The big stick

Just 16 more sleeps now until B20 lands. What the new stress test will do to residential housing is a giant topic at the moment. Will it tank the market, just stall it, or end up being as useless as the last stress test was for high-ratio borrowers?

To summarize: starting in a couple of weeks banks must ensure all borrowers can service their loans if interest rates shoot higher. To do so, people applying for mortgages will have to prove (with their income) they can make the payments at the current market rate + 2%. So, come January it’ll be as if mortgages had just popped over the 5% mark. Compared to the 2% loans available last winter, that’s an extreme change.

The federal bank regulator is doing this, largely, because of the Bank of Mom. After a similar test was brought in for kids with less than 20% to put down, CMHC-insured loan volumes crashed more than 40%. Unable to pass that test, the newbie buyers with small down payments were borrowing money from parents (and other unsavoury sources) in order to escape it. As a result the banks found their uninsured mortgages  were exploding higher, but that a lot of borrowers were actually high-risk – leaving them more exposed.

So the regulator said enough, already. Everybody will be tested, regardless of the heft of the down payment – no exceptions. And here we are. Also notable is that anyone with an existing mortgage who, after January 1st, wants to change lenders must also go through the stress test process. Astonishingly, that amounts to 2.7 million households who will be locked into their existing lenders.

So what happens now?

The mortgage industry says about 18% of overall credit will be reduced. More than 100,000 buyers won’t get the financing they want. Roughly half of those will end up buying nothing.

The real estate industry (CREA) says this will reduce overall sales next year by 5%, that prices will come down, 12,000 jobs in the industry will be lost and the economy will be impacted with a reduction of $1 billion in activity.

The Bank of Canada estimates about 10% of home buyers will be affected because that’s how many in 2016 would not have qualified under the new rules. This would represent some 36,000 lost sales, or $15 billion worth of borrowing.

Veteran mortgage guy and RateSpy founder Rob McLister says one in six borrowers will be caught in the stress test process next year, but that they “won’t just give up.” In fact, determined to buy real estate despite the odds, they’ll make some very bad choices. This will include taking loans with 30-year amortizations (more interest), dealing with a non-regulated lender (more interest), not shopping for a better rate when they renew (more interest) or dealing with a credit union (probably more interest).

And he makes this prediction: “Make no mistake, some home prices may drop for a while as B-20 trims demand (temporarily lowering debt ratios). But prices will surge to new records once again, leaving indebted borrowers in a worse—less flexible—position than today.”

If this is true (beats me) then B20 will make life as we know it more pooched. Real estate sales and prices will continue to rise, hurting affordability. People struggling to buy some will borrow more and save/invest less. Consumers will be shut out of making choices that actually improve their financial situation. The banks and CUs will make out like bandits. The unregulated shadow banking business will flourish as never before. Our debt gasbag will inflate further until, one day, we blow up.

And speaking of that, we just hit a new high of 171% in debt to disposable income, which exceeds the worst level those irresponsible Americans achieved just before that real estate market imploded. Now households owe $2.11 trillion, which is bigger than the entire economy (that takes some effort). Most of it is mortgages, of course. To date we have financed about $1.4 trillion against real estate, and the pile continues to grow larger.

Naturally, as interest rates increase (three more Fed hikes in 2018 and at least two in Canada) the cost of debt servicing increases. Disposable income drops. The economy is affected. Last year, for the first time in eight years, family net worth fell. And people still expect housing prices to increase?

Logic tells us that when rates went down and credit flowed, house lust flourished and property values rose. Now central banks are tightening and the regulators are freaking. We’re at unheard-of levels of borrowing, and crap houses cost $1 million. B20 is the big stick intended to beat the natives into submission. If this fails, round up the horses.

148 comments ↓

#1 Royal City Dweller on 12.15.17 at 6:17 pm

FURST

#2 Angie on 12.15.17 at 6:20 pm

Waiting for these measures to work is like waiting for a bad movie tonget better. Amd it just gets worse.

#3 Randy on 12.15.17 at 6:23 pm

Should have used a soft lens for the dog pic

#4 Mike on 12.15.17 at 6:27 pm

.
No B-20 can soft land and crash Canadian housing.

Canadians are rich with high wages/incomes. They will afford anything their realtors tells them.

#5 R on 12.15.17 at 6:27 pm

What’s the logic behind prices going up

#6 Crazy millennial on 12.15.17 at 6:28 pm

#1 Royal City Dweller on 12.15.17 at 6:17 pm
FURST

Guelph sucks

#7 mark on 12.15.17 at 6:29 pm

Business as usual.
Topic has been beat to death.

#8 Kick out the jams on 12.15.17 at 6:29 pm

Dear Prudence,

Starting a new gig with immediate 15% discount on stocks…do I gobble up as much of these as possible and enjoy the discount? Tread with caution?

#9 Nick on 12.15.17 at 6:29 pm

There no way in hell prices hit record highs. People were already out of this overdone market way before b20 was even a thing. But now they are all going to be buying at record highs at higher actual interest rates plus a 2+% stress test? No chance. There’s no consistency in that logic at all.

Stick a fork it it boys, it’s done.

#10 Hans on 12.15.17 at 6:32 pm

Firstly, thank you Garth for putting out this blog. I look forward to reading it daily and find it hard to imagine the time and effort you put out to keep it going. (‘Tis the season of giving thanks)

It appears to me that the real estate bubble in Canada is really only one aspect of worldwide speculative bubble. Yes, as you have mentioned many times….likely due to low interest rates and inflationary monetary stimulus. Cryptocurrencies, pot stocks, cdn housing (as well as other countries), debt…..I cant see this ending in a soft landing. I know your bias is towards a balanced portfolio however, stock markets are also showing froth and bonds are already inflated from years of low interest rates. Are there other ways to shelter ones net worth from what some think will be a very large black swan event?

#11 Goldie on 12.15.17 at 6:33 pm

The class stratification continues. Will we end up like Mumbai, where grinding poverty lives practically next door to opulent wealth? Will the majority of the hated “old stock” be destined to never own property, while paying into pension plans that will be exhausted of funds by the time they retire?

I feel bad for the Mills, especially those among them who want to have families and live like their parents.

The government of this country is a joke. It doesn’t even matter which party is in power. We are careening blindly forward into the future without any national vision. The current “same old” in power has even gone so far as to imply that it is wrong to even feel national pride (aping the cancer of Western Europe). But at least we will have trans-gendered bathrooms.

#12 PupPatrol on 12.15.17 at 6:34 pm

Thanks for addressing that today, Garth. It’s sure a spectrum of opinions out there, time will tell.
I’m seeing a stall of detached house sales in my area of the lower mainland – we’re on the cusp of something, considering all the headwinds coming our way in 2018. I’d rather wait around and watch it play out then have FOMO right now.

#13 Old gringo on 12.15.17 at 6:36 pm

OMG…… have these Canuks gone mad!!
Helter Skelter!!!

#14 When the Whip Comes Down on 12.15.17 at 6:38 pm

What is McLister’s logic used for projecting prices will eventually continue their ascent to new record highs? Does he states how he believes this will happen? Where is the money going to come from if that many buyers are affected basically we have a downturn in the credit cycle? Would love to know. Dogs? What say you?

#15 PGer on 12.15.17 at 6:40 pm

Holy [email protected] I wouldn’t want to have to pick up after that pooch!

#16 BMan on 12.15.17 at 6:41 pm

#5 R on 12.15.17 at 6:27 pm
What’s the logic behind prices going up

no logic…..just naivety!

#17 Bezengy on 12.15.17 at 6:41 pm

After the bank raised my LOC rate from 5 to 11 percent after I missed a couple of payments, I had no choice but to sell some CNQ shares and pay the thing off, making me debt free once again. I’ve been writing some nasty emails to [email protected] using words like predatory and reprehensible, because it makes me feel a lot better. I know this whole thing is totally my fault and I should have been more thorough and actually read the bank statements, but complaining seems like the Canadian thing to do.

#18 Cottingham a bargain on 12.15.17 at 6:42 pm

Sort of no logic between Rob McLister head winds he mentions RE is facing after B-20. He mentions a temporary drop which is logical but then a surge to new highs ? He provides no reasoning for this.

What gives ? Anyone ??

#19 Ex-Cowtown on 12.15.17 at 6:46 pm

#5 R on 12.15.17 at 6:27 pm
What’s the logic behind prices going up

+++++++++++++++++++++++++++++

FOMO

#20 Paralysis by Analysis on 12.15.17 at 6:48 pm

Most people I have talked to don’t really know what B20 is or what the mortgage “stress test” entails. They just have a vague knowledge of it’s existence (It does have a catchy name). But at the end of the day, people just want to pile in to a house and will find the means to do it. I personally know an amateur landlord that pays the property tax out of his own pocket because they don’t generate enough cash flow to cover the expenses. But hey, “it’s building equity”.

If the spring market is strong after B20 is implemented, and the rate spy guy is right, then I feel it is for sure time to abandon ship on YYZ or YVR.

The problem is, what is the best plan for some people out there that need to be in a major city for a job, what do you do? Trade a sizeable liquid investment portfolio for a house? Or keep paying higher rents every year, saving and investing less as a consequence, while hoping, praying, sacrificing, and meditating on some sort of meaningful correction that may or may not come?

Talk about first world problems..

#21 akashic record on 12.15.17 at 6:48 pm

My prediction is that old stock Canadians will go into submission, immigrants with higher risk tolerance, accustomed to spend high percentage of income on housing, less on coffee, eating out will suck it up and make their way through all the difficulties.

Twenty years from now the immigrants will live mortgage free in their own property, old stock Canadians with no old money will still rent, wait for the next crash and their turn finally.

#22 tccontrarian on 12.15.17 at 6:49 pm

And he makes this prediction: “Make no mistake, some home prices may drop for a while as B-20 trims demand (temporarily lowering debt ratios). But prices will surge to new records once again, leaving indebted borrowers in a worse—less flexible—position than today.”
————————————————————
In plain English, this dude believes that “it’s going to be different (here in Canada) this time”!

I would wager he’s going to be proven wrong – bigly.

