Oof course it is a bubble, as we cannot sustain the present ecconomic environment. It is a myth to say we have a workers shortage, what is happening is that employers refuse to pay going rates unless there is a contract. Just look at RAV - SNC Lavalin refused to pay the going rate for wages and hired workers off shore at $5 an hour, until the BC Fed got into the act.

Realators ramk lower than pimps, the worst od carpet baggers!

Me thinks the provincia; ecconomy is in a bubble, where the government, wearing rose coloured glasses, believes the gravey train will never end!

"burts"???

It's really exciting to see an increase in independant sources of information like the blog discussed above. What a breath of fresh air! BC's monopoly media is so tiring, so uninformative, so monotonous. Its no wonder that independant blogs recieve so much interest.

As to the topic itself, what the public REALLY wants is accurate reporting about the real nature of markets, including real estate markets. It would take the BC Real Estate Council very little effort (but a big change in philosphy) to provide an objective tracking system of prices, markets, trends and concerns. The public would then have real data to make realistic predictions and react to possible risks. All of which is anethema to the current real estate cheer leader model, which has no bearing--nor interest--in analysing this particular market.

Great article!

well now I have my glasses on, I can see the damn typo's!

First of all, Arizona is not a city, it is a state.

Secondly, of course we are in a bubble. Have a look at properties for sale in craigslist and see how often you see "reduced" in the heading. Many people who bought assignments are trying to bail before the market tanks.

Naturally people like Bob Rennie are going to tell you the boom will never bust. Duping morons into making payments on something that is not even built is kind the ultimate in marketing scams.

I work in construction and it is simply a case of supply, demand and incomes. A boom can only be sustained as long as new buyers are available at entry level. The number of people who can afford $250,000 for a 450 sq foot shoebox is limited. The number of new condos coming on the market is increasing. It is inevitable that prices will come down.

I have a relative who works in BC Assessment. Many places are being bought in half, third and quarter shares by small time investors. Many are new Canadians. Many will lose their shirts. The big investors will sell short, just like they did after Expo 86.

Many people ask me, since I work in construction, if they should buy. My reply is: "If you are going to live into the place long term, go ahead. If you are hoping to make a quick buck, don't."

Remember the herd mentality: When there is a boom on, few will ever admit or forsee a bust coming.

The main problem is the inflation caused by the deregulated banking system, yet not accounted as such, but as GDP and "growth".

The banks are now permitted to create unlimited capital to take over the resources and properties of others and against non existing values, as long as they can hope to make profits for themselves.

The best racket in history: Creating non existing money against non existing values and then charging usury for nothing.

The BC economy is not booming, but going down the drain. It is surviving on this artificially created inflation and the sale of resources, which is the sale of capital that must lead to bankruptcy.

We're basically in the same situation as a when a drug addict gives himself a shot and it makes him feel good.

Unfortunately, pain killers don't solve problems.

Every time we buy something made in China, peddled by some foreign owned big box, we're cutting our own throats.

Unfortunately, in most cases we don't have the choice because of Milton Friedman's "Free to Choose" ideals swallowed by stupid and crooked politicians that completely turned things upside down and are forcing us into economic suicide.

Ed Deak.

Working Man:

Actually, there is such thing as Arizona City... but unfortunately, that isn't dispensation for so obvious a mistake. Thanks for catching it. We'll change it!

The housing boom and inevitable bust is artificial and largely created by government's developer and speculator-aiding policies. Not only the financial aspect which Ed mentions, and indeed does play a large part. Other aspects include governments refusal to build significant number of affordable dwellings and regulations that encourage sprawl,and overly-large houses. James Kunstlers books on the suburbs are a good place to read about these aspects.

I am waiting for the bust as I can not afford to buy (single , $46K/Yr).

It also pisses me off that many houses for sale are previously owned-in other words they are 30 years old and they want $250K for it!!!!!!!!!!!!!! But you can't haggle as there will be some fool willing to pay the price.

What impact do speculators have on house prices and the market?

Do they contribute to the unaffordability of housing?

What is affordable housing?

I will wait for higher energy prices (2008?, 2009?, 2010?), conflict, climate change influenced weather disasters, avian flu, earthquake, etc. before I can afford a home (home: where I plan to live the rest of my life's journey) not a house (house: property investment to seek return on either immediately or in the short term).

Or live in a tent!

When the largest sections in your local daily newspaper is Driving and Homes, you're not going to hear anything negative about the real estate "boom"!

I have no idea how anyone in our market could possibly buy a home. The price of real estate is so high.
How does anyone save up enough money for a down payment. If an average house is 400K, it would seem out of reach for almost everyone. It's just the way it is here.
The prices in other markets are more reasonable. In Edmonton the mean price is 250K. And there are plenty of good paying jobs there.

I am interested in who is actually buying in this type of market. Have people had parents help them out with down payments? Have they inherited money from somewhere?

The cheapest apartment on the mls on the westide is $218k for a property in Marpole. With 5% down, and with property taxes and condo fees monthly payment are $1622. That is well beyond what an average single income can afford.

The cheapest house on the westside not on reserve land is $629k. Mortgage payments plus taxes are $4428 with %5 down. Who can pay $4428 a month? I really would like to know?

kwl: People aren't buying so much anymore.. A lot of properties are sitting on the market for longer and longer, and have you been to an open house lately? I've been to a few and more than half have been ghost towns.

