by Xmas should have a good idea of how “sticky” they are likely to be…

#66 The Wet Coast on 07.19.16 at 10:21 pm

Interesting the “Ghost House” issue seems to be a world wide problem. Singapore placed a 16% empty tax on these houses.

Anyone ever heard of the Hunt brothers?

http://www.news.com.au/finance/real-estate/buying/australias-ghost-suburbs-a-national-scandal/news-story/7e74c62fc314f86a2c8b176f3358d13f

#67 Dsw on 07.19.16 at 10:21 pm

@44

Ya its probably somewhere in the middle.

If you are subscribing to a doomer style apocalypse attitude towards the housing and stock markets, you are going to miss out on a lot of wealth creation. 5 to 10 years of flat or marginally declining markets actually makes a lot of sense from my pov and is the most likely scenario i see i.e declining slow enough to keep homeowners square and renters pissed.

#68 45north on 07.19.16 at 10:34 pm

What does this tell us?

(c) things are a lot more precarious than anybody imagined.

which is rather alarming. I mean RBC is the biggest lender in the country.

#69 bill on 07.19.16 at 10:55 pm

#44 crowdedelevatorfartz on 07.19.16 at 8:28 pm
not to mention the stench emanating from that vast pile of rotting compost out in delta.
its foul reek goes as far as kits when the wind is right.

#70 Maldroit Ape on 07.19.16 at 11:00 pm

@Aggregator#60

“Maybe people aren’t getting the message yet. This isn’t likly going to end in a housing crash. This is the making of a soverign debt crisis, which is largely negative for the CAD.”

Care to explain how this is even possible ? CMHC a crown corporation insures against defaults on home loans, the Canadian governments debt-to-gdp ratio sits at 91%, far too high of course but much lower than most european countries and the US. So there is room for the federal government to borrow and cover a pretty substantial number of defaults (far in excess of what the united states ever experienced), moreover being that there is only one entity involved the nasty feedback loop that led to mortgages in the US that were not impaired ending up in foreclosure can be addressed with loan modification.

The CAD will take more of a hit of course, but this isn’t the end of the world.

#71 Damifino on 07.19.16 at 11:17 pm

#67 Dsw

“5 to 10 years of flat or marginally declining markets actually makes a lot of sense from my pov and is the most likely scenario i see i.e declining slow enough to keep homeowners square and renters pissed.”
—————————-

False assumption: Renters have nothing better to do than bemoan their demonstrated inability to buy into the RE game.

Many rent by choice. I certainly do. I divested myself of all real estate in 2010 and chose to properly diversify what was essentially a ton of dead capital. That capital is still fully intact and working hard on my behalf. The yield has handily covered my living expenses these past six years and I expect it will continue to do so.

Frankly, the thought of owning real estate at this point in history makes me queasy. Some think that if you have $1.5M dollars of the bank’s money at your disposal, it somehow seems smart to dump it all into one piece of residential real estate.

But if you have $1.5M of your own, sinking it into a house looks like pure madness when the income that much cash can generate allows you to live quite comfortably without the onerous carrying costs and highly elevated risk.

#72 Maldroit Ape on 07.19.16 at 11:22 pm

@Heisenberg#24
“When you think about BC’s economy, construction is pretty much the only thing it has going for it. More reason for banks and governments to do what it takes to keep this machine rolling.”

Not disputing the real-estate mal-investment isn’t a big part of the economy here in Vancouver. But for someone on the ground you seem to have missed the a lot more going on. Technology is a fast growing employment sector (I mean how cool is it that d-wave is based here ?), the content buying boom from the likes of Netflix,yahoo,amazon etc has over subscribed Hollywood North, the video game industry is roaring and it is still the third busiest port in North America.

#73 The Spectre on 07.19.16 at 11:24 pm

London prices decreasing 30% – how can that be a bad thing? Its inaccessible for the avg worker so guess that’s a good thing since “London house prices most overvalued in the world, says UBS”.

https://www.theguardian.com/money/2015/oct/29/london-house-prices-most-overvalued-world-ubs

A reset is more than welcome to that and other markets.

On another note, it seems that for the Bristayers, all the recent problems in the world are now due to Brexit. Easier blaming the Brits than decades of financial mismanagement from the central bankers, politicians and corrupt gvts around the world.

Oh, of course! How could I forget? It’s Trump’s fault too!

#74 Something in the air? on 07.19.16 at 11:48 pm

not typical price changes in my area:
– a beater bung at 42 STEPHEN DR, Toronto. For more than a month it was 600K, then a couple of weeks ago around 550K, today it is 669K (smoking?)
– newly built and finished in spring 2015 at 58 CANNON RD, Toronto. Up until few weeks ago (around a year) the price was 1649K, a couple of weeks ago 1625K, today 1499K (final revelation?)

#75 Life among the Stars on 07.20.16 at 12:13 am

47 years ago the US landed on the moon… awesomeness.

#76 Smoking Man on 07.20.16 at 12:45 am

Celebrating with fellow back room boys. Trump boys.

They ain’t in Cleveland. There right here.

Why did this writer sign a non disclosure… That book would have been a book.

Now I’m doomed to a stupid fiction story.

When O’Leary’s comes for help. I’m not signing.

#77 Smoking Man on 07.20.16 at 12:50 am

The band in Boston Irish pub.. Was so tempted to turn the camera around to show you the men, the minds that will destroy crooked Hillary. My invented phrase.

But I cant

The Band, I need sub titles to know what there singing

Dyslexicsmokingman.blogspot.com

#78 Aggregator on 07.20.16 at 12:56 am

#70 Maldroit Ape

By bailing out CMHC and/or Genworth the government would be transferring household debt to public debt. Then if things get bad there's private sector contingent liabilities (bailouts for banks, Bombardier, General Electric, auto sector, etc.). What matters is the government's on-balance sheet liabilities plus household and contingent liabilities. Add it all up and we're now approaching 350% of GDP.

The debt load is already there. Now it's just a matter of when the markets lose confidence in Canada's creditworthiness. For the time being Canada is a safe place to park money considering what's going on in other parts of world. This ends when the markets decides to flee Canadian bonds and move their money into higher paying safe assets. It could take years or more then a decade. It's impossible to predict.

But of course, there's always the possibility of a Black Swan arriving tomorrow. This is where most investors lose their shirts.

#79 Smoking Man on 07.20.16 at 1:03 am

When the young hotties are dancing all around you, wanting you to participate, and you have absolutely no interest is the day you made it to the other side.

But then the issue of the bartender short changing you on the Jack..

This is how wars are started.

#80 wicked as it seems on 07.20.16 at 1:03 am

I only live in Victoria in Summer, so arriving back 3 months ago, all i have seen is Bill Goods face advertising Coast Capital Direct, Im sick and tired of looking at this pumper every night! The west coast is seriously screwed if thats your best spokesman……House of wet cards is Van!

#81 Ponzius Pilatus on 07.20.16 at 1:08 am

#24 bdwy sktrn on 07.19.16 at 7:07 pm
Vancouver is not Paris

——————
well thank FSM it is not.

van air is pure clean sweet ocean-purified moisty goodness.

paris smells like pee.
—–
Of course some parts of Paris smells like pee.
But so does most of the Downtown Eastside.

#82 macroman on 07.20.16 at 1:11 am

No debt, #33, Garth have a 7 digit portfolio?