TCC

#23 Blutterfy on 12.15.17 at 6:50 pm

So my brain got zombies and eaten by this awesome townhouse I saw in the neighbourhood I like right by all the amenities I use on the regular (gym and grocery store and transit and fairly close (5 min) to freeway). Will new home builders offer discounts in the new year as things get worse? Or only individual resales?
(Northern prairie town btw if relevant)

#24 When Will They Raise Rates? on 12.15.17 at 6:52 pm

But prices will surge to new records once again,

Based on what? The last time a GTA RE bubble popped, it took ~20 years for inflation adjusted prices just to recover to the previous peak – In a falling rate environment to boot.

Now, with stricter lending standards, rising rates, and an already debt-maxed-out citizenry, prices may not recover in the average boomer’s lifetime!

#25 Linda on 12.15.17 at 6:53 pm

Is the dog in the photo of the day for real? If so, yowza. As for B20, well, eventually this gasbag will pop, like any other bubble. If the folks buying are going for 30 year terms, shadow lenders & so forth, well, they did it of their own free will. I for one will be dead set against any ‘bail-out’ that those folks will be asking the government to provide. Time to find out choices have consequences.

#26 Andrew Woburn on 12.15.17 at 6:57 pm

If I were still in the tax consulting game, I would be saying a Christmas thankyou prayer for T2.

“Ottawa’s tax changes threaten to swamp the court, chief justices warn”

http://business.financialpost.com/personal-finance/taxes/ottawas-tax-changes-threaten-to-swamp-the-court-chief-justices-warn#comments-area

#27 Mattl on 12.15.17 at 7:04 pm

There will be further downward pressure on home prices but a portion of the 18% is already baked into market prices – the banks have confirmed they are underwriting at post Jan regs. So don’t expect a big pop.

My prediction is a standoff.

#28 Andrew Woburn on 12.15.17 at 7:05 pm

Another stupid, old guy that doesn’t get it.

“One class of technology that has emerged that can be used for payments is the so-called cryptocurrencies, the most prominent of which is Bitcoin. But in reality these currencies are not being commonly used for everyday payments and, as things currently stand, it is hard to see that changing. The value of Bitcoin is very volatile, the number of payments that can currently be handled is very low, there are governance problems, the transaction cost involved in making a payment with Bitcoin is very high and the estimates of the electricity used in the process of mining the coins are staggering. When thought of purely as a payment instrument, it seems more likely to be attractive to those who want to make transactions in the black or illegal economy, rather than everyday transactions. So the current fascination with these currencies feels more like a speculative mania than it has to do with their use as an efficient and convenient form of electronic payment.”

I mean, really! Just because he’s the Governor of the Royal Bank of Australia he thinks he knows it all.

https://ftalphaville.ft.com/2017/12/13/2196785/busting-the-myth-that-bitcoin-is-actually-an-efficient-payment-mechanism/

#29 CL on 12.15.17 at 7:06 pm

” R on 12.15.17 at 6:27 pm
What’s the logic behind prices going up”
==========

not sure. Doesn’t make sense to me either. How does one with mediocre income (most Canadians) service higher costs of mone AND higher real estate prices….? combined with too many to count regulator changes that seem to go nowhere…!???

#30 Elfer on 12.15.17 at 7:09 pm

“Also notable is that anyone with an existing mortgage who, after January 1st, wants to change lenders must also go through the stress test process. Astonishingly, that amounts to 2.7 million households who will be locked into their existing lenders.”

Ouch. I believe this number, but do you have a source for it? It would be good to have it for my own reference.

I feel for these people, I really do – they’re royally screwed. The term “debt slaves” is tossed around far too loosely with regard to mortgage holders, but it really does apply here.

With the inability to go to a competitor for financing (barring non-standard, predatory lending practices), these folks essentially become price-takers from the bank that holds their mortgage. Moreover, the bank knows their income and outstanding debt, and can figure out exactly how much money they can *just barely* pay per month without breaking. I can’t imagine that the banks won’t squeeze them for that extra cash once they ascertain that they are locked-in customers.

Increased payments will completely erode their ability to save, and falling property values will burn through much of their equity… sounds like they’re in for a decade or so of struggling to stay above water without getting ahead at all. It’s a shame, really.

#31 Weimario, Canada on 12.15.17 at 7:13 pm

I’m paying 40% to 65% more for groceries at Loblaws in downtown Toronto/Annex than I did last year.

Way to go Poloz 50 cent Loonies and Wynne’s hyperinflation Owe-tario.

#32 Royal City Dweller on 12.15.17 at 7:16 pm

#6 Crazy millennial on 12.15.17 at 6:28 pm
Guelph sucks
================
Yup.
It blows, too.

#33 What Stress Test? on 12.15.17 at 7:17 pm

We went in for a mortgage application at BMO a couple weeks ago. I asked if the OSFI qualifying rate was already being applied to BMO’s lending practices. I was told it was. An hour later we had qualified for a mortgage 6x our annual salary, with 20% down. That would put us in a house with total value of about 7.5X our annual salary, in a town with questionable job stability.

What would we have qualified for prior to the OSFI rules being adhered to???

#34 45north on 12.15.17 at 7:18 pm

The Bank of Canada estimates about 10% of home buyers will be affected because that’s how many in 2016 would not have qualified under the new rules. This would represent some 36,000 lost sales, or $15 billion worth of borrowing.

which is to say if the psychology of the market was what it was, then 10% of home buyers would be affected.

Veteran mortgage guy and RateSpy founder Rob McLister says one in six borrowers will be caught in the stress test process next year, but they “won’t just give up.”

one in six = 17% another guy another number. A man with experience who knows the market but it’s today’s market.

Seth Daniels: Yeah, generally people miss the non-linearity of what happens in the down part of a credit cycle, particularly in a down 50% scenario, so the model doesn’t capture that. During the US crisis, there’s the story about the risk manager who came in every day and said it’s a 100 year event or a 1000 year flood, and it happened 4 days in a row. It’s non-linear, and very complicated. When you have a problem of this magnitude and things starts breaking, it’s really hard to model.

Not only is it hard to model, it’s hard to measure.

#35 Zapstrap on 12.15.17 at 7:18 pm

How do you feed something like that? And do you need a bobcat to clean up after it?

#36 TheSecretCode on 12.15.17 at 7:19 pm

All eyes on the SFD market, credit unions and any alternative lender that allows you to dodge the stress test.

This stress does not only target just the broke working class. There are a lot of rule changes behind the scenes that is going to make it hard for speculating on properties and adding more homes to the portfolio.

Credit Unions in BC have announced (at least to me) that they are not enforcing the B20. However, they are offering a lower interest rate if you stress test (0.5% lower), which if you stress test you can still qualify for 3.04% 5-year fixed.

If interest rates start picking up in 2018…game over. Job loss due to any recession…bye bye buying spree.

Those have always been the only two factors to watch.

However, there is still that issue of foreign money…apparently special task forces are now on scene in Lower Mainland casinos…word on the street is to dodge the obvious casinos like river rock and take a drive to Victoria or Kelowna with your duffel bag.

#37 PastThePeak on 12.15.17 at 7:19 pm

My view is that Canuck RE will not correct (much) on its own – it will play out like RateSpy indicates. The belief that RE is the “be all and end all”, and will only ever go up overall, is too engrained in Canadian minds.

It will correct with an external event – recession, credit contraction, stock market correction, etc. And when GTA and VAN RE corrects then (more over leveraged than today), the fall will be significant. At first there will be some buy on dips thinking it is just a slight retraction, but it will plumb more depths. Everyone is leveraged – the new buyers, Mom and Dad, the fringe mortgage lenders. When credit and confidence unwind, it won’t be pretty.

The BoC will drop its pants, and no doubt T2 will have the govt step in, to try and save people from their own stupidity. Tax the savers to help the debt pigs. Maybe that will stop the bleeding, but the financial well being of the country will be down yet another notch. And then the cycle will start again.

Canada’s days as a prosperous nation are behind it. The governments are killing the resource industries while then increasing taxes on the knowledge industries and entrepreneurs of the future. Trade is in heavy flux and our gov’t is only concerned with virtue signalling for domestic popularity. Job growth is heavily weighted to public sector.

Since no party seems to want to focus on growth (Patrick Brown in Ontario is campaigning as a nicer Liberal), the only path forward seems to be currency devaluation. Compete with a $CAD in the 60c range. It seems like that is what the BoC wants. Maybe he is smarter than I gave Home credit for and knows that with the gov’ts in power it is the only hope.

It isn’t doom, but the standard of living is going to take a hit for awhile. Maybe in 10 -15 years with low growth, high taxes, extremely huge debts both public and household, low currency to buy much – a more conservative mindset will take hold and the hard work of crawling out from under the rock will start. Maybe. Not confident though.

#38 price on 12.15.17 at 7:22 pm

Well,

Price regulates demand.
So price of mortgages regulates demand for mortgages.

Higher priced mortgages lead to less demand for mortgages.

With fewer mortgages, or lower mortgages, the demand for RE will drop.

Hence, lower RE prices (definitely not higher.)

#39 steph on 12.15.17 at 7:22 pm

We know it will end someday.
It will end badly.
Just like the bit coin stuff.
Just don’t do it, it’s pretty simple

#40 Nonplused on 12.15.17 at 7:23 pm

I don’t think B20 will have more than a temporary effect. All it is going to do is delay home buying for first time buyers for a few years. They will have to wait until they are more established in their careers to buy the house they would have been living in for a few years with the new stress test, that’s all. So any affect on the market will be temporary.

That’s the problem with government solutions. They never work as advertised.

Make no mistake, none of these proposed changes are about protecting the consumer or first time home buyer. They are about protecting the banks.

If we imagine there are any millennials out who follow a traditional path that is they get a practical education, get a good job, get married, etc., it makes sense that they will be “high risk” when they buy their first house but that does not mean it is a poor decision to leverage so highly.