There are a few other good contrarian blogs on the Vancouver market:

http://vancouvercondo.info

http://vancouverunrealestate.blogspot.com/

I wonder how many foreign speculators are buying with their inflated capital, knowing that it will become worthless, but don't know when, and so they're trying to get rid of it into real estate.

The same happened here in the Cariboo about 15, or so years ago. Pieces of land that were on the market for, say, $45,000 for years, without buyers, all of a sudden sold for $300,000, virtually overnight.

Turned out that German and Swiss "investors", who had tons of Deutschmarks, wanted to get rid of them before the Euro came in and Canada was the place.

In Vancouver, I built a new house in 1975-6, for about $15,000 worth of materials, and sold it for $65,000 in 1979. The following year it was for sale for $138,000. That was the time when Hong King Chinese were fleeing and prices started going sky high.

Now we have the secret talks about the elimination of the US and Canadian dollars and the Mexican peso and replacing them with the Amero.

So, the people who will control the money supply in all 3 countries have to get rid of their present holdings so they can start new.

By the time I was 21 I was living under the 5th monetary system and the 6th by 28, which shows how money works.

Ed Deak.

This is just another example of the elimination of the middle class in Vancouver. The real estate market in this town just follows the perpetual business model that's always been active in Vancouver ever since the gold rush days: quick-buck scams, whether it's a gold mine stock or the family home.
I'd love to see the market tank but I don't expect it to happen soon since there are so few middle-class players left in the real estate market. My suspicions (totally unverified, mind you) are that the market is being driven by windfall money (dot-commers, inheritors and downsizing retirees), rich folk from around the world who buy teenie condos for their kids and as a pied-a-tere, for when they're in town, and the never ending lineup of imbeciles who have either moved here from middle-class towns and think that the normal rules of home-as-castle apply in Vancouver. The local press and people like Rennie keep perpetuating the myth that their "product" is your home.
As long as there are people like "Capitalism" around trying to pick up a quick-flip deal on a 250 sq. ft. "mansion in the sky", the market will still be active and prices will be stable. I'd really love to see some statistics on how many buyers are dropping down cash for their purchases as opposed to financing. Also, our financing is still not as ridiculous as the methods down South, so there can't be as many foreclosures here as there.
Anyway, I'm just as happy to rent when I see all of the lemmings buying into their leaky shoeboxes, having to postpone their dream of a liveable home with the rationale that "Well, someday I might be able to flip it for a profit and move back to Red Deer and buy a rancher on 5 acres."

A 47% increase in house prices in Canada between 1997 and 2005 works out to about 5% per year, a 73% increase in the US works out to about 7% per year, which is not that different from any other average performing investment. In the Vancouver area there was hardly any growth in real estate prices between 1993 and 1997. The problem is that for the average person it is a big chunk of money to come up with and commit to for many years, and wages may not have kept up with these increases.
The interesting question is what is the distribution of incomes in our society that makes it possible for a large number of people to afford such expensive housing, and impossible for a large number of people. Is the distribution of wealth becoming more unequal?

The key is (as always) to buy real value. What will your real estate investment yield, outside of speculative value?

If you buy some lovely land that you can use to feed yourself, go for it! That land will not lose value in the long term, as everything begins to inflate due to forced reduction of ancient sunlight inputs.

How much is clean water worth? How much is fresh free-range eggs worth? How much are organic vegetables worth? Not nearly as much today, when it costs a pittance to truck them in from California, but tomorrow?

So if you're shopping, take a Permaculture approach. What a typical small city house is worth in real value is precisely what you would pay to rent it, less taxes and maintenance. But if that small city house has enough good land around it to at least get a start on feeding yourself, it may well be worth quite a bit more to you than any speculative increase in market value will provide.

If oil starts declining at 3% a year, "commuter houses" in suburbs will crash, even as the cost of food goes up. But buy property with an eye towards feeding yourself, and you can't go wrong.

Some things never change and one of those is the fact that Vancouver is a Fauz City full of faux promises and hype. This particularly applies to real estate and the total lack of real, genuine fundamentals to back up the gross inflationary prices of housing. The pundits spew rhetoric about boom times, lack of supply etc etc = blah blah blah. The bottom line: The only industry that is booming in this province and city is construction, propelled by the hype we see by the self-serving agendas of the monopolized mainstream media and their advertiser masters. Meanwhile, BC has the highest percentage of working poor 10% - double the national average - working families have little or no hope and the only ones that are benefiting are wealthy opportunists and scam artists like Rennie! Shame on all of them for screwing up a city that had so mush potential which is all but lost. Spend some time in a real city with real opportunities where the wage earning potential is more in line with housing costs and you will quickly realize how bogus this contrived and superficial town has really become!!!

Sorry - spell checked...

Some things never change and one of those is the fact that Vancouver is a faux City full of faux promises and hype. This particularly applies to real estate and the total lack of real, genuine fundamentals to back up the gross inflationary prices of housing. The pundits spew rhetoric about boom times, lack of supply etc etc = blah blah blah. The bottom line: The only industry that is booming in this province and city is construction, propelled by the hype we see by the self-serving agendas of the monopolized mainstream media and their advertiser masters. Meanwhile, BC has the highest percentage of working poor 10% - double the national average - working families have little or no hope and the only ones that are benefiting are wealthy opportunists and scam artists like Rennie! Shame on all of them for screwing up a city that had so much potential which is all but lost. Spend some time in a real city with real opportunities where the wage earning potential is more in line with housing costs and you will quickly realize how bogus this contrived and superficial town has really become!!!