Ha, gata be high 8 or low 9. The first seven being a con pol. Ok Garth, just joking, don’t delete me.

He could be a ten digiter by now if he was a bullion licker convert Jan 1, 2016.

Hit my fifth one month double today and I suck at trading. Might have to get a Vancouver real estate job to keep up.

#83 Sheane Wallace on 07.20.16 at 1:11 am

If BOC cuts rates (and the idiots there will),
If CMHC and government continues ‘insuring’ mortgage (and the idiots there will) so banks have no skin in the game,
If the idiots continue keeping their increasingly worthless savings in GICs with 0.1 % interest,0
then:
Lending will continue and prices will keep climbing. The prices could actually go up 30 % from here. Maybe 50 %, even 70 %.

The fact that a loaf of bread would be worth 10 CAD, a coffee – 6 and your kids will be working with PHD and MBA for minimum wage, if lucky and the whole economy will be totally screwed (it already is bu with the idiots at the helm he keep digging the bottomless pit of misery) is just a small annoying detail.

The only thing I am praying for is to have the patience to finish my transition out of this place. Scotch helps.

#84 Doom denial... on 07.20.16 at 1:14 am

Now we are getting macro economic arguments from YVR RE interests posting here about how the party will continue and Garth, yet again, is wrong. Trite.

If his drop in sales chart, realty blog reports, RBCs recent report and as important, observers posting from there of few if any going to open houses such as Wet Coast…well then the party IS over. Sell if you can to monetize gains now or enjoy your underwater mortgage.

BTW to the CMHC liquidity poster, you cannot walk away from a mortgage in Canada. Their liquidity will not save you from your debt obligation and neither will bankruptcy…look to paying at least 75 cents on the dollar if you have a job for many years not counting your shattered credit line for a near decade or so.

God, so much a replay of the early 80s…denial and all that comes after.

#85 Smoking Man on 07.20.16 at 1:14 am

When I went to a AA meeting yesterday.

I realized quick I don’t belong here. My lush doom is beetwen the hours of 9pm to midnight.

It’s disaplind drunck. Ok tonight is a different story.

Went a bit over. The consulting check with bounas is in the mail. Well the night is going to be long.

Come on Donald you real estate hound. Give credit.
Where it’s due.

Donald Trump. FAN 2 from way back when..

Dr Smoking Man
Destroyer of communism.
I hate them.

#86 macroman on 07.20.16 at 1:30 am

OK Wet Coast, I’ll bite on Nelson and Lamar (and Ray).

Besides cornering a market of real wealth, what is the connection to taxing empty Aussie homes?

HL Hunt had three homes full of wives and chillens, what’s the implication?

#87 Smoking Man on 07.20.16 at 1:41 am

Really sucks to watch your dad painfully die. He was a good man. Great father. A no one to the world.

To me his kindness and love of everything. It deserves a book.

You made a lazy son dad…. But in my heart and anyone who was lucky enough to have met you..

You are perfect. Less of course your where a natsy trying to take Serbia.

#88 macroman on 07.20.16 at 1:48 am

DELETED

#89 Love My Kia on 07.20.16 at 2:01 am

Well Garth, so much for the checks and balances that you mentioned that would keep Trump from getting the nomination.

Actually that referred to his being elected president, not nominee. Read harder. — Garth

#90 Mark on 07.20.16 at 3:03 am

Its pretty simple what’s happened in Toronto/Vancouver. Many newcomers aren’t welcomed very much to the local labour market.

So what do many of them do? They become amateur landlords. Them, and their extended families. Taking out large amounts of credit in the process.

Of course, with RE price gains 1996-2013 in Toronto/Vancouver, this has many of them wealthier beyond their wildest dreams. Hundreds of thousands, sometimes millions of dollars of unearned equity in their pockets merely for owning real estate.

Now the banker types are getting nervous with the appraisals. With the 2013 peak of Canadian RE prices, the appraisals aren’t coming in higher at the big banks. So they basically have to paint the narrative, to the alternative lenders, that prices are still rising. So they can continue the game of leverage against their equity.

And what better of a ‘group’ to blame for their false narrative of ‘rising prices’ than one that is often linguistically divided from mainstream Canada — the “Chinese”.

Terribly, terribly unfortunate. Readers of Greaterfool and people who have studied the statistics have known for years that prices on identical houses stopped rising in 2013 in response to Flaherty’s subprime crackdown. Yet month after month, we’re bombarded with what can be best described as propaganda, false at best, claiming continued price increases. Mortgage rate spreads are rising and continue to rise, only covered up slightly by falling policy and bond market rates.

Technology is a fast growing employment sector

I beg to differ. Its quite rare to see any job postings with APEGBC in BC’s high tech sector. And easily half of the ‘postings’ on the BC “high tech industry” lobbyists group are either fake (ie: replicated postings from headhunters), aren’t really in high tech, or are just the usual sort of churn. Compensation in most cases isn’t even enough to maintain a residence in Vancouver/Victoria. The whole idea of a “tech boom” in BS is basically one of almost complete BS.

#91 Mark on 07.20.16 at 3:08 am

“Maybe people aren’t getting the message yet. This isn’t likly going to end in a housing crash. This is the making of a soverign debt crisis, which is largely negative for the CAD.”

It might be worth pointing out that the collapse of the US housing market was extremely and strongly deflationary for the US economy. If anything, the necessity of raising CAD$ to repay CAD$ debt will push the CAD$ to the moon. Throw in other factors like a rush to the precious metals (a sector dominated by Canada), and foreign desire for CAD$ as a ‘safe’ place to invest, and you easily could be looking at a set of circumstances which inverts the CAD$ to $1.3-$1.5USD$ or above.

$66B of CAD$ debt sold to foreigners last month I’m told. Big money is positioning itself for a much higher CAD$, IMHO.

#92 jane 24 on 07.20.16 at 3:52 am

As most of you guys know, I am British/Canadian and live in Britain and I and everyone I know voted to exit the EU so we can be an independent and democratic country like Canada again without 27 other countries voting down our own laws. Canadians wouldn’t stand for it.

Don’t worry we will be fine. You can’t put a monetary value on democracy. I want the British parliament who I directly voted for and can fire, to be responsible for me and not unelected bureaucrats from other countries that I can’t fire when they are corrupt or useless. Believe me many are indeed corrupt and useless. I live in Italy part of each year and I see the corrupt and useless with my own eyes. The EU accounts have never been signed off as fair and valid in my lifetime but it is my own tax money being stolen in this manner. Enough is enough.

Four new extremely poor Eastern European countries are waiting to join and I’ll be dammed if my taxes go to them instead of British schools and hospitals. The EU is basically a giant personal wealth redistribution system. Let Germany pay since they are so keen on it.

The IMF were on the BBC this morning saying that Britain will pay a heavy price for ignoring their great wisdom and breaking free and that our economy will only grow about 1.5% next year. Under heavy questioning they admitted that it was guesswork and that the 1.5% was better than they were expecting from either France or Germany who remain in the heavy dead hands of the EU. I think that the term is back peddling.

After 3 weeks of intended freedom we have 12 potential trade deals on the table, including Canada. Your folks were here last week and on TV saying that the deal is on, the minute that we leave.

It will work out fine and we are not sorry in the slightest. Britain was the world’s first parliament and democracy, we need to re-establish that fact.