I will use myself as an example. When I bought my first house I was 5% down and at the limit that CMHC would finance (it was back when CMHC had limits). But I was a newly minted P.Eng. and my salary was in the process of going from $32,000 a year when I graduated to $173,000 a year 12 years later (I didn’t know it was going to go that high, but it was certain to go up). Plus my wife (at the time) was about to complete her masters in education and could be expected to bring yet a second income in a short period of time. The idea we were “high risk” just because we were fresh out of school and didn’t have much for a down-payment was not reflective of the situation many young people are in at that age. The first 10 years of your career are the time when you will see almost all of your wage gains as you move from a newbie grad who really hasn’t demonstrated anything but an aptitude to learn to a 10-year-man who can design high-rises and bridges, or, as what happened to me, put in a supervisory role.

The CMHC limit at the time was a significant throttle on the housing market and the moves to raise and eventually eliminate it probably had as much to do with the craziness we see now as the absurdly low interest rates. My first house cost me $175,000 dollars, and I could not spend more because of the CMHC cap. 12 years later I was earning that per year, plus bonuses. If I’d have stayed married, I probably would have stayed in that house (it wasn’t bad and it was in a great location with a great big back yard by today’s standards) and I would be retired now. Of course the divorce screwed up the retirement schedule considerably.

Ah, the things that we do, that we should not if we knew.

Hey that sentence is a bit of a poem! And not bad actually!

Anyway, my point is that stress tests and all that do not solve anything because they do not account for the trajectory that first time home buyers are on, and only the first time home buyer is in a position to judge their prospects. If they wanted at any point to control the real estate market, all they needed to do was increase interest rates and be more reasonable with changes to the CMHC limit, maybe increasing it in line with inflation. That’s all that needed to be done. But for political reasons it was not. Now the government is trying to come up with all sorts of complicated “bolt on” policies to correct for previous bad policies and I predict they are all doomed to fail. Complicated policies always fail.

It’s like trying to lose weight. Only 1 thing works and that is to stop eating so much. All the other things you can spend money on do not work. You can apply it across most of your life. If it’s complicated, it doesn’t work.

#41 TheDood on 12.15.17 at 7:25 pm

#5 R
__________________

What’s the logic you ask?

This is Canada! There is none.

#42 Ummm, no... on 12.15.17 at 7:25 pm

“Make no mistake, some home prices may drop for a while as B-20 trims demand (temporarily lowering debt ratios). But prices will surge to new records once again, leaving indebted borrowers in a worse—less flexible—position than today.”

lol – no “Veteran mortgage guy Rob McLister”, that’s not what happens when credit dries up, unless you are referring to prices going up again during the next cycle in 5-10 years.

#43 SJE on 12.15.17 at 7:27 pm

I didn’t have time to comment on the post the other day, about the tax changes, but I will now.

What irks me the most about the way they’re phrasing it:

***Data show that men represent over 70 per cent of higher-income earners initiating income sprinkling strategies, and women represent about 68 per cent of recipients of sprinkled income. While this income is of benefit for recipients, it also creates incentives that reduce female participation in the workforce.***

is that it’s very clearly not just about tax “fairness” – it’s ideological. If you parse the above, what they’re really saying is: “We think all women SHOULD be in the workforce, and incentives should be in place to get them there, irrespective of what those families actually want.” Ideological to the core.

#44 Doug t on 12.15.17 at 7:30 pm

People that have never been through a major recession are in for an experience – Canadians use to “save” money for a reason

RATM

#45 Rainbird on 12.15.17 at 7:39 pm

DELETED

#46 TheSecretCode on 12.15.17 at 7:43 pm

For anyone interested in the small community scene within the gangster paradise (as per how the Globe and Mail describes it) otherwise known as money laundering gateway to Canada – British Columbia.

Here is what is happening:

The two quick rate hikes freaked everyone out. This is what happens when you are broke and know that you cannot afford anymore cost increases (even though your home is worth multiple millions of dollars). People are realizing how they were duped by rising home prices. Inventory spiked for the first time since 7 plus year outside of scamcouver /lower mainland in the smaller areas – death crossing sales (insane spike)…this has not been observed in the months of August, September, October, November in the past 7 years.

Virtually every property in BC is net negative from a rental income perspective, which is okay to some if prices continue to climb so you can just offload it to the next fool for a profit.

We don’t even need a crash..flat prices alone are a MASSIVE problem.

Rental demand has fallen off a cliff (you can still get your place rented for a retarded high rate – for how much longer?), but the hundreds of people fighting for an over priced rental have simply disappeared. Anyone new to the rental property/income game in BC knows this right now.

#47 Guy in Calgary on 12.15.17 at 7:56 pm

28 Andrew Woburn on 12.15.17 at 7:05 pm
Another stupid, old guy that doesn’t get it.

“One class of technology that has emerged that can be used for payments is the so-called cryptocurrencies, the most prominent of which is Bitcoin. But in reality these currencies are not being commonly used for everyday payments and, as things currently stand, it is hard to see that changing. The value of Bitcoin is very volatile, the number of payments that can currently be handled is very low, there are governance problems, the transaction cost involved in making a payment with Bitcoin is very high and the estimates of the electricity used in the process of mining the coins are staggering. When thought of purely as a payment instrument, it seems more likely to be attractive to those who want to make transactions in the black or illegal economy, rather than everyday transactions. So the current fascination with these currencies feels more like a speculative mania than it has to do with their use as an efficient and convenient form of electronic payment.”

Out of curiosity, what is off base in what he said? It is slow, uses an enormous amount of energy (which if stopped, BTC would seize to exist), and is highly volatile due to speculation. If Bitcoin did the same transaction volume as Paypal, it would have to use all the energy in the world.

#48 Marc R on 12.15.17 at 7:58 pm

With the inflation and rate raises, will we ever see TFSA contribution limits go up?

#49 young & foolish on 12.15.17 at 8:00 pm

There seems to be a persistent element in society which simply does not trust fiat money and the way it can be manipulated to bring forth unearned wealth from the future into the present (debt). The creation of this “paper” money has inflated assets (like houses and stocks) and transferred wealth to favoured insiders.

Such folk tend to invest in gold, and now also in crypto currencies in an effort to hold on to true value.

So naive. — Garth

#50 crowdedelevatorfartz on 12.15.17 at 8:08 pm

By all thats Holy
WHAT is the breed of beast sitting on the couch with the lady?

#51 crowdedelevatorfartz on 12.15.17 at 8:09 pm

@#35 Zapstrap
“How do you feed something like that? And do you need a bobcat to clean up after it?”
*******

A human femur for starters.
Yes.

#52 For those about to flop... on 12.15.17 at 8:10 pm

Recent Sale Report/ Realtor Assistance Needed.

This house sold about a month ago and they were asking what they paid for it.

Could have taken a decent hit even just with expenses.

If your Mum is a realtor, go bug her and tell her your helping out a Flop…

M43BC

5930 CONDOR PL WEST VANCOUVER paid 2.99 ass 2.92

Sep 14:$3,288,000
Oct 20: $2,998,000
Change: – 290000.00 -9%

Sold on November 10th.

https://www.zolo.ca/west-vancouver-real-estate/5930-condor-place

https://www.zolo.ca/index.php?sarea=5930%20Condor%20Place,%20West%20Vancouver&ptype_condo=1&ptype_house=1&filter=1

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDAyOTBIOQ==

#53 Rexx Rock on 12.15.17 at 8:11 pm

In GTA,YVR and Victoria will escape this stupid stress test fiasco.High wages,strong economy and migration from other depressed areas of the country.Everything sells in Victoria when it comes to real estate just like 2007!

#54 TheSecretCode on 12.15.17 at 8:13 pm

The banks run the RE game and own .gov. Period. They will manipulate things behind the scenes every which way to keep the party as stable as possible – although we know the coordinated direction they are going around the world right now, which is trying to pull back and engineer a soft landing.

This is my favorite part of the game, watching for which bubbles spring a leak and see how they try and patch it.

We are currently a cumulative 0.15% above 2012 rates (this positive number represents reduced borrowing power and you know what that means)…but it has barely changed!!!!

Watch the rate number for any change, and heaven forbid any hiccup in the economy leading to a job loss shock.

Apparently the US Fed doesn’t think that we will have another recession until 2027 (even though numbers now show as of Nov. of balance sheet shrinkage and R.Koo can tell you what that means)…and for anyone who believes the Fed: I have a couple of condos to sell you.

And lastly, stay debt free.

#55 Blacksheep on 12.15.17 at 8:27 pm

Alistair # 140, @ #134 Blacksheep,

“individuals and firms are not sovereigns.
We can’t print more of our own money.
—————————
No shit…
—————————
“And an economy growing only due to the expansion of debt is doomed.”
—————————
Overlooked the Export portion of my comment?

When citizenry steps back (Recession) the system steps in, ala QE whatever. Besides, where exactly, do you think 90 plus percent of the money supply currently comes from?
—————————
“Just like those participating in the debt orgy. Household debt alone is now 101% of GDP in Canada. “The highest in the world. So yah, count me as one of those on the curb complaining about too much debt. It’s absurd, and there will be a price to pay.”
————————————–
Maybe one day, but no day soon.
————————–
“Ralph Crampdown used to come here and make the same arguments – that we could in fact print/inflate our way out of all of our current problems.
————————–
Never claimed that, but knowing debt is required to create new $’s, makes my observation valid.
————————–
“He was wrong, and so are you. There is no free lunch; no get out of debt free card. A reckoning is certain.”
————————–
Again one day, yes, but not right now.
————————–
“The alternative scenario – one you seem to be promoting – is that we’ve entered new territory, and there is no longer any such thing as a credit cycle. That for the first time in history, a credit bubble will indeed continue forever.”
————————–
Have you not noticed, the negative ‘real interest rates’ for the last decade? When has that ever happened before?

Of course credit expansion will not last forever, but the system is sure as hell trying, so I’m riding the wave until presented with a better plan.

Like Garth recently reminded me: Human nature doesn’t change, but circumstances definitely can and clearly have.

I am a reformed Gold bug that bet his life savings in 2008 by selling my house and buying bullion I could hold in my hand. I was sure that the fundamentals of credit and the masses ability to carry said debt, were capped at 4X income and that the Van market would simply stall and correct, like the US did.