The Economist has been making dire predictions on the worldwide housing market for years. I remember reading a similar article in Spring, 2003. If I sold on that basis instead of last Fall I would have been out 100's of thousands. However, sooner or later they will be right. The best place for increasing property valuation presently is in the White Rock (The Peninsula)area. I bought in March after careful consideration of the market. A couple of blocks away Bosa Development is knocking down the Old Town Centre and putting up a 21 Story commercial/residential complex which is 75% sold out with interest from the North Shore, Alberta and the US. A studio starting at 278,000 makes my place look like a steal (which it was). Plenty of American boomers want to retire in their 50's (before their Medicare kicks in at 65) and living a few kilometers from the border (gas is 20 cents cheaper a liter in Blaine/Bellingham) in a benign winter climate is very attractive to American buyers.

Unfortunately, despite's the left's continual prognostications, the sky is not falling. I have been hearing that it is for as long as I can remember but it still hasn't happened.

Freebear, there are places in Burnaby or out by Lougheed Skytrain you can get into with $10,000 down and make a payment on with your salaries. It is a question of priorities.

[Freebear, there are places in Burnaby or out by Lougheed Skytrain you can get into with $10,000 down and make a payment on with your salaries. It is a question of priorities.]

I guess that depends on whether you want to kiss you quality of life good-bye and live with a monstrous mortgage hanging over your head in a rain-drenched piss-hole making half of what you could make if you lived in most other cities in North America.

Putting things in the proper perspective might help for an intelligent debate. People need to travel and get out of Vancouver to realize how absurd the situation hear really is. Example: Although San Francisco is expensive, the costs about the same as it is in Vancouver. The city is far more interesting and has considerable more cultural and social depth and I would make 4 - 5 times the wage there for the same job in Vancouver. Unfortunately, work visa challenges prevent a quick move.

A few months ago, supposedly knowledgable people like Levy and Somerville were saying similar things about American real estate. Professors and analysts couldn't get it into their heads that a crash can actually occur after mass speculation. These guys acknowledge the bubble conditions but feel the need to deny the burst is coming (perhaps peer pressure). Now the American real estate market is crashing, and too many fools listened to "experts" like Levy and Somerville.

Hi everybody,

I wanted to point out a couple of things:

1) please check out the other Vancouver housing blog sites by Rob Chipman, vancouvercondo.info, and vancouverunrealestate.blogspot.com. They do excellent work - mine isn't the only blog on the block!

2) If you feel like offering praise to VHB, please offer it to the commenters at the site. They are routinely well informed, intelligent, and inciseful. There can be some 'froth' around the edges, but I've learned a tonne from my commenters.

Finally, let me jump into the fray of these comments here at the Tyee:

Workingman, I am *not* from the 'left'. (Much to the chagrin of some of my commenters, I should add!) The housing market is not about left and right. It is about simple economics. Prices keep rising. Until they don't.

Ok, so there's no Starbucks down the street (thank gawd), but houses are definitely cheaper in parts of the Cariboo:
http://www.wellsbc.com/Realestate/properties.htm

IAMC -

An MLS search for properties $400k or less in Vancouver turns up two properties. One is a 30.5x99 foot lot with no house ($379k), and the other is a dump in the Main and Hastings area (Princess St.) on a 31x50 foot lot for $389k.

I believe the median house will set one back well over $600k now - over 10x median income.

So, my wife are renting in Yaletown since we moved back to Vancouver in 2004. We pay horrendous rent, but I CANNOT for the life of me pay $500K for a 700 sq ft 1bd/1ba w/ a closet that doubles as a home "office". I just wouldn't be able to look at myself in the mirror anymore - hard enough already.

People talk about migrants to the city buying-up property, whether they're from China (the Hong Kongers all bought a while ago and many have moved back to Hong Kong because of better employment) or the UK - LOTS of Brits now living in the neighbourhood - and folks from Latin America, moneyed Asian language students, etc. BUT, the biggest driver for entry-level condos as far as I see are young couples - newly-married late-20's/early-30's - whose parents used to own a house in Vancouver bought 30 yrs ago- for a $100K and then sold for north of $1M. So, the parents give the kids a couple of hundred grand for the down-payment, move themselves into a nice, new condo and presto - everyone else is priced-out. Then there are the grow-ops. . .

Having lived in San Francisco during the dot.com boom and bust - I saw massive price swings in real estate. Vancouver is weird though - it defies gravity and does NOT follow the fundamentals that govern real estate in other markets. I quickly realized in my open house visits that EVERYONE believes that prices will continue to go up, and if they EVERYONE believes, then it will. Or at least until some kind of major economic downturn happens - but it won't be rates - at least for the condo-dwellers in the pricier place. These people are largely immune to the rate shifts as they're not the typical local buyers, but part of the moneyed global elite nomads. Vancouver has become a global real-estate market not unlike an Aspen, Plam Beach, Monaco or whatever. It is a destination location for that 2nd or 3rd place.