Incidentally guys the term UK is a EU construct and one that I have noted the new Prime Minister avoids. The new politically correct term for us is Britain and the British. I like it.

#93 ulsterman on 07.20.16 at 4:36 am

162% increase in Vancouver prices since 1999. Oh if only it were so! My single family rental house on a duplex lot in Burnaby, BC was purchased in April 1999 for $294k. A house across the street on a smaller lot recently sold for $2.3m. If the house i’m in sold for $2.4m that would be a 716% increase since 1999. 162%! Oh, the good ole days!

#94 Get out of YVR on 07.20.16 at 4:55 am

#25 Heisenberg “…on the ground in YVR”

Thank you for this!

“I’m on the ground in Vancouver and suburbs and all I see is RE prices going up and monster houses being built and condos being built and entire blocks of houses being sold to build more condos. Development is everywhere. They’re being built fast and crappy. Chipboard sheets and parallam beams everywhere. Structures meant to fail so the builders can reap more work in the future.”

Sure, let me line up for a week in Langley or elsewhere to snatch 3 of those built-to-fail structures!

Your comment is exactly the reason why Greater Vancouver Real Estate valuationswill collapse – again.

Just curious, who do you think will bail out the idiots who signed the purchase agreements and will inevitably stand to lose their deposits? They will scream and kick like 4 yr old toddlers and demand that the government DO SOMETHING.

Yup, that’s BC and that is the mentality and the idiocy of Greater Vancouver.

Time to cash out was last year. This Spring was the blow off top. Hard to time these.

#95 Jenna Q on 07.20.16 at 5:52 am

Why rates will never rise again, governments can’t afford it, even 1/4 of one percent would bankrupt most budgets now that governments have become the most addicted to debt of any sub class of borrowers.

http://www.cnbc.com/2016/07/18/why-raising-interest-rates-by-just-25-basis-points-may-cause-zombification.html

Hyperinflation is here to stay in housing and houses will become only for a generation of super rich elites and civil servants, leaving millennials and doctors sucking hienie in the basement.

Stagflation is here to stay for consumers and we can expect to see wild inflation in consumer costs amidst zero wage gains

Taxes will escalate rapidly as debt in provinces like Ontario requires more that 60% of revenue to service current debt of 400 billion and climbing.

#96 Goldie on 07.20.16 at 5:56 am

Trump 2016.
That is all

#97 Goldie on 07.20.16 at 6:00 am

@#73 The Spectre

Indeed. Many of the pro-leave camp predicted that exact situation. They predicted that anything that goes wrong in the world economy over the mid-term will be blamed on Brexit.

#98 Eddie on 07.20.16 at 6:03 am

Garth says keep a cool head, yet all he engages in here is fear mongering.

Scotland isn’t leaving the UK, and if it did, it couldn’t join the EU. Both Spain and France have wannabe break-away regions that will not allow this to happen. If it did, Catalonia’s next.

The real estate market in London has long been due for a correction. Nothing new here.

The pound dropping in value merely gives Britain and edge, improves competitiveness, decreases imports, increases exports.

The reason London City’s banking sector is getting hollowed out is because it did nothing for average Joe. All UK ever got from that deal was more debt and stagnating salaries for poor and middle class. And ISIS flag waving immigrants that have taken over whole towns. They were now voted out, and if it didn’t happen now, it would have happened more harshly later on.

Same thing with Trump. If he doesn’t get elected today, the backlash down the line is going to be even harsher. Better let off a little steam today than a lot at once later on.

There is going to be no sudden decrease in RE prices. Interest rates will stay low for years. Prices will stagnate, and slowly over time, inflation will bloat away the debt.

#99 Zen Headspace on 07.20.16 at 7:05 am

#50 Dirty Seconds
“Did you fail math?”
——————————————————————–
Maybe the “tips” are great!!! :-)

https://www.tuscl.net/postread.php?PID=40534

#100 Nelley on 07.20.16 at 7:45 am

I have this theory that Smoking Man is actually a precocious young (14 year old) aspiring female novelist-who comes here to flesh out her character’s psyche and patter.

#101 crowdedelevatorfartz on 07.20.16 at 8:11 am

If Donald Trump becomes President you’ll have to listen to his nonsensical babbling BS AND his wife and her “fingernailsonachalkboard” Eva Gabor accent for the next 5 years………….think about it

#102 TurnerNation on 07.20.16 at 8:13 am

Millenials want handouts. A grumpy boomer might suggest we need another draft to put these hipsters (see: hippies) to work? Queue nostalgia and backpacking stories….

From Stockwatch.com:

“The Globe and Mail reports in its Wednesday edition that Air Canada has launched its own on-line travel-fundraising site called Embarq. The Globe’s Karen Ho writes that the website helps mainly millennials raise money for a travel goal by encouraging users to upload photos or a video story and spread the campaign through social media. It was soft-launched in March. More than 800 people have already put up profiles on the site, including Claudia Martellino, who wants to go to Vancouver for a national bodybuilding competition; Rosalie Poirier, who wants to volunteer in South Africa for a wildlife conservation trip; and Clement Horton, who wants to travel to Madrid for next year’s World Pride event. A large percentage of millennials value travel as an essential aspect of their lives”

#103 Andrew t on 07.20.16 at 8:14 am

#71 Damifino on 07.19.16 at 11:17 pm
#67 Dsw

“5 to 10 years of flat or marginally declining markets actually makes a lot of sense from my pov and is the most likely scenario i see i.e declining slow enough to keep homeowners square and renters pissed.”
—————————-

False assumption: Renters have nothing better to do than bemoan their demonstrated inability to buy into the RE game.

Many rent by choice. I certainly do. I divested myself of all real estate in 2010 and chose to properly diversify what was essentially a ton of dead capital. That capital is still fully intact and working hard on my behalf. The yield has handily covered my living expenses these past six years and I expect it will continue to do so.

—-
I’ll second that. Renting is great. New owners bought the building I live in (storefront plus apartments on top) with an eye to turf everyone, renovate, and jack up the rent. This being Ontario, that’s not allowed per se.
So I challenged the eviction and won. Twice.
Finally the LL’s lawyer advised him to make a deal.
His offer – a 15k buyout. All my friends said “take the money and buy a condo!”. No thanks, my deal: I get the newly reno’d place, which because they are consolidating two units per floor into one to meet the fire code, is twice the size. (1300 sq. ft). Two bedroom, office, laundry, deck in Little Italy for $1250 inclusive, rent controlled. “But I’ll be losing money!” He argued.
Yes. Yes he will.

Oh, and to the poster who said Vancouver is Hollywood North. Where are the head offices of the 3 big media companies in Canada? That would be Toronto. As someone “in the business” let me assure you our entertainment industry is on a much greater scale here.

#104 maxx on 07.20.16 at 8:18 am

#5 Johnny D on 07.19.16 at 6:28 pm

“This talk of “reset” and downward pressure on house prices goes down the drain if the BoC cuts rates. Depressing thought but even I’m starting to believe we’re stuck in this low interest rate, high inflation, bad economy loop.”

Nothing will change. Rates will be held low, the economy will melt or at (very unlikely) best remain stagnant for decades and not much at all will change hands.
The global economy is stuck in neutral because of the brilliant moves by our governing elite over the past quarter century. Don’t hold your breath. We are stuck in a sludgy economy surrounded by talking heads treating it as though it’s all a sporting event.
The louder cb bs gets, the less anything is happening – just seems like something’s about to happen with all the stuffed shirts blathering in overdrive.