Then the realty set in that system (gov) controls all the levers and needed to keep this RE pig airborne (all they had) and did what ever was necessary to achieve just that.

Fast forward 10 years, things have improved and the system is trying extradite it self from the support it offered.

But it has to be very careful not to disrupt the RE apple cart because there is no plan “B” in the wings to take up the slack that a real correction would cause. Many debtors are balls deep in the shit and Politico’s know better than to commit career suicide, by causing a crash.

Google MMT, it helped me get a better perspective on: Taxes, metal bullion, sovereign currencies, debt and money creation. Things do not work the way 95% of the population believes.

Oh and enjoy the view from the curb…

#56 AGuyInVancouver on 12.15.17 at 8:28 pm

So without meaningful controls of shadow lenders, all the government actions will be for naught? Did the USA even have all the shadow lending that Canada does before its crash? Sure they had subprime, but weren’t those at least regulated, however badly.

#57 TheSecretCode on 12.15.17 at 8:29 pm

RE: #5 R on 12.15.17 at 6:27 pm
What’s the logic behind prices going up?
_________________________________________

1. Canadian Banks giving anyone who can fog a mirror one million dollars to buy a mold trap in Vancouver…

2. Developers now openly admitting and selling out local condo projects to people/investors in other countries who can afford the $1700 per sqft and rising price points…

…let’s see if that changes in the New Year.

#58 M on 12.15.17 at 8:36 pm

“Our debt gasbag will inflate further until, one day, we blow up.”

..you got it baby. If you want to know how it looks like study really hard eastern europe 1993 to 1997.

Fun to watch. And get rich on other people misery. Easy to think one is a cynic if not for the misery being self induced.

#59 For those about to flop... on 12.15.17 at 8:45 pm

Recent Sale Report /Realtor Assistance Needed.

This one sold 4 days ago.

You can see by my notes at one stage they were trying to get 1.62 before dropping down to 1.48

Most likely a loss after expenses but we will have to wait unless we find a realtor with a conscience.

As the band Foreigner once sang…

I’ve been waiting for a realtor like you ,to come into my life…

M43BC

6633 Broadway Street, Burnaby paid 1.46 asking 1.48 May 2016
$1,620,000
2017-04-30

https://www.zolo.ca/burnaby-real-estate/6633-broadway-

https://www.zolo.ca/index.php?sarea=6633%20Broadway%20,%20Burnaby&filter=1

#60 Willem on 12.15.17 at 8:47 pm

Forget about the stress test moderating RE prices! I finally am getting Garth’s rationale regarding foreign buyers. It’s NOT just foreigners pushing prices into the stratosphere; its stupid greedy local speculator buyers that are goaded by cheap money they have borrowed from their HELOCS to buy multiple properties thinking that they will become RE moguls. This is as stupid as using borrowed money to buy stocks on the market when everything is at an inflated, bubblishouse level! No pun intended. Hats off to Garth for standing pat against the myth that it is only foreign buyers that have created the horrendous distortion in the supply / demand housing equation.

#61 oncebittwiceshy on 12.15.17 at 8:51 pm

“Also notable is that anyone with an existing mortgage who, after January 1st, wants to change lenders must also go through the stress test process. Astonishingly, that amounts to 2.7 million households who will be locked into their existing lenders.”
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

Astonishingly, Garth, no small percentage of these renewals will also be trying to refinance their extend and pretend lives.

They will be in for a major shock when they realize that "refinancing" the mortgage means qualifying under the OSFI rules.

One mortgage broker told me of numerous people who had a bigger mortgage 5 years after buying.

The new cars, toys, and vacations had to come from somewhere and the HELOC allowed a lot of people a glimpse into another lifestyle.

It doesn't matter if your house is worth $2,000,000 if you can't afford to make your mortgage payment and a separate heloc payment because you couldn't pass the stress test. A lot of stress sales coming up.

The time to pay the piper is coming and a lot more than first time buyers are going to be affected.

#62 the other shoe on 12.15.17 at 8:52 pm

BC RE specers beware, Hulk Horgan has you in his sights. Bring on Feb. skip to the 8min mark:

https://omny.fm/shows/the-jon-mccomb-show/premier-john-horgan-on-his-site-c-dam-decision-and

#63 april on 12.15.17 at 8:59 pm

#18 R.M. is a RE shill.

#64 Nick on 12.15.17 at 9:16 pm

Tin foil hat theory for fun:

Big banks already stress test at the higher rate. They cheered on B20 because they know it hurts their competition. When the downturn happens and shit hits the fan, big banks will blame non-bank lenders and their shady lending practices. Government will step in and come down hard on non-bank lenders for optics, ultimately pushing more business to the banks and firming up market share.

#65 Crazy millennial on 12.15.17 at 9:20 pm

Royal City Dweller on 12.15.17 at 7:16 pm
#6 Crazy millennial on 12.15.17 at 6:28 pm
Guelph sucks
================
Yup.
It blows, too
==============
LOL!

#66 young & foolish on 12.15.17 at 9:29 pm

… is the tide turning on passive vs. active management?

https://www.bloomberg.com/news/articles/2017-12-14/next-year-could-be-the-last-time-stock-pickers-rule-investing

#67 Hockey bags on 12.15.17 at 9:32 pm

#62 the other shoe
BC RE specers beware, Hulk Horgan has you in his sights. Bring on Feb. skip to the 8min mark:

https://omny.fm/shows/the-jon-mccomb-show/premier-john-horgan-on-his-site-c-dam-decision-and

What a clown.
I thought the “hockey bags with cash” was a hoax that has been debunked by now?

#68 Me again on 12.15.17 at 9:35 pm

So what’s up with Cross Currency Basis Swaps? Why are they in negative territory?

https://twitter.com/tracemayer/status/941766112806662144

From Trace Mayer:

“The Great Credit Contraction relentlessly pushes on like a glacier. Cross Currency Basis Swaps should trade at 0; not in negative territory. Implies a shortage of $USD balance sheet (credit) offered by global banking system.”

#69 For those about to flop... on 12.15.17 at 9:35 pm

Pink Pumpkins being carved in Richmond.

This is and old case that just pulled out the sickle and took a whack at the asking price for the at least the third time.

As you can see by my notes they are on the hook for 2.81 and after the latest 160k reduction,now asking 2.79

This house was only built in 2015, and so they have a relatively new product to sell but that hasn’t helped them yet.

Mr Market who sometimes moonlights as the mailman put a letter in their mailbox saying you’re a year too late…

M43BC

4260 Coventry Drive, Richmond paid 2.83 ass 2.58

Feb 21:$3,180,000
Aug 23: $3,060,000
Change: – 120000.00 -4%

Were asking 2.96

Now asking 2.79

https://www.zolo.ca/index.php?sarea=4260%20Coventry%20Drive,%20Richmond&filter=1

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDA1WExSQQ==

#70 Newcomer on 12.15.17 at 9:40 pm

#20 Paralysis by Analysis on 12.15.17 at 6:48 pm
….
Or keep paying higher rents every year, saving and investing less as a consequence, while hoping, praying, sacrificing, and meditating on some sort of meaningful correction that may or may not come?

————
An odd little math factoid is that, in Vancouver, the money I have saved by renting over buying gives me passive returns that turn out to be almost exactly the same as the increases in market rents over the same period. I’m not saying that means anything. It’s just kind of neat.

#71 Ronaldo on 12.15.17 at 9:53 pm

Listen to what Roger Ver has to say about Bitcoin now.

https://www.cnbc.com/video/2017/12/11/man-who-bought-bitcoin-at-1-now-sees-this.html

#72 X on 12.15.17 at 10:09 pm

Can’t people get pre approved for mortgage loans for up to 120 days….might take a couple months to see the full effects of B20.

If B20 doesn’t settle down house prices/demand, it could be scary what a cash starved government could do to squash demand and raise some $. They are already intent on going after small business who employ the most Canadians.

I am hoping B20 and more interest rate hikes do the trick, enough messing with the rules. Perhaps the Trump tax cuts will stoke inflation a little, 2-4, .25 increases over 2018, 2019, 2020 should get lending back to historical norms, and house valuations to reality.

#73 Blutterfy on 12.15.17 at 10:14 pm

#55 Blacksheep

Current politicos can’t avoid a crash because the pendulum was started by the boom. (Steve Keen, Can we avoid another financial crisis (2017)). He agrees that it is unfortunate that crises befall the unsuspecting and idiots are crowned economic genius’s for basically making cheap money. What goes up must come down (and vice versa).

#74 dakkie on 12.15.17 at 10:22 pm

The Separatist Movements in Canada & One-Size-Fits-All of Marx
http://investmentwatchblog.com/the-separatist-movements-in-canada-one-size-fits-all-of-marx/

#75 Newcomer on 12.15.17 at 10:23 pm

#40 Nonplused on 12.15.17 at 7:23 pm
….
All it is going to do is delay home buying for first time buyers for a few years.
———-

Have you thought about what stopping the inflow of first time buyers for a few years would do to the market? For a model, think about what happens to an airplane when it stalls for a few minutes.

#76 Paddler on 12.15.17 at 10:26 pm

Veteran mortgage guy and RateSpy founder Rob McLister

 says buyers will take 30 year mortgages ( more interest) 
I don’t see a problem with a 30 year mortgage. Yes you pay more interest but at least the payment is more affordable and hopefully there is money left to have some fun in life instead of most of the paycheque going to pay the mortgage. How much fun is that?

#77 n1tro on 12.15.17 at 10:32 pm

#47 Guy in Calgary on 12.15.17 at 7:56 pm
28 Andrew Woburn on 12.15.17 at 7:05 pm
Another stupid, old guy that doesn’t get it.

Out of curiosity, what is off base in what he said? It is slow, uses an enormous amount of energy (which if stopped, BTC would seize to exist), and is highly volatile due to speculation. If Bitcoin did the same transaction volume as Paypal, it would have to use all the energy in the world.
———-_———
He makes a generalization about something that is disrupting his industry and cherry picks particular weaknesses of one particular crypto and implies it affects all cryptos.