When the rates go up - look for bargains in Port Moody, Coquitlam, etc. where families who should be owning $400K places have mortgaged their underwear to get into brand-new $700K monster homes while they live off their Costco 10% refunds. Once the rates go up - this is where we're going to see the most blood IMHO.

I think the bust is coming pretty soon. Lots of people move every year and a half in the rising market to get free capital gains. These people will panic first when the market flattens. Anyone with all their savings in their (inflated0 house price should be worried

And yes, schadenfreude is a huge motivator for my perspective 8) God, if only I'd bought back in 2002. . .

Workingman responded saying:

"Freebear, there are places in Burnaby or out by Lougheed Skytrain you can get into with $10,000 down and make a payment on with your salaries. It is a question of priorities."

No thanks!

1. My job is in Campbell River on Vancouver Island!
2. I will not move unless I already have a job lined up.
3. I am 45 years of age and do nopt wnat to pay a mortgage until I am 90 years of age (I doubt I will last that long!).
4. I do not want anything over 100- sq feet.
5. Vancouver and the lower mainland is too smoggy!
6. When sea levels rise I do not want to be in the lower mainland.

As to the sky is falling quip:

Tell it to your kids or grandkids you deluded, believer in growth is infinite, flat earth forever, technology is our saviour, environmentally apathetic, mortgage the future a-hole

Oops! (my 'eco-rage' affects my typing!)

Last post should have read:

Workingman responded saying:

"Freebear, there are places in Burnaby or out by Lougheed Skytrain you can get into with $10,000 down and make a payment on with your salaries. It is a question of priorities."

No thanks!

1. My job is in Campbell River on Vancouver Island!
2. I will not move unless I already have a job lined up.
3. I am 45 years of age and do not want to pay a mortgage until I am 90 years of age (I doubt I will last that long!).
4. I do not want anything over 1000- sq feet.
5. Vancouver and the lower mainland is too smoggy!
6. When sea levels rise I do not want to be in the lower mainland.

As to the sky is falling quip:

Tell it to your kids or grandkids you deluded, believer in growth is infinite, flat earth forever, technology is our saviour, environmentally apathetic, mortgage the future a-hole

Apathsux siad on another post and I think it is applicable to Workingman and others who think the same way!

"In MY experience, it is those with the most serious of flaws that have the greatest denial factor"

Until the sky actually falls!

vhb said, "The housing market is not about left and right. It is about simple economics. Prices keep rising. Until they don't."

EXACTLY! But why do some people need to politicize what isn't narrowly political?

Just to point out to the "sky is falling" people.
It is not a fair comparison. The sky has not fallen in living memory.
But house prices do fall or stay flat at times. Check out the vancouver museum. House prices in van once stayed flat for 20 years!
Lots of people move every year to take advantage of the rising market and tax free capital gain.
Lots of people will lose a big chunk of their nestegg in a falling market too. These people WILL panic first and that will frighten lots of others. And in a fast falling housing market, buyers wait for a better price. It is a process with feedback on both sides. Just like a rising market!

People have to politicize because in their narrow minds the world is divided between so called "left and right" and the "faithful and the infidel", or as they used to say "the circumcized and the not circumcised" and there's no room for rational thought.

I've lived under a system where circumcision was a death sentence. So much for human intelligence, especially of the ideologically brainwashed.

Ed Deak.

When I walk my dog in East Van and see dinky little shit houses going for half a million (there are nice ones here, too... can't imagine what they are going for), there is no doubt in my mind we're in a bubble.

In most of the world's major cosmopolitan centres its a similar story. Only prices are way higher. Vancouver is bigger on an international scale than we locals think and offers investors cheap real estate in a first class natural environment. I'm afraid this is one 'bubble' that won't burst: we're simply playing catch up.

One really interesting thing I've discovered in observing this bubble is that, no matter where people are, they say "its different here." Sorry, the bubble is everywhere.

Have wages risen at the same rate as house prices?

I echo the earlier questions about who are buying these homes (and not just in the lower mainland-all over BC)?

What size household income do they have?

Obviuosly someone who does not have a home to sell and then use the proceeds to buy a new house is chitte out of luck!

You can find it out in Langley, Maple Ridge, Delta. If you want it, you'll have to go get it.

Capiatlism, I would be interested to know what your definition of affordable housing is?

What price?

How long of a mortgage?

How much are the mortgage payments?

Will I have to fend off crackheads and thugs in an affordable neighbourhood?

Housing prices are less here in Campbell River than the lower mainland, but still unaffordable for me. And trailer parks are being converted into condo sites!

Moving to the Valley and having to buy a vehicle to get back to your job, contributing to the smog, congestion, and sprawl, plus trading a couple hours of your day for equity that may or may not exist when it's time to sell is questionable logic for many of us. Paying the bank for the privilege seems even stranger.

Colour me a happy renter, ten minutes from work, five minutes from most amenities, and like most bike commuters, enjoying the trip to work rather than fuming in traffic.

Freebar, we bought our first bungalow on East 47th in Vancouver in the mid '60s for about $6,000 with a monthly mortgage of $45. with a weekly takehome pay of between $50 to 60. A week's groceries with 3 children was about $25. A VW beetle was about $1,300, a Morris Minor $1,200.

Now figure what this "wealth creating, globally competitive market capitalism" has brought us, and the world, in costs and wages.