#105 crowdedelevatorfartz on 07.20.16 at 8:26 am

@#80 Wicked
“Bill Goods face advertising Coast Capital Direct, Im sick and tired of looking at this pumper every night!*****************************************
Apparently you’re not the only one.
Bill Good Jr. Got his original job through daddy’s connections.
Eventually worked his way up to TV anchor on the evening News.
Ratings dipped…Bill was punted. Showed up on a 3rd rate tv news channel. Ratings dipped….Bill punted.
Eventually resurfaced on a TalkRadio station in a Prime time slot( 8am to 10am Mon-Fri and managed to drag that radio stations’ ratings from #1 in Vancouver to the bottom of the charts with his insipid pandering to the Clark Govt. ( interesting note: Christy Cleavage was a talkshow host on the same radio station while SHE was between jobs as a pathetic politician).
Bill was finally booted when the ratings were so low that even a mortician couldnt dig them out of their hole.

Bill Good Jr deserves the job as a pathetic shill for a second rate loan company considering all the damage he’s done promoting the most vile political party the Province has seen in decades.
Enjoy viewing his doughy, cracked visage grimacing at the camera as he wheezes out his insipid “message” of money.
Reminds me of another local “celebrity” hack, Red Robinson, who’s heyday was 50 years ago prompting you to take out loans using your house as collateral.
Those early 1990’s TV ads ….”There’s money in the walls!” he’d beam as he magically pulled cash from a hole in the wall of a house…..

#106 crowdedelevatorfartz on 07.20.16 at 8:31 am

@#69 bill
“not to mention the stench emanating from that vast pile of rotting compost in Delta….”
*******************************************

Thats not Delta you’re smelling.
Its our fearless “leaders” in Victoria……

#107 Saint Herb on 07.20.16 at 8:32 am

I don’t see much change in the market other then, higher prices. House I looked at 3-4 years ago is more than double the price now! Houses on my street (where I rent) have gone from 850K last summer to 1.2M this summer. I am very worried that my landlord will notice and sell.

In the mean time my portfolio Market Value never seems to catch up to my Book Value. At least it is now above my principle investment.

#108 rosie on 07.20.16 at 8:46 am

Perception is reality.

http://wolfstreet.com/2016/07/19/americans-economic-gloom-risis-stocks-hit-high-asset-bubbles-not-helpful/

#109 Noel on 07.20.16 at 8:56 am

#10 Frank on 07.19.16 at 6:38 pm
The same IMF who called Canada housing a bubble last year and predicted a correction that turned into a 11% national gain. More like read their press release and do the opposite.
__________________

Yup, and the year before:

http://business.financialpost.com/news/economy/the-imf-cant-stop-worrying-about-canadas-potential-housing-bubble

and in 2013:

http://business.financialpost.com/business-insider/according-to-the-imf-canada-has-the-most-overvalued-housing-market-in-the-world

and in 2012:

http://www.businessinsider.com/imf-sees-a-bubble-in-the-canadian-housing-market-2012-1

and in 2011:

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/canadian-economy-vulnerable-to-overheated-housing-market-imf-warns/article621142/

and in 2009:

https://www.imf.org/external/pubs/ft/wp/2009/wp09235.pdf

In short, the IMF has no clue when it comes to housing prices.

Perhaps it is house-horny Canadians who keep pushing risk. — Garth

#110 Nelley on 07.20.16 at 9:19 am

#97Turner-I am entering a Gay Bodybuilding competition in South Africa and need your support-donations gladly accepted at asuckerborneveryminute.ca

#111 Not Garth on 07.20.16 at 9:34 am

Hey Garth. Use your own words. You are not allowed to use the word ‘reset’. That word is reserved for all of the higher intellect commenters who you have called conspiracy kooks. You know the ones warning about negative interest rates coming to Canada and the price of precious metals skyrocking and the predictors of world chaos- those guys. You are not privileged enough to use our language. Stick to -“diversified paper portfolio”

#112 Steerage Bilge on 07.20.16 at 9:43 am

#76 Smoking Man on 07.20.16 at 12:45 am

Celebrating with fellow back room boys. Trump boys.

They ain’t in Cleveland. There right here.

Why did this writer sign a non disclosure… That book would have been a book.

Now I’m doomed to a stupid fiction story.

When O’Leary’s comes for help. I’m not signing.

So smoker dude is Melania’s fiction speech writer!

#113 CJBob on 07.20.16 at 9:43 am

#62 WalMark of Sadkatoon on 07.19.16 at 9:57 pm
I just got 1.4% on a 1 year term with the orange guy. I might need the money next year if I decide to redo the kitchen.

That’s pathetic. What is that? A $1000 kitchen redo? Buying a microwave?
___________________________
So moving the discussion away from my kitchen and back to investing: We’re seeing rates continue to fall to levels not seen before. Bond funds are also falling as a result and the rate to compare to the 1.4% is not what was received in the past but what the next year will bring.

I’ve read that if you want higher returns then look at the mix of equities vs fixed, don’t take on more risk on the fixed side. Long term bonds are not paying much more and certainly contain risk if rates rise in a few years. So what to do with the safe portion?

#114 CJBob on 07.20.16 at 9:46 am

VSB was 1.37% for the last year, VSC 1.83%:

https://www.vanguardcanada.ca/individual/etfs/etfs.htm

#115 Shawn on 07.20.16 at 10:09 am

U.S. Household debt is clearly too low?

The chart shows how U.S. household debt has dropped, as a percentage of GDP, despite far lower interest rates.

This is counter to the basic rules of supply and demand but was caused by the 2008 financial crisis.

The crisis was not necessarily caused by U.S. household debt that was too high on average but rather by high-risk debt to high-risk customers being tarted up as AAA securities due to perverse incentives for credit rating agencies, lenders, borrowers, and mortgage brokers and others to behave badly.

With the crisis out of the way U.S. household debt will almost certainly rise as a percent of GDP.

That is, the two lines on the graph may come together as the U.S.line rises rather than Canada falling.

Many times a similar graph of U.S. and Canadian house prices has been shown with the implication that Canadian house prices would fall to meet the U.S line. Instead, both lines rose but Canada rose faster and remained far above the U.S. line. Predicting the future is never as easy as it seems.

Key to the decline in US household debt levels are (a) a drop in overall home ownership, back to levels of two decades ago – while Canadians keep piling into mortgages and (b) a far more restrictive lending regime adopted by US banks following the credit crisis. — Garth

#116 Shawn on 07.20.16 at 10:14 am

Question:

What is the theoretical value of a risk-free and perpetual dollar per year as interest rates (on risk-free perpetuities) approach zero? (Japan is reported to be considering issuing perpetual bonds at some very low interest rate)

And what is the implication of that for the value of any asset that can deliver a reliable net profit per year?

#117 Prairiboy43 on 07.20.16 at 10:21 am

Interesting. I had a Victoria residential service business in 88. Going Uvic at time. Hired a kid, that would Skate Board to work every morning. He was awesome. He Skate boarded from Calgary to Victoria. Hitch ride up hills, then get out and thank his ride. Then Skate board down. Good Times.

TurnerNation on 07.20.16 at 8:13 am
Millenials want handouts. A grumpy boomer might suggest we need another draft to put these hipsters (see: hippies) to work? Queue nostalgia and backpacking stories….