Your mistake was to fall for it and regurgitate the same arguments. Bitcoin is flawed in that it takes a lot of power to work and other cryptos have addressed this issue along with the volume issue.

Change is disruptive and these “experts” will naysay until one day they stop well after everyone has stopped listening. Notice the similarities of most naysayers…. Old, white, fortunes from old money.

#78 jon on 12.15.17 at 10:33 pm

we had our annual christmas party at work here in vancouver and i work as a engineering manager for a fortune 500 company so i thought this was a good opportunity to speak to the millennials on my team and ask them about real estate and how they are investing to save up for the future.

1. have you purchased a property and if you did , how did you come up with down payment.

I was a little surprised most hadn’t purchased a property they said was too expensive. the 3 or so out of ten did but with help from parents because they saw it as a good investment.

2. are you thinking vancouver is too expensive and you may leave soon because of this. almost all said yes its too expensive but i will rent but looking at other places to find a job. now these are people working for me saying yep i will take another job total transparency

3 do you own bitcoin. wow this one shocked almost 70 percent said they had crypto and felt it was better than investing in the stock market.

4. are you paying taxes on crypto gains. 100 percent said no its not taxable.

5. if you have enough money to put down payment down and would you purchase a property. all yes

so not sure what to make of this but all wanted to own the house, didn’t like any current investment opps. basically none buying stocks.

#79 When Will They Raise Rates? on 12.15.17 at 10:37 pm

#60 Willem on 12.15.17 at 8:47 pm

Forget about the stress test moderating RE prices! I finally am getting Garth’s rationale regarding foreign buyers. It’s NOT just foreigners pushing prices into the stratosphere; its stupid greedy local speculator buyers that are goaded by cheap money they have borrowed from their HELOCS to buy multiple properties thinking that they will become RE moguls. This is as stupid as using borrowed money to buy stocks on the market when everything is at an inflated, bubblishouse level! No pun intended. Hats off to Garth for standing pat against the myth that it is only foreign buyers that have created the horrendous distortion in the supply / demand housing equation.

——————-

Absolutely. Garth is correct in his analysis regarding who and what caused this bubble… It’s clearly dumb Canadians, ridiculous government policies and bad central bank monetary policy that has fueled the bubble.

To blame this solely on the Chinese is asinine.

#80 april on 12.15.17 at 11:06 pm

# 53 – yes realtor!

#81 FOUR FINGERS WATSON on 12.15.17 at 11:16 pm

Quantitative easing has flooded the world with liquidity. There is a lot of money floating around out there. Bonds pay next to nothing. Stock markets are risky and taxable. Real estate is a tax free slam dunk and the cost of borrowing is minimal. B20 will not make much of a difference.

That was a puerile analysis. – Garth

#82 LivinLarge on 12.15.17 at 11:40 pm

Bezengy, so you paid off the LOC, now take the money out and buy back the equities and write off the 11% interest.

#83 Newcomer on 12.15.17 at 11:51 pm

#61 oncebittwiceshy on 12.15.17 at 8:51 pm
……..
One mortgage broker told me of numerous people who had a bigger mortgage 5 years after buying.
————-

Most of the people I know who own in Vancouver have a HELOC and use it in the same way they might use a well-performing investment portfolio. These people don’t see any difference between debt and savings.

#84 Vancouver on 12.15.17 at 11:55 pm

# 46 Secret Code
Funny you mention rental situation in Vancouver. In my bldg in Yaletown, currently 4 apartments for rent – price range from $2500 to $3999/month. Next door apt has been empty since September, and just recently the guy dropped the price to $3500 (furnished) to $2990/month. In the meantime, another empty rental available for $3100/month (unfurnished). It would be interested to see if this one goes down as for right now, the furnished one is cheaper then empty one. Two other condos are also available, but empty. Sure this price drop is interested… A trend or pure coincidence…

#85 Leo Trollstoy on 12.15.17 at 11:56 pm

#48 Marc R on 12.15.17 at 7:58 pm
With the inflation and rate raises, will we ever see TFSA contribution limits go up?

Yes.

https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/adjustment-personal-income-tax-benefit-amounts.html

http://www.advisor.ca/tax/tax-news/cra-confirms-tfsa-limit-for-2018-246528

#86 down_boy on 12.16.17 at 12:01 am

Tease them into the corral with low rates and caviar dreams, lock the gate with depreciating asset prices, turn the screws with rising rates, then bleed em dry with taxes. Saw this coming a long way out. Years ago. Welcome to the bile farm.

#87 Nic on 12.16.17 at 12:01 am

Will do nothing but go up. I have believed all the reasons it would go down year after year..thinking how the hell does this get any more expensive. Well, I am starting to believe the real estate guys..they have been right all along. They control the data, statistics and mainstream news.

#88 Tony on 12.16.17 at 12:19 am

Re: #53 Rexx Rock on 12.15.17 at 8:11 pm

Wages are low in Victoria and the Vancouver area. The B20 stress test will decimate both Victoria and Vancouver real estate. That is an absolute certainty. Like I said before cities like Sutton where no one makes anything will be crushed by the B20 stress test.

#89 Nonplused on 12.16.17 at 12:32 am

#75 Newcomer on 12.15.17 at 10:23 pm
….
All it is going to do is delay home buying for first time buyers for a few years.
———-

Have you thought about what stopping the inflow of first time buyers for a few years would do to the market? For a model, think about what happens to an airplane when it stalls for a few minutes.
—–

Hey I am not saying there will be no effect. Just that it will be temporary. Houses, unlike airplanes, don’t turn into craters when they lose momentum. Hurricanes and wildfires can turn houses into craters sure, but all the government policies in the world will turn out to be no more than a nuisance.

#90 LivinLarge on 12.16.17 at 12:34 am

If you don’t use the LoC to buy back the shares then I hope that in your rush to “show it to the bank” you also paid the extra $100 or so and had the charge removed from your home. Just paying off the outstanding debt doesn’t remove the charge and now, after the nasty emails believe me, they won’t be waiving or reducing their fee to remove that charge.

That charge will sit there and impact your ability to borrow in the future.

#91 Nonplused on 12.16.17 at 12:37 am

I would further add to that, the government can’t even tie it’s own shoes by policy. Government policy is perhaps the most useless and destructive thing ever invented.

#92 Andy on 12.16.17 at 12:51 am

Garth,

I am a fan of your blog and read it daily.

There are a few things that you have never included in all your assumptions:

1/ the foreign buyers: the data, if its accurate and exit, shows the info of nom-residents
Majarity of speculation is by the immigrants/ canadians to be / canadian citizens where they only saw home value appreciation in their home country therme tire life.
People who HAVE money!
Just a quick look around me in friends and family, there are people who own businesses in the middle east … live (part time!) in Canada. The money they make and almost no taxes that they pay back home… is next level rich .. its not canadian hard working CEO rich…
i know people who dont get existed by $100K
These people are ruling my neighborhood.
A $2M house in Toronto is cheaper than an appartment in many countries.

2/ stress test ? Haha
Bank employees, mortgage mobile agents of the banks, mortgage agents , brokers … with the help of realtors et al .. their new job is to fake documents .. it is soooooooooooooooooooo commom to make “paper work” and get mortgage. Every one is doing it .. every race … every one
2% interest test? Need $30,000 income to buy the house?
No problem! These guys will make u docs with $30,000 more inclme .. problem solved

On daily basis … fake companies are being made … fake websites and fake linkedin and instagrams for fake businesses … fake t4 .. fale NOA .. fake pay stubb.. fake article of incorporation.. fale t2.. fale bank transactions to show how much money te business is making!
This guy literally deposited and withdrawsd &25,000 in a momth .. so bank thinks he has done $100,000 tranaction .. oh .. such a great business

Did i say 1,000,000 people are coming from countries who believe that the only investment is real estate???
These are the main reasons that has not let the real estate market to collapse.

#93 will on 12.16.17 at 1:03 am

Holy cow! What kind of dog is that?

#94 Ponzius Pilatus on 12.16.17 at 1:20 am

#143 Ronaldo on 12.15.17 at 6:42 pm
#133 #Three Things Keeping Me Awake at Night on 12.15.17 at 3:35 pm

Three Things Keeping Me Awake at Night:
1. A 50 cent Loonie.
2. $10 Cauliflower
3. Overcrowded Toronto that basements cost $3,000 a month.

#Three Things Keeping Me Awake at Night
——————————————————————If you’re losing that much sleep you probably should consider relocating. Sleep deprivation is not healthy.
————-
Ronaldo.
Your bang on.
The best soccer player in the World who happens to bear your name has a sleep coach.
As Freud said, without adequate sleep we’re zombies.
With

#95 Smoking Man on 12.16.17 at 1:24 am

Just think.

Back in the 60’s the globalist hatched a plan at Bilderberg.

Hey dudes, I have a great idea, let’s get two tax farm slaves for the price of one. Let’s get some token females in here to make it ligament.

I give you the start woman’s movement.

Progress, today our daughters snap chat too what they think is a success not realizing they gave up real power over stupid men when they tried to be like them.

If we can’t figure out how to outsmart the globalists.
Take a trip to Nigeria, that’s your future.

It doesn’t end with two slaves for the price of one.

Power keeps going, it gets ridiculous, let them eat cake till it pushes and pushes. They need to know where the edge is.

Risk-taking thinking how much more can I get away with till my head is chopped off.

Human nature bitches.

Forgive me. it’s Friday night, bourbon.

First, drink in two weeks.

#96 Ponzius Pilatus on 12.16.17 at 1:32 am

#38 price on 12.15.17 at 7:22 pm
Well,

Price regulates demand.
So price of mortgages regulates demand for mortgages.

Higher priced mortgages lead to less demand for mortgages.

With fewer mortgages, or lower mortgages, the demand for RE will drop.

Hence, lower RE prices (definitely not higher.)
———-
Naive.
You gotta figure in the money washers

#97 Lost...but not leased on 12.16.17 at 1:33 am

Real Estate prices projected to go up?

Is pot legal already?