Ed Deak.

Wow.

Ron and I agree on something: the Lower Mainland real estate market makes no sense.

I originally post the following on another Tyee article in July of 06, and it applies more than ever today to this re the "Bubble".

posted: 07-14-2006

Regarding ethics and journalism, here is what is happening in real time in your back yard;

Newspapers sell billions of dollars of advertising to the real estate industry. When the Olympics come to town it temporarily boosts everyone's confidence and they go on buying sprees fueled by real estate sharks who know the window is narrow. Artificially inflating real estate values is unconscionable. I have no problem with newspapers selling as much space as they possibly can to developers and real estate firms, but in order to maintain journalistic integrity, it is also necessary for said media to also disperse an equal amount of information that clearly describes what happens when the market is artificially inflated. Staying silent, as media has for the most part up until recently is unethical. For every ad that Bob Rennie bought over-hyping the big "W", media should have presented an alternative view relating how ad campaigns supported by advertorials, and in conjunction with compliance selling techniques, undermine the social fabric of our community, but they didn't, for obvious reasons - money. Media won't tell a balanced story because if they do, developers won't buy ads from them.

It's now interesting to see on the front page of The Sun (06/06/06), a headline that reads, "B.C. real estate boom could cost us" (It's due to equalization shares being dropped.) What did developers, realtors, the media and the premier think was going to happen? It certainly seems to be a free lunch for anyone in the real estate and media industries, but now that the Feds want to punish us for obscenely high property values, the premier is surprised. I'm not, and you shouldn't be either. It happens in almost all Olympic regions. The average home in B.C. now costs almost twice as much as in Quebec. Please explain how this is a good thing in a province that is struggling to grow.

Every developer, realtor, and news company who over-hyped property values in B.C. over the last three years should be held accountable for the government's recent announcement. Maybe they can make up the difference.

The Vancouver Sun flip flops all over the place. One day they run six inch headlines on the front page blaring that 22,000 B.C. homeowners are now millionaires on paper -- like it was a good thing, and a short while later they tell us, oops, that boom we were hyping last month, well, "it could cost us." Thanks. Thanks a bunch.

More info;

http://www.olyblog.com/06/BickeringS06052006.shtml

My Dad purchased his first home on a 1.25 acre pak in North Burnaby and paid $1900.00 during 1945. I met my wife in 1962 and we both lived in east van and looking for homes in Dundar for approx. $14,000.00. We finally purchased a home in north burnaby for $8,550.00. I could get a house built for $9.00/sq ft. I could pay my house off in 2 years in 1966.
* My Dads place now has 8 new homes on the 1.25 acre parcel.
** My place on union street in North Burnaby just for the property is $500,000.00
*** Even with mortgage rates so low now it will take 2 substantial salaries to purchase a home in the Dunbar area for around 1.2 million and pay it off in 2 years.
++ yes the balloon keeps getting larger and some day it will do something different.
- I can predict that we will have 100 year mortgages for home buyers in North America in the near future.
-- Maybe the homeless are smarter then what we think?

KWL

If you take the mortgage on a 400K house and cover a significant chunk of it off by renting out a portion then life becomes bearable. That's the only way a lot of people are getting into the market now.

Most people today live high off the hog.
1) Learn to go without for a few years
2) Learn to pay no interest on your credit cards
3) Learn to pay cash if you can
4) Take advantage of your relations lending you money
5) Learn to share things
6) Take it easy during Xmas
7) Take it easy during birthday parties
8) Do not go overboard buying anything
9) Drive reasonable car
10)On your vacation learn to stay home
11) Play cards
12) Do not smoke
*** DO NOT BUY A LEAKY HOUSE OR CONDO
** A salary of 130K this day and age is not much
* Take advantage of your employers vehicles and expense accounts that you are entitled to
--- we have not seen anything yet as the dollar keeps shrinking

How much money does a person really need to live and enjoy?

Some people buy a trailer as the overhead is low.

We better keep all the farm land we can in the fraser valley and in canada. I do enjoy milk and cream in my coffee and tea. Lets not forget the cows and chickens. A house in vancouver is one thing and a farm is for another purpose.

We are in a bubble. But there's not necessarily much downside to this one unless a global geopolitical event occurs causing significant financial shock. the best example of what I mean comes from the Credit Union Central of BC which has put out this report each year for years. Look on pg.5 of http://www.cucbc.com/publications/economics/pdf/presentations/vbotre2006c.pdf to see how we're above the moving average for prices now in BC, and obviously significantly so in Vancouver.

However, the whole real estate report given here http://www.cucbc.com/publications/economics/pdf/presentations/udvic2006c.pdf outlines the requirements for a collapse, and we appear to be headed for none of them. Hence, those who favour a "slowdown" in prices rather than a collapse may well be correct.

Never count on ordinary people to do the right thing. It's not usually in their own best interest.

Before every bubble bursts there is always hopeful talk about "soft landings", a "levelling off" of the market, "a minor correction." Since so many people have a vested interest in averting a crash no one dares to rock the boat. As if our collective actions can avert a crash. It's like those Wild Coyote and Roadrunner cartoons where the coyote gets too far out on a limb and hopes that he won't fall as long as he doesn't sneeze.