From Stockwatch.com:

“The Globe and Mail reports in its Wednesday edition that Air Canada has launched its own on-line travel-fundraising site called Embarq. The Globe’s Karen Ho writes that the website helps mainly millennials raise money for a travel goal by encouraging users to upload photos or a video story and spread the campaign through social media. It was soft-launched in March. More than 800 people have already put up profiles on the site, including Claudia Martellino, who wants to go to Vancouver for a national bodybuilding competition; Rosalie Poirier, who wants to volunteer in South Africa for a wildlife conservation trip; and Clement Horton, who wants to travel to Madrid for next year’s World Pride event. A large percentage of millennials value travel as an essential aspect of their lives”

#118 Dyugle on 07.20.16 at 10:29 am

Brexit looks good so far. FTSE up 10% from the recent sell off. Best in Europe. Pound down improving terms of trade has a lot to do with the market improvement. Lower bond yields are also generally good for business but they are still higher than German yields. Needing trade deals is a must and they can negotiate them prior to even exercising article 50 which takes 2 years before they lose their EU market access. This looks like a serious win for the Brits. Kind of like Iceland rejecting EU membership which allowed them to shed the banking sector debt by letting their banks go under. EU wanted the country to absorb the debts or they wouldn’t let them join. This would have bankrupted the country worse that the Greece. Speaking of Greece, it is wonderful how the EU rode to the defence of that country isn’t it?
EU looks like a train wreck waiting to happen and the global elite continuing to warn of the problems that brexit will cause smacks of desperation.

#119 Greg on 07.20.16 at 10:35 am

Amazing what low sales and the 8.4M condo sale in Calgary did to CREB statistics.

http://www.creb.com/Buyer_Resources/Housing_Statistics/

Average Price July 2015 = 309,040
Average Price July 2016 = 370,506 19% increase

Weekly July 13-19 2015 = 315,715
Weekly July 13-19 2016 = 500,870 58.65% increase

How many realtors will spin this into the market is recovering and convince people to pull the trigger now or FOMO?

#120 Aggregator on 07.20.16 at 11:16 am

#119 Greg

I've posted examples a few times on here showing how the average price can rise while the market contracts. You can tell if it's a strong number or not by looking at the median price, which is down 2.22% so far for July.

But fear not… ATB Financial (Alberta Treasury Branches, a crown corporation) is about to get more bulk CMHC MBS guarantees. Their current MBS portfolio is now over $6.1 billion dollars, up about 70% over two years.

Yes, Alberta's government is in the mortgage business. Maybe Canada Post will be too one day soon.

#121 boomer88 on 07.20.16 at 11:29 am

I have a friend who’s a truck driver who is just flipping his second house. He bought a junk bungalow in a good area for $750k (Oakville), hired contractors, completely demolished it and built a new one from scratch for approx. $400k (3000 sq ft) and he’s listing it now for $1.65M. Took it less than a year to do that and if he gets his asking price his net profit will be almost $400k. He still kept his original house, but changed his primary residence address to the new one to avoid paying any capital gains tax (apparently it’s possible because it worked the first time?)

This is a bubble economy, where you can make a killing before the music stops.

I hate central bankers, their cheap money policy is responsible for these monstrous asset bubbles. Prudent savers and investors look like fools. Why save money, just spend everything you have, or leverages yourself up and buy assets , any assets. Your cash will be worth zero soon…

The trucker will not get away with evading tax on his business investment. Eventually he will be audited and the $400K added to his annual taxable income. Then kiss away half of it. — Garth

#122 Hot Albertan Money on 07.20.16 at 11:42 am

In fact, the bank suggests the influence of foreign buyers is more at the bottom and middle of the market, not the top.

I know foreigners are a msll piece of the pie, so I’m not a HAM doomer but…

If foreign money is hitting the bottom/middle of the market, isn’t that where the most damage could be caused?

If the foreign 1% is targeting the top of the market, average people aren’t affected. But if the 1% starts buying up the average stuff, then that’s bad no?

#123 Capt. Serious on 07.20.16 at 11:54 am

I’ve read that if you want higher returns then look at the mix of equities vs fixed, don’t take on more risk on the fixed side. Long term bonds are not paying much more and certainly contain risk if rates rise in a few years. So what to do with the safe portion?

You accept low returns on your short term bonds. Actually in this environment staggering GICs from 1-3 years maturity probably will net more after expenses than a short term bond fund will. Reaching for yield necessarily means you’re taking on more risk (interest rate or credit). Risk and return are linked, as we all should know. You do not get high returns without taking risk. You’re right that adding risk is done most efficiently by adding equity exposure.
Garth groups preferred shares into the income side of his 60/40 but, while you can consider them part of the income side, they’re not risk free. Garth quite rightly says to still keep some of the 40% on the safe side in bonds to stabilize the portfolio. Let’s say half of that 40% is in bonds, then it really means your equity exposure is closer to 80%, although some is ‘safer’ equity by being in preferred shares and REITs.

#124 Shawn on 07.20.16 at 12:15 pm

U.S. Household Debt will rise

Garth responded to me at 115:

Key to the decline in US household debt levels are (a) a drop in overall home ownership, back to levels of two decades ago – while Canadians keep piling into mortgages and (b) a far more restrictive lending regime adopted by US banks following the credit crisis. — Garth

***************************************
Agreed. No argument with that response.

And now U.S. home ownership rates will likely start to rise again as the fear abates.

And U.S. lending standards will ease as exemplified by a new Wells Fargo mortgage requiring just 3% down payment. And Wells has reported strong steady loan growth as well since the bottom a few years back.

U.S. Households will ultimately respond to the lower price for debt the same way they respond to the lower price for anything: They will increase their use of debt. Just as soon as they are finished licking their wounds, which may be right about now.

The one (and only?) really big difference between Canada and the U.S. was the lack of high risk mortgage debt in Canada being packaged off as AAA securities, and the fact that this led to a crisis as the AAA securities revealed themselves to be junk bonds. No?

Yes we have CMHC mortgages some but not all of which are sold as AAA (or something close) securities. These truly are AAA as they are guaranteed by Canada unlike in the U.S. where some had an implicit guarantee and some no such guarantee. Canadian mortgage backed securities are in no way junk, not even remotely close.

And in Canada we never had much if any of the truly bad teaser rates and no documentation mortgages that became common in the U.S.

The propensity to pile on debt will ultimately be no different in the two counties. That’s because human nature is the same in both countries. The U.S. lenders and the home owners received a major major scare. But the memory of that will fade as house prices rise.

If rates remain low, U.S. household debt as a percent of GDP will rise because the laws of economics pretty much require it to do so.

Canada’s household debt as a percent of GDP might come down if in fact the level is too high to service. But so far default rates indicate that the debt is being serviced. (But possibly new debt is doing the servicing and if so then it is unsustainable)

The future awaits and may hold surprises.

#125 AB Boxster on 07.20.16 at 12:26 pm

So the EU message to Turkey (and all other EU members) is that if you have a policy of capital punishment, then we won’t allow you into the ‘club’.
You know: The elite.

Yet Canada, which supports the EU, cares less whether China perpetrates massive atrocities against its own people and we are actively trying to increase trade with them.

And the US, which performs capital punishment, is a big supporter of the EU, yet could never be a member because of this, and would never succeed the rights that it is ok with EU countries giving up.