No way Jose’…Running out of Greater Fools,…credit is tightening…CRA is out hunting.

aka the market is running out of gas and crucial momentum is stagnating. Only remote possibilities, in the short term, are outlying areas from the given epicenter which are relatively cheaper ie in Metro Vancouver..areas such as Langley, Abbotsford etc.

#98 Mclister Just Listed on 12.16.17 at 1:47 am

Mclister just tweeted last week he was selling his house as 2018 is not going to be positive for real estate FACT look at his Twitter

#99 Howard on 12.16.17 at 2:03 am

1) You’d need to get a mortgage just to feed that dog.

2) Is it just me or do bitcoiners seem easily triggered and in need of safe spaces?

3) Any dip in housing values and T2 will steal whatever is left in savers’ bank accounts to redistribute to the indebted while simultaneously reinstating the federal immigrant investor programme. Problem solved.

#100 Bobs ur uncle on 12.16.17 at 2:08 am

#78 jon on 12.15.17 at 10:33 pm

Working for a Fortune 500 company, but thinking bitcoin is a safer bet than stocks? Do they understand where their paycheques come from? Smdh.

#101 Dolce Vita on 12.16.17 at 2:09 am

What B20 will do?

For certain it will slow down, diminish RE purchases and their amounts as it did for insured mortgages back in Oct. 2016. In the quarter following, per Equifax & in YVR, mortgage amounts decreased by 6.5% and the number of mortgages decreased by 32%.

Dispute all you want but the above is fact/history and it follows the same will happen, at least, with B20 for uninsured mortgages.

__________________________

Shadow or Private Lenders. They are us.

3 million HELOC accounts, 2016: 80% were readvanceable mortgages. Great until the price drops.

“The Smith Maneuver” anyone?

Any doubts as to the amount money thrown about recklessly in this manner, you need only read these sections:

Equity
Equity Takeout

…for fun and all you Bank of Ma & Pa haters:

Sources of Down payments

from this article summarizing “Canada’s Annual State of the Residential Mortgage Market survey” Nov. 2017 by Mortgage Professionals.

Article called “Fall Survey Highlights Stress Test Fallout” but most of it devoted to survey summary results:

https://www.canadianmortgagetrends.com/2017/12/fall-survey-highlights-osfi-stress-test-impact/

________________________________

I believe that in Cdn. 2018 RE assets will drop in price catastrophically, especially YVR and 416.

The trigger will be some economic shock that affects the FIRE sector of the economy as it accounts for far TOO MUCH of Canadian GDP, probably enough to create a recession.

B20 may be just the trigger plus a couple of rate increases.

By the time the BoC figures it all out, it will be too late to do anything about it, free fall…just like 416 RE post April 2017.

Queue tissue paper for T2, another good cry coming.

#102 Dolce Vita on 12.16.17 at 2:25 am

For those of you wishing to flee Canada for the cheaper RE prices of the US, here is the 2015 road map Millennials there are using [for once, ZeroHedge has something of interest that is not rumour, heresay and/or pure fabrication]:

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/12/15/20171215_mills.jpg

I like the $100K-$200K average home value dots, lots of them.

Comparatively, this tells you that Cdn. RE is in a massive bubble and about to burst I think.

Not even Purchasing Power Parity or The Economist’s The Big Mac Index can explain the disparity between Canada & US RE prices.

They cannot be sustained.

#103 jane24 on 12.16.17 at 2:39 am

The answer is always speculation and capital gains taxes. Use the tax system for something positive rather than negative.

#104 Mark on 12.16.17 at 3:38 am

“To blame this solely on the Chinese is asinine.”

The only reason it gets blamed on the “Chinese” (even though there is no evidence of statistically meaningful foreign inflows, with evidence more squarely pointing to outflows from Canada) is that the “Chinese” are a genericized ethnic group that does not have a cohesive public relations effort going in Canada.

Do you think there’d be any tolerance if, for instance, someone concocted a similar story about Jewish people buying up RE? The B’nai B’rith would be all over you and any business or entity that made or propagated such claims in no time flat.

Its a very disgusting state of affairs, that certain elements would pick on an identifiable group that traditionally has not cared to mount a vigorous defense of itself.

#105 crazed and a little confused on 12.16.17 at 5:09 am

nothing will stop the BC real estate engine.
BC people will pimp out their own mother for real estate
there will be generational mortgages after dad retires the son will pay the mortgage

#106 unbalanced on 12.16.17 at 5:27 am

Had a mortgage 17 years with a Manitoba Credit Union. They gave me the best rates against any bank. Wanted to open up a unsecured LOC. Poof! 25 k, no problem. Thankyou very much.

#107 Raging Ranter on 12.16.17 at 6:48 am

Rob McL is usually one of the more sensible voices among the mortgage brokers. But I think he overestimates the amount of money available from alternative lenders. As the Home Capital near-miss last spring showed us, this secondary supply of funds is not always rock solid, and by no means unlimited. Secondary lenders have to get their cash from somewhere, and they need to maintain reserves lest the depositors get spooked and pull a Home Capital shitstorm on them. I’m thinking Rob has misled this. Yes, there will be a certain amount of behaviour just like he describes. But those borrowers will find their options dwindling, and the interest rates they must pay steadily rising. This paragraphs sums it up nicely:

This will include taking loans with 30-year amortizations (more interest), dealing with a non-regulated lender (more interest), not shopping for a better rate when they renew (more interest) or dealing with a credit union (probably more interest).

It seems OSFI has acted boldly where the BoC feared to tread – they have succeeded in raising borrowing costs, thus reducing demand for housing. Thus, there will be no new record highs next year. Rob is wrong.

These regs would be entirely unnecessary if the BoC had the cahones to do its job properly. The central bankers of my youth did not hesitate to raise rates even if the economy was struggling if they felt they had to. Paul Volcker (US), John Crow and Gerald Buouy (CA) were not the timid creatures Poloz and Yellen and Draghi are. They were often hated. And always right.

#108 Raging Ranter on 12.16.17 at 7:00 am

Blacksheep, MMT is a grossly oversimplified theory that overestimates the ability of governments to keep the party going. It is just another version of the free lunch illusion with a veneer of Keynesian legitimacy (that is, if you think Keynesianism is legimate, which I don’t).

#109 maxx on 12.16.17 at 8:27 am

#13 Old gringo on 12.15.17 at 6:36 pm

“OMG…… have these Canuks gone mad!!
Helter Skelter!!!”

Yes indeed…….Helter Shelter.

#110 Player on 12.16.17 at 8:28 am

It’s time we Catanians faced the facts. Nobody wants our stinking coal, enriched uranium, or depleted cod.
Our only playable resources are wood, wheat and women singers (the hot ones). If somebody wants to buy overpriced houses in one of our two metropolises, why whinge? Neither city is livable, one is Calcutta without the heat, the other is Seattle without the culture. Rather than complain about these greater fools, we should be grateful. I predict Van will slide into the ocean on May 7th, 2027. Long before that, the entire population of TO will have died in a series of autonomous car pileups caused by software viruses. Merry Christmas to all.

#111 Sue on 12.16.17 at 8:59 am

So with all this new regulation, would it not be a reasonable expectation that stocks are going to take a hit as well? Would people not be forced to liquidate investments so they can pay their increased payment? I think stock markets could be canary in coal mine. Unless am I missing something? Maybe homeowners are house poor and have no investments. Similar to the 80’s without the inflation?

#112 maxx on 12.16.17 at 9:04 am

#21 akashic record on 12.15.17 at 6:48 pm

“My prediction is that old stock Canadians will go into submission, immigrants with higher risk tolerance, accustomed to spend high percentage of income on housing, less on coffee, eating out will suck it up and make their way through all the difficulties.

Twenty years from now the immigrants will live mortgage free in their own property, old stock Canadians with no old money will still rent, wait for the next crash and their turn finally.”

Agree…..there are however, a few exceptions to the rule. Started saving at 15 with my first split-shift job at McDonalds. In my 20s, I started traveling and saw how hard-working people in other countries were. In Hong Kong, they seemed to work and save 24/7. I admired (and still do) this amazing work ethic. So I doubled down and saved even more. Easy…once you start, you hardly notice it.

Much later, even when we earned far more at 9 to 5 jobs, and when rates were squashed by the brilliant ptb, we saved even more (hello bargain and charity shops! Treasure hunting season is all year long, so much fun and many charge ZERO tax). The more tptb dropped rates, the more creative we got. We have never lived and eaten (at least 90% organic) so well. Still travel and enjoy life to the full. Travel is our largest expense.

When old stockers start realizing that they and they alone are in control of their future well-being, debt could revert to the optic that it should have: a dangerous, life-altering instrument that should be used with the greatest caution.

Never could stand debt. Especially now, with realturds having pumped up re to insane levels for the past 2 decades. Re debt and resultant consumer debt is the reason for the pathetic state of the Canuck economy.

It’s what happens when players at all levels of government get greedy.

The only FOMO I have is fear of not owning my time.

Who says money can’t buy time? It certainly can, it simply cannot buy more of it.

#113 Ponzius Pilatus on 12.16.17 at 9:11 am

#108 Raging Ranter on 12.16.17 at 7:00 am
Blacksheep, MMT is a grossly oversimplified theory that overestimates the ability of governments to keep the party going. It is just another version of the free lunch illusion with a veneer of Keynesian legitimacy (that is, if you think Keynesianism is legimate, which I don’t).
————-
In the age of kryptos, Keynes is as relevant to economics as Isacc Newtons is to physics in the age of quantum Physics.
By the way, Keynes was not born out of wedlock.

#114 Asterix1 on 12.16.17 at 9:43 am

I’m pretty sure that Rob McLister predictions will not come to fruition in 2018.

There is absolutely nothing that can spruce up this deflating bubble in the GTA.

#115 Dharma Bum on 12.16.17 at 9:43 am

#13 Old Gringo

OMG…… have these Canuks gone mad!!
Helter Skelter!!!
——————————————————————–
http://www.dreadcentral.com/wp-content/uploads/2017/07/charlesmansonbanner.jpg

https://i.ytimg.com/vi/JoDThyV8c84/hqdefault.jpg

#116 Howard on 12.16.17 at 9:57 am

#103 jane24 on 12.16.17 at 2:39 am
The answer is always speculation and capital gains taxes. Use the tax system for something positive rather than negative.