BC's last real estate crash in the 80s came as interest rates rose past 20%- enough to cripple many homeowners, speculators and developers. No one foresaw high interest rates. And high unemployment and a stagnant economy. Naturally, memories are short and today we are in the same, but yet different position. We will repeat history, but differently this time. Don't forget that it's called a crash because it's a surprise and none of us anticipated it.

There are tangible signs that a big bubble is in place, but a bubble and a burst bubble are two different events. Bubbles in many different assets have been known to persist for a long time. Buyers are willing to pay more (whatever price) for something if they believe there is hope that prices will rise in the future. So sentiment supports much of the mkt. Of course, real estate values are also driven by financing and today, financing is as freely available and cheap as it can get. Alot of buyers are maxed out these days and vulnerable to a loss in income. Bubbles burst for different reasons usually something we least expect.

Successful investing boils down to either having time or timing. You're either good at timing or you have lots of time to make money. Few people have consistently great timing. It's best to have the income, cash flow or assets to possess the time to ride out the mkt.

That is absolutely preposterous. Canada does not allow retirees - from the US or anywhere else - to legally immigate so they can use our taxpayer-funded social programs. We're not that stupid.

BTW, is Whatcom country a retirement mecca for Amercan retirees right now? I think they like places with warmer winters and less rain.

It's arguments like that that show that the housing bubble's days are numbered.

Uh, the mid-'70s? I do recall that there was some Chinese influx around then, but "when Hong Kong Chinese were fleeing..." didn't really come along until the mid-1980s, after the Solidarity year and not even quite before Expo; THAT's when prices went nuts. The upswing in prices in the '70s was part of a continent-wide escalation in housing values and I don't recall pressure from Hong Kong and Tokyo markets being an issue; I remember warnings in the later 1970s, more like the early '80s, about how the new age of air travel and Asian tourism, specifically Japanese at that point, would influence realty prices because of the $1 million dollar bachelor suites common in Tokyo (likewise the typical $1 million annual golf club fees in Japan). In the era of the Socreds touting the "level playing field" (largely in reference to the $5/day wages paid by Indonesian and Brazilian competitors to BC's forest sector) there were worries that Asian-style house prices would become the norm. Realtors and politicians, of course, assured as that this was not the case....

My folks bought our then-rented place ($50/mo.) at Ruskin Dam, a 20s-era post-and-beam company house (BC Hydro), for $6000 in 1968. Its market value was $8000 (Hydro gave employees a deal to buy out the townsite's houses, which they didn't want to maintain anymore). Dad's salary, as regional production super for the eastern Fraser Valley (Ruskin to Boston Bar), was in the $12,000 range.

The house was worth in the $120,000 range by the mid-70s; Mom didn't sell until 1988 or so, for $220,000. That same house now would be in the $500,000 range (on 2/3 acre, w. trees).

I should have said $500,000 and up. From what I saw of $300-400,000 joints in new Mission subdivisions last week, our old place would be worth WAY more. That there are now dozens of million-dollar properties in Mission seems, to me, bizarre, given that there's been no REAL economic growth in that town, other than population-induced services spending/consumerism.

I've wrestled with trying to give good advice with this one for a long time. On one hand, we have all of the leading indicators of a bubble:

- rising interest rates.
- inflated prices straight across the board, in some cites, more than double what they once were. Alberta and BC have inflated like crazy.
- high commodity values. As we all know, Canada's main economic drivers are commodities and their values. Oil and mining sectors have swollen the TSX index, which has increased personal affordability of all sectors in real estate, leading to the rise in real estate.
- inflated undeveloped land values.

The thing that kills us concerning real estate, is debt load. If Canadians have a high debt load and interest rates rise to double digits, expect a serious real estate recession, spiralling prices down to the 10 - 25 % range from peaks. If Canadians couple this with spiralling commodity values triggering layoffs in the resource sectors of the economy, expect the real estate percentages to drop even further, to an average of 40% or more, especially out west. (Sorry, Cappy, your tip is misleading, unwise and dangerous) If Canada's manufacturing gets hit with a world wide downward tide, expect the recession to hurt Ontario and the Tri cities (Vancouver).

The thing that has been propping up commodity values and real estate prices, has been a healthier economy. But sooner or later, the banks get greedy and the rates go up. And just as the rates climb to high at a time where the economy slows or heads towards a deflationary cycle, look out.

There has been only one factor that points to why there hasn't been a bursting bubble sooner in real estate, outside of a strong economy (high commodity values). Its growing populations. Even with the most stupid print and spend fraudulent economic policies that ED DEAK alludes to, as long as the tax base continues to grow, all is well or at least, temporary in terms of economic slow downs. And the existing populations like China, who is becoming increasingly westernized in terms of their "Capitalistic" ideology, does offer increased levels of consumption for what Canadians trade. But the U.S. has such a large deficit, combined with high interest rates from the feds, that there isn't much of a direction for their currency to go, but down.

And to that end, Canadians would be wise to be more protectionist instead of more "for sale" than it has been. But hey. If British Columbians love crooked politicians that mirror the corruption that the Conservative Divine government had in the 80's, who am I to judge?

And, if I sell my over inflated house to a sucker who gets stiffed with high rates and a morgage that will never see its true value, its not my fault. I'm not to blame. Who am I to judge my own greed, or success at someone elses expense? Everyone else is doing it, right?