The hypocrisy is massive.

A pretty good example of how the EU tries to enforce their social mores on countries that just want to have better trade relations with their neighbours.

Note to EU: European countries do not all want to be the same. England does not want to be France. France does not want to be Germany.

Which is why Britain’s short term pain will be offset by long term benefits of Brexit.

And why many other EU countries will follow.

#126 Shawn on 07.20.16 at 12:27 pm

Dollarama Soars…

Dollarama is up 3.2% today and up about 900% since it started trading at the end of 2009.

This indicates (pick one):

a) Canada’s economy is terrible and consumers must resort to this junk store chain which has led to its big profits and growth., or

b) Dollarama is one of Canada’s very best managed companies and delivers exceptional value for price and has grown earnings and its P/E ratio because of its value proposition, cost structure and excellent management. It is a highly efficient delivery mechanism for bringing products to consumers and its success reflect that.

Only one of the above is correct. But each of us can choose the answer that best suits our world view. Thanks for playing.

#127 bill on 07.20.16 at 12:44 pm

#106 crowdedelevatorfartz on 07.20.16 at 8:31 am
victoria you say?
well certainly when the wind blows from that direction…
[indeed that would explain those especially ‘bad days’…]
I think we can definitely agree that the end result is an unbelievable stench in the Vancouver area.

#128 Ronaldo on 07.20.16 at 12:51 pm

#91 Mark

”$66B of CAD$ debt sold to foreigners last month I’m told. Big money is positioning itself for a much higher CAD$, IMHO.”

Agree. And those who bought U.S. real estate and didn’t sell in January will watch the value of their investment in CDN $’s erode along with the declining housing prices in the U.S. Still time to sell unless your flush with cash and it doesn’t matter to you.

Gotta know when to holdem, know when to foldem.

#129 BS on 07.20.16 at 12:53 pm

26 Shawn on 07.20.16 at 12:27 pm
Dollarama Soars…

Dollarama is up 3.2% today and up about 900% since it started trading at the end of 2009.

This indicates (pick one):

a) Canada’s economy is terrible and consumers must resort to this junk store chain which has led to its big profits and growth., or

b) Dollarama is one of Canada’s very best managed companies and delivers exceptional value for price and has grown earnings and its P/E ratio because of its value proposition, cost structure and excellent management. It is a highly efficient delivery mechanism for bringing products to consumers and its success reflect that.

Only one of the above is correct. But each of us can choose the answer that best suits our world view. Thanks for playing.

Dollarama has a PE of about 30 to 1 or double that of comparable mature retail chains. At some point we will have enough dollar stores. Once the growth slows down or stops that PE will go to about half that to match the others. That means the stock price will get cut in half. That happens to all growth stocks at some point and the PE gets reset lower. I wouldn’t want to be holding it when that happens.

#130 crossbordershopper on 07.20.16 at 12:56 pm

it is now july 2016 and trudeau has given the poor seniors more money, this is great. i challenge anyone to do the calculation that if you never work a day in your life in canada you will get the oas and the gis, and i am in sask so they top it up via the sip.
so with the gst and the provincial credit we are at about $1500 per month. i understand for most of you people who are millionaires, who cares. millions of canadians do, millions of canadians, not only wait for that cheque but NEED that cheque.
when you are 65 in canada it is great, 1500 a month may seem to be trivial if you have a goverment or company pension or have high six or even seven figures investments great for you and a house paid for, great. i just wanted to speak to the millions, over 6 million canadians who are retired and need that money. i know many of them personally.
so first point is basically, enjoy your life, dont work dont pay taxes and retire on 1500 a month, since if you work and pay into the CPP ponzi scam, you end up at exaclty the same spot. not the max cpp, but the average guy out there with these low wages, pay into the cpp, get a cheque equal to the gis payment so why bother. sure you work and pay taxes you are better off during your lifetime, sure, but why? work for cash, everyone does, i dont understand this board, everyone i know, everyone pays cash for everything, auto repairs, home renovations, everything, .CASH.
secondly is the child benefit, the new and improved greately enhances the single mom with their kids, great, same program, why would a women work, just have a kid or two or three, why get involved with a guy, the state is easier to deal with than an ex. great income. I understand my millionaire colleagues on this board dont understand what being a single mom is, but they are not that bad off, given all the benefits that this fine country gives. so.
1- IF YOUR A WOMEN, HAVE CHILDREN
2- IF YOUR A LAZY BUM, STAY THAT WAY, WORK FOR CASH AND RETIRE THE SAME AS THE GUY WHO GOES TO WORK EVERYDAY.
3- GET A PLACE IN THE SUN, GO VIIST IT NOW, AND SOON YOU WILL BE THERE SIX MONTHS LESS A DAY EVERY YEAR.
THATS IT. trudeau said so.

#131 Victor V on 07.20.16 at 1:19 pm

5.3% yield on CPD, and capital values creeping up nicely too as of late:

https://ca.finance.yahoo.com/echarts?s=CPD.TO#symbol=CPD.TO;range=1m

#132 CJBob on 07.20.16 at 1:28 pm

#123 Capt. Serious on 07.20.16 at 11:54 am
…You do not get high returns without taking risk. You’re right that adding risk is done most efficiently by adding equity exposure…
______________________
Thanks for the reply. For those who don’t agree with the 1.4% GIC for the next year on a small portion of my investments I’m open to suggestions that don’t increase risk (my split is roughly 55% equities vs. the 60% recommended because it helps me sleep better at night. A portional is hedged for the same reasons, smaller bumps on the roller coaster).

I checked IShare returns and as expected most of their fixed income ETF’s are just as low or lower and trending down. There is no free lunch.

https://www.blackrock.com/ca/individual/en/products/product-list#!type=iSharesETFCA&tab=performance&view=grouped&fac=43515

#133 Maldroit Ape on 07.20.16 at 1:35 pm

@Mark#90

“I beg to differ. Its quite rare to see any job postings with APEGBC in BC’s high tech sector. And easily half of the ‘postings’ on the BC “high tech industry” lobbyists group are either fake (ie: replicated postings from headhunters), aren’t really in high tech, or are just the usual sort of churn. Compensation in most cases isn’t even enough to maintain a residence in Vancouver/Victoria. The whole idea of a “tech boom” in BS is basically one of almost complete BS.”

At least in software and service tech companies that I am familiar most hiring is done by internal recruiters via referrals or head hunting, lots of pinging via linkedin. Low end of the market and the companies who don’t pay very well tend to use external recruiters or use job postings and deal with the mountain of trash applications they get.

As for compensation its not as high as down in the valley but starting is in the $70k range for fresh out of university, 10 years of experience is about $120-140k CDN not bad at all. Lots of the firms are big american firms e.g. salesforce, amazon and microsoft have been on a hiring binge lately here in YVR. Another thing is that in tech most of the compensation from these big guys tends to be in stock options or grants. My personal experience is that this can often add a pretty large bump in incomes as well. So total compensation will be near $200k.

Probably not enough to buy a house in Vancouver but YVR real estate is for crazy speculators. Just an anecdote but of the 100 or so people who I work most of whom make well over six figures there are no more then 10 that own real-estate (at least in Vancouver) and they usually bought a while ago (like early 2000s.

Canada is pretty attractive for opening an office, we have a immigration system that favors the highly skilled, lower wages and various government incentives such as SRED.