———————————

The foreign buyers tax was the first good tax enacted anywhere in Canada in decades.

Bump it up to 50% (barring a complete ban on foreign ownership) and use the funds to build transit infrastructure or pay down debt.

#117 Raging Ranter on 12.16.17 at 10:13 am

CORRECTION:

I meant “I think Rob has ‘misread‘ this.” Not ‘misled’.

#118 down_boy on 12.16.17 at 10:35 am

#91 Nonplused on 12.16.17 at 12:37 am
I would further add to that, the government can’t even tie it’s own shoes by policy. Government policy is perhaps the most useless and destructive thing ever invented.

…..

I paraphrase a commenter from another venue…
“Figure out which parts of the economy don’t work, identify the government role in this, and eliminate it. Problem solved. It is the only industrial strategy you will ever need.”
Meaning, the only things propelling our economy are the work-arounds.

#119 TurnerNation on 12.16.17 at 10:57 am

Proof Toronto house prices are out of whack (whacked out) at the lower end due to ‘Nesting Wasps’.

They are bidding up sht bungs and slanty semis to a cool million bucks.

Look at this mansion 1/2 hour from downtown core – words cannot describe it!

https://www.realtor.ca/Residential/Single-Family/18851007/95-OLD-COLONY-RD-Toronto-Ontario-M2L2K3-Bridle-Path-Sunnybrook-York-Mills

It’s only 14 million! Look at it this way, is this house 14 times better than a million dollar slanty semi with its mud basement, attic raccoons, and on-street parking. Yes!

Is this house 20x better? YES! 30 times! HOO YA.

So, 14 million is an absolute bargin. I think you could fit 14 sht bungs into its garage.

Look at the lot size..land value alone – not that zoning would allow – it at least 20 million, given a small community could there be built.

#120 Guy in Calgary on 12.16.17 at 11:26 am

“He makes a generalization about something that is disrupting his industry and cherry picks particular weaknesses of one particular crypto and implies it affects all cryptos.
Your mistake was to fall for it and regurgitate the same arguments. Bitcoin is flawed in that it takes a lot of power to work and other cryptos have addressed this issue along with the volume issue.
Change is disruptive and these “experts” will naysay until one day they stop well after everyone has stopped listening. Notice the similarities of most naysayers…. Old, white, fortunes from old money.
. ”

Your mistake is to not look at the space critically. It’s fine to support something, especially something like crypto that has such huge potential. Also I never said anything about other cryptos, I was talking about bitcoin as it is the flavour of the month.

It is disruptive only to an extent and this is assuming it becomes widely used. At the end of the day, banks exist to loan money and that will not change. Transactions are not only slow but they are also expensive which is an issue that is not easily fixed. Removing transactions and transaction fees from the Blockchain isn’t viable. Right now those represent less than 9% of miner compensation and need to grow, not shrink, as the block rewards are reduced.

The nay sayers primarily address bitcoin as a bubble. The reason they are older is because they have seen this type of herd mentality before and are speaking from experience not a “this time it’s different” POV. People are “investing” in bitcoin whilst knowing nothing about it or the technology. People are putting money in bitcoin and (HIVE/RIOT) because it is going up. Not to store wealth or use it as a currency to stick it to the man.

I love the concept of Bitcoin and I think it has the potential to be used as an effective way to store wealth however there are still large kinks to be worked out and the volatility makes it impossible to use as currency as of right now.

There is a lot of snake oil sales going on with these ICO’s and there are security issues. Not to mention providing a convenient way for underground crime and terrorism to launder money and move it around anonymously. That is a huge moral implication that needs to be considered.

“The value of a Bitcoin is based on just two things: (1) Its popularity and (2) A cap on the number of coins possible. Both of these are problems. Even though the number of BTC is capped, there is effectively *NO* cap on the number of coins in the crypto-currency ethos.”
MattZN2 – Seeking Alpha

It could go to $100k or to $0.10, no one knows. But be critical of it.

#121 crossbordershopper on 12.16.17 at 11:57 am

When the senate approves the new tax regime in the US, i will calculate that this entire conversation the northern neighbours are having will be completely laughable.
even with a $750,000 mortgage, and 75% of the US, having a million dollar home is very very nice for most people. So a 20 year fixed at 3.75% is a $28K deduction. In the US, this mortgage deduction, even after the change, coupled with double the personal exemption and minor changes to the 401K, make the US far better.
In Florida, with no state tax, if you can write off say the 2500 in prop tax. off your fed rate as well. (max is 10K proposed) . It is quite possible that a husband and wife making a modest 50K each in income pay like $5K in tax together as a family, -married filing jointly. In Canada in most provinces, Your at about $10K each Canadian dollars, same nominal income.
In 20 to 30 years, the difference is crazy.
So living below your means for 25 years in Canada to own a piece of drywall that would be falling apart by then, compared to a better annual lifestyle and pool of cash (portfolio i assume) south of the border. You really cant even compare the two.
Its Saturday, a week before Christmas and It is quiet at the mall, 30 years ago before the immigrants took over. was very busy. Its not a shot against immigrants, just that many are non christian and into that consumerism society.(probably a good thing). But, Canadian society is based on taxes, lots of it, property taxes that stores pay keep the social system going, so with less sales, many retail companies will be closing in January in Canada. Sears is just one, the only one left is Costco, Walmart, Canadian Tire,Dollarama, and Giant Tiger. Thats it, dollar store junk from China, stuff for the house and car because its winter time, and discount stores. Canada is tital discount market.
Once the US senate votes, i will compare dollar for dollar tax rates .

#122 BillyBob on 12.16.17 at 12:03 pm

DELETED

#123 Statistics on 12.16.17 at 12:28 pm

The number of individual round trip flights from China to Vancouver has increased by 44% in the last year to 600,000. This number does not include Hong Kong or other non China airports. Things that make you go hmmm.

#124 oncebittwiceshy on 12.16.17 at 12:37 pm

Apparently, the Mortgage Broker industry didn’t share Rob McLister’s opinion when they filed their submission to OSFI.

It’s amusing that these vested industries bleat about the carnage that OSFI would do to the housing industry in their submissions to OSFI and then talk about rising prices after the fact. Suck and blow much?

https://mortgageproscan.ca/en/post/submission-to-osfi

We acknowledge that the cooling of certain markets was the objective and is showing signs of being achieved in the Greater Toronto Area (GTA), and to a lesser extent, the Greater Vancouver Area (GVA).

However, we are seeing reductions in housing activity in the form of sales and housing starts, in areas of the country that were already moderate, flat, or even
declining.

We are concerned that the combination of all of these changes, and the speed with which they have been cumulatively implemented, have created some
adverse effects which could cause a further, and potentially significant, decline in housing activity nationally”

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<,

#125 iRent2018 on 12.16.17 at 12:39 pm

If B20 fails, the government can try providing realtors some lucrative opportunity outside real estate. May be just guaranteed income if they sat outside. This will do the economy a whole lot good in the long run.

#126 Guy in Calgary on 12.16.17 at 12:41 pm

“Your mistake was to fall for it and regurgitate the same arguments. Bitcoin is flawed in that it takes a lot of power to work and other cryptos have addressed this issue along with the volume issue.”

Are you referring to the lightning network? Also, would having other cryptos that are not as flawed as Bitcoin not make Bitcoin less valuable (which was the entire point being made)?

My point was that Bitcoin is sluggish and power hungry. Your point is that other cryptos have fixed this, without you actually providing additional information. You can’t possibly think by your logic that creating other cryptos that are more efficient and usable then bitcoin would fare well for bitcoins price? You make no sense.

#127 For those about to flop... on 12.16.17 at 1:05 pm

Possible Pink Snow.

This one has financial tragedy written all over it.

As you can see by my notes it was picked up at the peak for 1.94

Sold 51 days ago and the asking price had slowly been whittled down to 1.68

I added the realtors link and he didn’t even boast sold over asking,which is not good for the previous owners.

Didn’t have many cases sell in September/October but had a few go in November and so I will probably have to wait to February/March 2018 to show you more of this financial debauchery…

M43BC

3443 e 51st Ave,Vancouver.

Paid 1.94 June 2016

Asking 1.68

Sold on October 26th for .???

https://www.zolo.ca/vancouver-real-estate/3443-e-51st-avenue

https://www.leowilkrealestate.com/listing/3443-e-51st/

#128 Smoking Man on 12.16.17 at 1:09 pm

Just bought 222 shares of IOTA the new and improved version of block chain. Cost 1000 bucks.

Venture capital.

#129 AGuyInVancouver on 12.16.17 at 1:43 pm

#104 Mark on 12.16.17 at 3:38 am
“To blame this solely on the Chinese is asinine.”

The only reason it gets blamed on the “Chinese” (even though there is no evidence of statistically meaningful foreign inflows, with evidence more squarely pointing to outflows from Canada) is that the “Chinese” are a genericized ethnic group that does not have a cohesive public relations effort going in Canada.

Do you think there’d be any tolerance if, for instance, someone concocted a similar story about Jewish people buying up RE? The B’nai B’rith would be all over you and any business or entity that made or propagated such claims in no time flat.

Its a very disgusting state of affairs, that certain elements would pick on an identifiable group that traditionally has not cared to mount a vigorous defense of itself.
_ _ _
You;re reading comprehension must be low, as the amount of foreign inflows has been documented by several major news outlets:
“A large Chinese real estate website claims Chinese investors at home and abroad spent over US$100 billion on overseas property investments in 2016.

This is a 25 per cent increase over Juwai.com’s 2015 estimate of US$80 billion.

The website named Canada as one of five top destinations for this record amount of money, after the U.S., Australia and Hong Kong…”
http://vancouversun.com/business/local-business/canada-a-top-destination-for-property-investments-by-mainland-chinese-buyers-report

…No Canadian region is more impacted by Mainland Chinese capital than Metro Vancouver, a relatively small city of 2.5 million.