Currently, real estate values are not based on reality. When it gets cheaper to build new than it does to buy old, something is wrong. When the average family incomes are at 75,000 in areas where housing sells on average for 350,000, something is wrong. Delusion, greed, flawed paradigms in terms of goals, unrealistic optimism, all are major signs of a bubble. Were in one, and there's nowhere to go, but down.

Seller's remorse. Wow, things are changing.

Can't say I've exercised sellers remorse in real estate, snert, but I have with stocks. :-) (mind you, I got hammered in 2000 and 2002)

And this income trust business. Don't people know that the income trusts set up in Canada were Canadian corps? Don't we protect our own? Income trusts were brilliant for our economy in the sense that they were more protected from M & A's by americans corps under an income trust. Thats all gone now.

The Canadian Republican Alliance party (CRAP, is that what its called?) could have put the brakes on new income trusts or disallowed income trusts being formed from new sectors, there's alot of different choices they could have made... but didn't. It just didn't favor the continued unsatiable U.S. appetite for increased Canadian market share.

The thing Canadians need to understand about currency and its values which are huge in terms of what Canadians get for its commodities... a higher dollar means more bang for your buck. But what props up a higher dollar besides national debt load? (486 billion at this point, I believe) Higher interest rates that attracts foreign investment in our currency.

But don't be fooled. Higher interest rates giving us higher currency leads to us having to "honor" these federal interest rates and at the same time, the banks borrow from the feds based on these rates, so a higher dollar propped up by higher interest rates leads to higher mortgages in Canada.

What Canadians should aspire for, is a higher Canadian dollar with lower interest rates. Lower interest rates would "soften" the real estate landing to realistic valuations. Is this possibility there? Depends.

The U.S. dollar is most definitely destined to fall. The Republican regime in congress, governance, senate and whitehouse has left ink bleeding all over the place. Their trade imbalance's that can only be corrected through protectionism and an outright battle against their own powerful lobbiest corps, is unlikely.

And where will their own interest rates go to try to prop up their dollar? Only higher. And in time, within 5 years, it will implode. There is far to much debt load, far to much inflation in real estate where personal value's are most concentrated, far to little recognition of what ills "globalization" does cause. Ohio knows this best, with their manufacturing base taking huge hits since 2000.

Looking into the crystal ball, I see protectionism rearing its head from the U.S., mainly because they have no choice, and we should be more like minded, expect it to come if not between nations like Canada/US, perhaps more importantly, protectionism on a continental basis. I see this trend growing world wide in the decades to come.
China's trade deficits promoted by the likes of the Walmarts of the world, will be a major test to any government that acknowledges the true value in manufacturing its own products and so far, although its to early to tell, the Democrats won't do much about it until 2008, if ever and this means that Canadians should be double wary of future economic failures south of the border.

To that end, "we need more East/West trade internally and internationally." While the leader of the Republican party here in Canada, Harper said this same thing, he has done what every other Republican before him has done where it counts. The opposite. And why not? Harper does represent Republican interests before Canada's, after all.

The one that dies with the most money wins and that is the Canaidan way.

Pure says:

I truly hope that you are dead wrong Man!

To me the Canadian way si that we help & take of one another, hence public health care - thank you Tommy Douglas.

The Canadian way is about working people being able to earn a living wage and be able to afford a home of thier own for thier families - both of these ideals are rapidly disappearing as short-sighted and self-serving individuals and corporations utilize exploitive and opportunist practices to make short term cash in exchange for trashing the future for canadaian working families.

It's time for working families to say enough is enough and one of the first things we can do is refuse to buy into inflated real estate and stay off of the monster mortage treadmill.

At the moment even real estate in Boston Bar and Lillooet is inflated out of proportion to local economics; still far below the Lower Mainland, but far above what it should be given economic conditions in those towns (and nobody can sell, because of those economic conditions; those in Lillooet who can are selling to new buyers from the Whistler side of the mountains, with appropriate "buzz" in the market which has already hit the Bridge River Country in between there and Pemberton.

What I'm saying is how do you boycott inflated real estate values when everywhere is inflated, including places like Ocean Falls, Dease Lake etc. Even those listings in Wells (where I was this last August long weekend) are high relative to what else there isn't there (jobs in particular).

Greater London has the prospect of $2.14 million entry level homes within 12 years.

https://secure.mortgagestrategy.co.uk/cgi-bin/item.cgi?id=131653&d=11&h=24&f=254

Sure, there could well be serious downturns but even a catastrophic 40% drop in Vancouver would still put the average house at $300.000.

100 year mortgages are on the way per pure and this is all in accordance with the world markets on land values, trade workers, materials and supply & demand coupled with timing and events.

Immigrants continue to flock to the UK. They buy property. How? They live together for a while and work hard. They save money since they don't tend to go out and eat in restaurants often or drink in pubs much, etc.

My sister is selling her house for around the 112,000 english pound mark. Are they expecting a whole lot of inflation there in 12 years?
But who cares what happens in 12 years in london england. It isnt here.
One of the reasons for the high prices is that banks are giving money to everyone and their dog.
This wasnt the case 5 years ago.
You had to have a downpayment and a decent credit rating to get a house.
No more!
Now they will give you (or finance) the downpayment.
So lots of people with no willpower have financing.
The crash will be all the faster because of this.