#134 Shawn on 07.20.16 at 1:36 pm

I Rest My Case….

From Wells Fargo’s Q2 report, the following stunner:

“Residential mortgage loan originations were $63 billion in the second quarter, up $19 billion linked quarter”.

So a 43% increase versus Q1. That may include refinancing but in any case is a huge increase.

Total loans were up 9% year over year.

So, yeah America household debt is clearly on the rise.

Ya gotta be a dum dum not to own a house if you are an American with a good and stable job who has no intentions of moving. The houses are very affordable and you can lock in record low rates for 30 years, with the option to refinance if rates go even lower! It’s a no brainer. The American economy is improving. Home prices and household debt will increase. It’s a no brainer to be a home owner for Americans. And they will. They have been buying.

#135 tkid on 07.20.16 at 1:38 pm

Translation for post #130: if you are saving for your retirement you are a millionaire and a meanie, because #130 didn’t didn’t save for their retirement and now suffers financially for it.

#136 Ole Doberman on 07.20.16 at 1:42 pm

#28 Lea on 07.19.16 at 7:22 pm

#8 ole Doberman

The reset in my Los Angeles neighborhood meant that a house bought for $999,000 sold for $699,000 18 months later.
———————————————————
Can you explain how that works – is it just because?

#137 Shawn on 07.20.16 at 1:49 pm

Dollarama

BS responded to me:

Dollarama has a PE of about 30 to 1 or double that of comparable mature retail chains.

*************************************
Quite so, it looks expensive and I never indicated it was a stock to buy or advised one way or the other above. It is not necessarily a mature operation yet.

My (implicit) point was I think it has proven to be one of Canada’s very best managed companies, that it offers excellent value and that its dramatic success has precisely NOTHING to do with a poor economy in Canada. People have always sought out bargains.

Its earnings per share are up 525% from 2010 to 2016. I declined to buy in 2010 partly because major owner Bain Capital was selling out its position and because, then as now, it looked expensive in relation to earnings and especially because the value per store, then as now, looked stratospheric. Bain and I were both wrong on that one.

#138 Heisenberg on 07.20.16 at 2:14 pm

#72 Maldroit Ape on 07.19.16 at 11:22 pm

Not disputing the real-estate mal-investment isn’t a big part of the economy here in Vancouver. But for someone on the ground you seem to have missed the a lot more going on. Technology is a fast growing employment sector (I mean how cool is it that d-wave is based here ?), the content buying boom from the likes of Netflix,yahoo,amazon etc has over subscribed Hollywood North, the video game industry is roaring and it is still the third busiest port in North America.
—————————-

When it comes to number of jobs, construction and related industries are much bigger. Think about it, there are no barriers to entry in construction. Don’t need to speak English, don’t need a degree. There are also very well paid jobs in trades that do require more training. Plumbers, electricians, welders, mill workers, heavy machinery drivers, etc. From logging to cement plant workers, construction and related jobs are what’s keeping the BC economy going.

#139 Mountain Dew on 07.20.16 at 2:19 pm

Overhead some young guys in their 20’s talking about work the other day in Vancouver.

One says to another: “Where are you working these days?’

Response: “I don’t work anymore — I just invest in real estate.”

I recall the same type of thing was happening at the height of the dot.com bubble — except some 20-year-olds were trading dot.com stocks for a living.

When young people with little life experience go all-in on a money-making trend, it’s not a healthy sign…

#140 Shawn on 07.20.16 at 2:28 pm

Negative Rates…

It is possible that a bank could show a line item of negative interest rate deposit costs.

I looked at Wells Fargo as of Q2 and no such line item shows up including their short term borrowing on which they still pay positive interest rate costs.

Their lowest funding cost line item is market rate and other savings at a paltry 0.07% average. There would be a ton of 0% chequing accounts in there. There might be some negative rate stuff too where they charge the customer to keep the deposit.

Fractional reserve doomers and misinterpreters of Bank of England papers may wish to note all of this and the fact that average funding cost is still 0.34%. Weird given that some people think banks can fund loans at 0% by conjuring the deposit. (which is technically true as step 1 but false as soon as the loan is spent – step 2- and the deposit moves away and must normally be attracted back by paying interest).

As far as borrowing at negative rates. Forget it. Wells Fargo loans line items range from 2.35% to 11.52% (credit cards). Within those line items would be some lower numbers, but doubtful anything negative unless there is some old prime minus stuff that unexpectedly went negative and certainly would not be offered today.

#141 tkid on 07.20.16 at 2:33 pm

What the holy heck just happened to CPD?

#142 Heisenberg on 07.20.16 at 2:43 pm

#94 Get out of YVR on 07.20.16 at 4:55 am

“Sure, let me line up for a week in Langley or elsewhere to snatch 3 of those built-to-fail structures!

Your comment is exactly the reason why Greater Vancouver Real Estate valuationswill collapse – again.

Just curious, who do you think will bail out the idiots who signed the purchase agreements and will inevitably stand to lose their deposits? They will scream and kick like 4 yr old toddlers and demand that the government DO SOMETHING.

Yup, that’s BC and that is the mentality and the idiocy of Greater Vancouver.

Time to cash out was last year. This Spring was the blow off top. Hard to time these.”
————————————————-

First of all, the shoddy housing being built is great for the economy because it keeps the construction industry going. This is all part of the plan.

Why else approve such crappy building materials that don’t last? Because the industry and government knows all these structures will be rebuilt in less than 20 years. Whether to replace them with smaller, higher density housing or to simply change the design to something more modern.

Developers being the greedy bunch they are, are building as fast as they can, maximizing profit by cutting corners. Whoever builds their condo building first on the block gets the big wave of fomo buyers. My friend’s 6 month-old concrete condo already has 4 units leaking and the strata is about to sue the builder.

As long as demand exceeds supply, all is good.
This is why the Canadian government is so eager to increase immigration. Low interest rates and a rapidly growing population will fill that housing demand and keep BC’s economy going.

Will the party come to an end? Who knows… But in my opinion, these are the first signs you will see:

1. when condo units in Vancouver are no longer selling out in a frenzy the way they still do.

2. Once demand in the YVR condo market drops, their price will drop.

3. Half built condo projects will then be abandoned and fly by night developers will disappear with deposits in hand. I know this happens now once in a while, but I’m talking this will happen a lot when it all starts to unravel.

4. Rents will drop as condo prices drop and units are unsold.

5.At that point housing prices will drop because when condos are cheaper, people consider moving from houses to less costly to maintain condos.

None of this is happening right now, so the party is not over just yet.

#143 Bram on 07.20.16 at 2:49 pm

#137 Shawn on 07.20.16 at 1:49 pm

Yeah, revenue went from 1.5B in 2012 to 2.5B in 2016.
That’s some really solid growth if you ask me!
In times where GDP have flat lined, I would call it Impressive.

About earnings-multiple…
I’ve come to care less and less about PE, because the earnings number is so easily manipulated with accounting tricks.

Price-to-sales could be a better indicator for judging whether a stock is expensive or cheap.

#144 jess on 07.20.16 at 3:20 pm

Kleptocra zies

U.S. Targets $1 Billion in Assets in Malaysian Embezzlement Case

By LOUISE STORYJULY 20, 2016 nytimes

“Hidden in the United States in real estate, art and other luxury goods, the money was embezzled from the fund and moved around the world using secretive shell companies that masked its trail, the Justice Department said.