The Hurun Report shows wealthy Mainland Chinese consistently rank Metro Vancouver among the top six most popular cities in the world to invest in residential real estate.

In 2015 alone, the National Bank of Canada estimated buyers from China poured $13 billion into Metro Vancouver real estate, one third of the total. Vancouver Sun and Province reporter Sam Cooper follows the flow of such money, a portion of which is illicit and often ignored by Canadian officials…
http://www.montrealgazette.com/news/national/douglas+todd+what+does+china+want+canada/13935823/story.html

#130 Howard on 12.16.17 at 1:47 pm

Any guesses on that pooch’s pedigree? Looks like a cross between a Great Dane and a St. Bernard.

#131 TurnerNation on 12.16.17 at 1:58 pm

I suspect today’s photo provided by Flopster: a picture of him with his missus. Big Blawg Darg.


Tangerine making a push- just buya the house:

https://www.tangerine.ca/en/products/borrowing/tangerine-mortgage/index.html

5-year variable special:

2.70% | 2.71%APR

#132 Overheardyou on 12.16.17 at 2:00 pm

#11 Goldie on 12.15.17 at 6:33 pm

You’ve got it wrong, we don’t want to live like our parents. We want to live better than them, no one sets their standards so low.

#133 Lost...but not leased on 12.16.17 at 2:19 pm

CRA out for more blood…

dr.talc mentioned Morneau in a Global interview commenting on principal residences and how CRA will have increased scrutiny on those claiming PR’s.

THINKPOL article states that CRA is tightening up their voluntary disclosure program (VDP). aka that if one wants to come clean on past tax matters, this will not necessarily result in immunity.

Set up in 2001, its intent was to correct errors in tax affairs, but wealthy individuals and corporations were using it as a means to avoid consequences of tax evasion.

In fiscal 2016-2017, VPD received 18,500 disclosures representing over $1.5 billion in in unreported income.

They (Feds and CRA)will throw a lot of resources at this.

Cases will be investigated as to ways and means the tax evasion occurred, (ie offshore tax havens)…the number of years, ….the dollar amounts and “sophistication” of the taxpayer.

This seems to translate that a naive senior will be penalized much less than the wealthy with accounts in Bahamas. This also seems to imply that the gray area between tax evasion and “legal” tax avoidance is disappearing.

Overall, it appears the Feds are behind the scenes circling like sharks leaving no stones unturned in pursuit of $$$$ revenue.

In this latest (VDP), as stated earlier immunity(and also anonymity) is no longer in place,it appears that many parties will be deemed as tax evaders…the CRA will then determine to what degree of tax evasion intent and penalize accordingly.

Finally..IMHO, we won’t see parties like Poloz take the big hammer to”rationalize” the economy…more like the death of a thousand cuts…err cash grabs….ie the Feds will reduce liquidity and inflation etc by setting CRA loose….ends up the same.

#134 For those about to flop... on 12.16.17 at 2:25 pm

#124 TurnerNation on 12.16.17 at 1:58 pm
I suspect today’s photo provided by Flopster: a picture of him with his missus. Big Blawg Darg.

/////////////////

Hey TN,

Well you got the size comparison right between my wife and I.

Probably eat about the same amount.

Unfortunately for myself, that dog is much better looking than me…

M43BC

#135 For those about to flop... on 12.16.17 at 2:38 pm

chimingin.am
Flop-Happy Anniversary!

My husband is from Perth. Once the kids are older and out we hope to spend more time there. Australia rocks.

/////////////////////

Thanks Chime,and I guess it’s as good a time as any yo thank Slip and Don as well for their messages.

Not real sure why I wrote that post.

Guess I was trying to say that some risks are worth taking if you really believe in something.

My wife was all interested when I told her we got some well wishes as she is more of a social media maven and my only contact with the outside world is this blog…

M43BC

#136 Wet Toast on 12.16.17 at 2:51 pm

The logic for the Canadian real estate market is simple. Easy credit, higher prices and tight credit lower prices unless of course you are in the business of selling credit then it’s always rainbows and sunshine. This market is toast as everyone is way over leveraged and thinks they are a speculative genius – until you are not. Tulips anyone?

#137 When the Whip Comes Down on 12.16.17 at 2:58 pm

Rex Rock – price pressure in Victoria has tapered off people are hitting the max of what they can pay. Veteran realtors are indicating b20 will hit buyers here in a big way.

#138 oncebittwiceshy on 12.16.17 at 3:10 pm

A Vancouver Guy: “No Canadian region is more impacted by Mainland Chinese capital than Metro Vancouver, a relatively small city of 2.5 million.”

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

Well, we are both Vancouver guys. I was born in Vancouver and lived there for over 50 years.

So, the Chinese "extraillionaires" buying high end Vancouver properties isn't really a secret not even to Garth, but explain that trickle down affect, please.

The "gazillionaire" buys your $1,000,000 property for $1.5 because he's simply "laundering" money. That's understood … sort of.

Please help me to understand how you suddenly got stupid and decided to move out of the city or downsize and overbid for your new place.

After all, the Chinese "trillionaire" isn't buying up $300,000 to $400,000 properties and you're not laundering your money.

Sorry, I understand now, you saw the "investors" buying so you decided to "invest" your "winnings" into housing as well.

You then told half of Vancouver, because I heard you, that you were getting rich on your real estate empire.

Damn, now just about every "Vancouverite" is doing the same thing with their helocs.

Everyone is going to be so rich … right up until next year when the B20 legislation kicks the feet from underneath this behemoth and all of the "investors" run to the exits.

#139 Lost...but not leased on 12.16.17 at 4:01 pm

From Vancouver realtor Steve Saretzky’s latest…”Condo Flipping ” reaches a 9 year high.

Re: Flipping, he defines it as selling RE within 2 years of purchase.

Condo flipping is at a 9 year HIGH @ 10.9 % of all condo sales(685 units…74% increase from previous year.)

Detached flipping is at a 17 year LOW.( 201 houses flipped in 2017….compared to 2005 peak of 678 flips …..and 252 in 2000.

His thesis is that FOMO is gone, prices are being slashed.(implying that sellers are not simply removing inventory from the market).

Interpretation: IMHO, and especially via RE.. the future is predicted by the past.
Saretzky is inferring that what we are seeing now parallels what happened in the 1990’s RE: downturn…so beware.

While flipping may be a small % of overall sales, these are the catalysts that ultimately set the benchmark prices.This is NO different than fractional reserve banking or futures markets.aka if 10% of the market is flippers..the other 90% follow the jetstream set by flippers.

Hence, if we note a large rise in flipping..these parties are bailing and the market is set up for a major correction.

I go by the classic metric re “Revolution”…to enact significant change, only 3% of the population needs to be.motivated…whereas the aforementioned RE metric is at 10+%.

#140 SoggyShorts on 12.16.17 at 4:20 pm

#123 Statistics on 12.16.17 at 12:28 pm
The number of individual round trip flights from China to Vancouver has increased by 44% in the last year to 600,000. This number does not include Hong Kong or other non China airports. Things that make you go hmmm.
****************************
People making round trip flights, maybe. The way you worded that made it sound like there was a plane from china landing in YVR every 54 seconds.
600K people doesn’t seem all that high to me, it’s only 2.7% of passengers.

Also there are a lot of people who book roundtrip to China just because it’s way cheaper. I did that earlier this year- Got a roundtrip ticket from Van to Beijing despite my actual trip being from YEG to SGN, saved almost $1K.

#141 Lost...but not leased on 12.16.17 at 4:24 pm

I’ve commented in the past re: my role as Executor for my Dad’s estate.

Some background:

Back in the 1980’s , when Hong Kong money was flowing into Metro Vancouver…my Dad’s neighbours home was bought for the previously unheard of $250,000. Approx 8,000 sq ft lot…2500 sq ft home from 1960’s.

In 2015…a developer assembled 7 properties for multi-family development for approx. $X each . We sold this year for approx. $2X to another developer…that’s how much the market changed.

The key for us was having the benefit of, or being party to,… some metrics as to what a developer could pay for land after all the soft costs were tallied. Also our EXCELLENT realtor did a lot of homework @ City Hall and determined that the minimum assembly for a development in our area was (3) properties.

Now….there are realtors floating around like vultures getting listings with prices at$2.5 X.

Given I know the metrics..this is simply a fishing exercise.. for not even stand alone properties with the usual realtor spin of GREAT POTENTIAL…blah blah…but without some miracle no developer will purchase and assembly at this price…and I submit even greater fool pool has dried up.

#142 backwardsevolution on 12.16.17 at 6:25 pm

#113 Ponzius Pilatus – economics is the new alchemy.

Add a ton of liquidity, leverage up the yin yang, suppress rates, and then look the other way.

Money for nothing.

Robbery.

#143 AGuyInVancouver on 12.16.17 at 7:06 pm

#141 Lost…but not leased
Would be interested to know if the developer you sold to was backed by a Mainland Chinese company or money. They’ve become notorious for overbidding on building lots, leaving long time developers shaking their heads. Someone posted a graph showing the real estate market in China and Canada moving up basically in tandem. Our only hope is that some black swan event takes them both down brutally at the same time.

#144 morrey on 12.16.17 at 8:22 pm

Bitcoin hit 18K and down to >17K today.

As for Real Estate, it too will keep on rising.

we live in crazy times.
B20 will do didly sqaut

#145 Boombust on 12.16.17 at 11:44 pm

#144 morrey

Er, not quite.

Here in Metro Vancouver, RE is going d-o-w-n, not UP

So, nice try.

#146 Gravy Train on 12.17.17 at 6:30 am

#91 Nonplused on 12.16.17 at 12:37 am
“… [T]he government can’t even tie its own shoes by policy. Government policy is perhaps the most useless and destructive thing ever invented.”

I take it you’re not a Keynesian. :D

#147 gfd on 12.17.17 at 11:05 am

This is how it erodes. R. McL. is the cartel now.

#148 Mehdi on 12.18.17 at 4:57 am

Can someone (Garth maybe?) please explain to me what “Bank of Mom” means, once and for all??