..use of shell companies in high-end real estate in the United States, The Times traced the purchases of about $150 million in residential properties in New York and in the Los Angeles area…

#145 Basil Fawlty on 07.20.16 at 3:29 pm

http://www.dailymail.co.uk/news/article-3698476/IMF-clowns-admit-got-wrong-Brexit-doom-gloom-warnings-saying-British-economy-grow-faster-Germany-France.html#ixzz4EwvmJUqJ

Looks like Brexit had an affect, but not near as dire as anticipated by the Remain Crowd

True consequences will be unknown for years. — Garth

#146 Son of a Gun on 07.20.16 at 3:33 pm

Garth, if i use TFSA for investment in non-traditional securities (like derivatives or futures contracts), will capital gains still be tax free?

#147 DisgustMadeMePost on 07.20.16 at 3:35 pm

Well maybe things ARE turning…

Overheard a snipoet of conversation between two young men (millenials of course)… In which one proclaimed to the other “..and then you’re a slave to your mortgage for the rest of your life..”

First time I’ve heard young people talk like that.

#148 ValueHoundDog on 07.20.16 at 3:36 pm

Hey Garth,

Can you please provide the link to the RBC report you referenced? I’d love to read it myself.

Love the blog, thanks!

#149 TurnerNation on 07.20.16 at 3:44 pm

If we lived in a Democracy Britons could have elected their new Prime Minister.

A new order out of chaos always.

I wonder if a domestic attacker will again be used this time to delay US elections.

#150 jess on 07.20.16 at 3:48 pm

Panama Papers link Japan’s shady online brokers to tax havens
by Scilla Alecci and Alessia Cerantola

Special To The Japan Times

Jul 19, 2016
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A paper trail that runs from Okinawa to Canada and from Israel to Italy and France links some unauthorized online traders on the blacklist of Japan’s financial regulator to offshore companies in tax havens, an analysis of files leaked from a Panamanian law firm has revealed.”

http://www.japantimes.co.jp/news/2016/07/19/national/panama-papers-link-japans-shady-online-brokers-tax-havens/?utm_content=buffere4a9e&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer#.V46aRZMrK-w

#151 WalMark of Sadkatoon on 07.20.16 at 4:18 pm

As for compensation its not as high as down in the valley but starting is in the $70k range for fresh out of university, 10 years of experience is about $120-140k CDN not bad at all.

I agree. the starting pay for tech is amazing. similar to pay be an entire household in most canadian cities. and the pay ramp ramp up is fast too

great sector! not enough applicants

http://m.huffpost.com/ca/entry/9561100

https://www.roberthalf.ca/sites/roberthalf.ca/files/rht-pdfs/robert_half_technology_2016_salary_guide.pdf

http://content.randstad.ca/hubfs/STEM_2015/Randstad_STEM_WP_EN.pdf

#152 Shawn on 07.20.16 at 4:35 pm

Stock Valuation

#143 Bram on 07.20.16 at 2:49 pm responded to me:

#137 Shawn on 07.20.16 at 1:49 pm

Yeah, revenue went from 1.5B in 2012 to 2.5B in 2016.
That’s some really solid growth if you ask me!
In times where GDP have flat lined, I would call it Impressive.

About earnings-multiple…
I’ve come to care less and less about PE, because the earnings number is so easily manipulated with accounting tricks.

Price-to-sales could be a better indicator for judging whether a stock is expensive or cheap.

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P/E manipulation is easier in some businesses (banking and insurance for example) than others.

Dollarama as a retailer with rented premises has less ability to manipulate earnings. They could overstate inventory but that catches up.

Dollarama has no need to manipulate earnings. They buy at like 60 cents and sell at a dollar and keep costs low. They are the real McCoy.

Based on price to sales you might like the likes of Bombardier. Good luck, sir.

Accounting rules can cause accounting earnings to be either higher or lower than what might be called economic earnings. The ability of an investor or analyst to adjust earnings to some more representative figure can provide a competitive advantage in stock picking. Then again as Garth would say, stock picking is not wise for everyone.

Again my point on Dollarama is that it is clearly one of Canada’s very best managed companies and a fantastic success story. No ifs, ands or buts about it. Discussing is P/E is another matter.

#153 Shawn on 07.20.16 at 4:39 pm

BREXIT…

The U.K voted to leave at a time when its unemployment rate just went under 5%.

When it comes to free trade, many people think it is bad for them. But it is clearly better for most people though, yes it hurts certain workers in sectors where it a country simply can’t compete.

Immigration has hurt the British economy? Apparently not.

#154 Lea on 07.20.16 at 5:31 pm

#136 Ole Doberman

Just what some lesser or greater fool is willing to pay for your house. Your gains are unrealized until you actually sell. If prices drop and you need to sell, you take what you can get.

The house I was thinking of, had an ARM (adjustable rate mortgage). The monthly payments were too high after the the teaser rates expired. When they went to refinance after prices started to free fall, they could not refinance. They had to sell to salvage some of the equity or lose it all in foreclosure.

#155 eventually on 07.20.16 at 5:43 pm

The trucker will not get away with evading tax on his business investment. Eventually he will be audited and the $400K added to his annual taxable income. Then kiss away half of it. — Garth

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Or he can just hire KPMG.

#156 Shawn on 07.20.16 at 6:07 pm

House Gains Are Unrealised?

Immigration has hurt the British economy? Apparently not.

Lea at 154 said:

Just what some lesser or greater fool is willing to pay for your house. Your gains are unrealized until you actually sell. If prices drop and you need to sell, you take what you can get.

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Quite so, the gain is unrealised by definition until sold.

But that does not mean it is not a real gain in net worth. Though it should deduct selling costs of course. And the purchase price should be adjusted up to reflect major renovations.

Any standard accounting rule would require that an unrealised gain be recognised as a gain in net worth but that it also be reduced by selling costs and any tax due if the gain is realised.

And of course the unrealised gain could disappear if the market value changes. So what? Life itself will also disappear one day for each of us. Meanwhile it is real.

It is sad to see that many people seem to think that unrealised gains are not real.

To suggest (as some do) that all unrealised gains ought to be quickly realised into cash is silly. What for? to spend the cash on consumption? To put the cash back into another risky asset? How does that help?

Of course, yes, if an asset is far over-valued then it is wise to realise the gain. Or if the risk of a loss in value on the asset is too large for comfort, then realising it is likely wise.

But suggesting that ALL unrealised gains are somehow not real is bad for the credibility of anyone suggesting that.

#157 Tony on 07.20.16 at 8:09 pm

The only two factors are the Chinese and the stupid Millennials in the Vancouver area and in the greater Toronto area. Something known as monkey see, monkey do or total retardation something only akin to the Millennials in the Toronto and Vancouver areas. If anyone else can come up with anything other than this I’d like to know how they arrived at it?

#158 Shortymac on 07.22.16 at 9:39 am

@28

I went back to my old neighborhood, a suburb outside of Philly, for a family reunion this weekend.

The house across the street from my parents was bought for 600k in 2002 is now selling for 400k. It’s on the water and everything.

My neighborhood went downhill after the 2008 crash and a lot of halfway houses went into a blue collar neighborhood nearby.

My parents are waiting to move to the mountains when my Mother’s pension is ready.