Rising house prices tend to be universal that is why what's happening in other places can well have a bearing on what happens here in Vancouver. As the world becomes smaller worldwide effects are even more pronounced. We do not live in a bubble.

Banks started lending more liberally and offering longer mortgages so that those with less money for downpayments and/or lower income could afford to buy a home.

In many countries people with low incomes have no chance of ever having their own home because mortgages simply do not exist. Yes, the banks in Canada make tons of profits, as they pretty well do in all countries, but here they also enable people from all stratas of society to have their own home.

Dear realisticman; Please consider a name change. Your current one is unrealistic. On one post you say:

I point out that is about 17 years salary at minimum wage.

Then you claim that poor immigrants afford to buy houses in the UK, one of the most expensive markets in the world, by not eating out.

Then you make the leap back here with:

How exactly do you figure that? The subsidised down payment on $300,000 is $15,000. About one year's whole salary. For people

I don't wish to be mean, sir, but That's a lotta baloney. No bank anywhere on earth uses that kind of math.

Bailey, immigrants double, triple and quadruple up. They don't spend on luxuries, they eat at home, they save everything and that's how they buy property in the UK.

All stratas of society in Canada own homes. In many places in the world only the wealthy own property, the rest rent.

Are you suggesting that only the wealthy in Canada own property?

No question, the gap is widening and it's shocking but it's happening everywhere. When we were young we used to shack-up with a bunch of friends to be able to afford the rent. Nowadays, one has to do that to get into home ownership in the city.

When the US economy bottoms out, most other currencies will suffer as well!
It is only a question of how soon!
Then once again we will see people walk away from their houses!
Always the middle and lower class that bears the consequences of what the rich are doing!

No, I'm not suggesting that only the wealthy own property. I'm suggesting that only people with an aggregate income of somewhere around $100,000 can get the time of day from a lender in this country unless they already have big equity through inheritance or marijuana farming. Or through having bought before the 25% flipfest of 1982.

They will of course lend you whatever you ask if you assign them title to your parent's life savings. And be glad to accrue (compound, of course) interest without payments till they croak. That way they can buy holding properties at a fraction of their value without incurring tax liabilities. Unless you can pay in full within 40 days of the funeral. Without notice.

How exactly do immigrants double and triple up on a 1000 square foot two bedroom one bathroom forty year old East end crackerbox?

That stuff about hippies shacking up is true but irrelevent. That was a way of being unstable and avoiding responsibility. Home ownership is about family and stability and the future.

Market manipulation is about stealing all value from people who need to find a path forward. By commodifying their hopes, dreams and the needs of their very souls.

A suite in the basement will help with the mortgage payments.

RE: B.C. Real Estate Market

..and the many good comments posted on this topic.

Given the artificial land shortage created in the GVRD and West of Hope B.C. , the property values will inevitably rise when demand exceeds supply, though I agree it is somewhat skewed by the current economic climate.

Condo King "BOB" is in interesting phenomenon...It appears that many Local Gov'ts are on the densification teat...promoted as altruistic yet hiding other agendas. When they print permits to build hi-rises, Condo King,effectively monopolizes the listings...and like the old VSE, promotes the "stock" err..now in the form of a "Title" to something that hopefully won't leak in "pump and dump" fashion.

I suppose their are still some who think the Condo King will personally meet them and show them the unit(with or without their own realtor....) and then go over in objective no B.S. detail why this unit is in their best interests to buy. Condo King, of course, does this for all the other 200 - 300 units....not to mention 10 -20 OTHER hi- rises he has listed to market....

Then Condo King and Co. waits for the customers to line up...."sign here SVP ".

The problem with this is both overall credibility and eventual diluted credibility...one "talking head" and their "marketing firm" listing 100's on units via the monopoly of an entire hi- rise...and many others ...I can't say the consumers interests are necessarily protected.

Sales of almost $ 500 million???... so what...more a sad sign of a heard mentality( BAD ! ) than due- diligence...Maybe "King's" voice or Condo King and Co. signature name have some sort of Pavlov's dog response to potential buyers seeking the Kings' blessing.

Having experienced a few boom bust cycles in the market..anyone with half a memory can listen(and recall ) the same- old same- old PR buzz words....."sales are up...prices are up"ie hot market .... and when sales are down when compared to____ it's because inventory is tight....or sales are down but prices have not gone down...aka the POSITIVE subjective self -serving spin....

Regardless, there may be a correction ,prices stabilize, , and perhaps a dip.... but given BC is no longer a well - kept secret..I can't see any major correction.

Note...Typo above re: " Heard mentality ".

...shoulda read "herd mentality"...but then again perhaps BOTH versions are apropos.

Real estate opportunists have simply replaced the weasels and scam artists that left when they closed down the VSE - the most corrupt stock market in N. America. And now the Vancouver R.E. scene is the most bubbly and over-hyped yet there are those still take the rhetoric from the promoters as gospel.

What is it that makes BC and Vancouver so inept when it comes to recognizing such obvious scams. The odd glimpse of mountains and ocean seem to leave the sheep in some sort of irrational stupor.

I guess some will never learn!

Demand doesn't need to exceed supply. Let's face it, the lower mainland is the most treasured place to live in Canada - and it's dictated by climate. Not only are the extremely cold temperatures avoided - but as a result, one's vehicle here outlast's vehicles in all other parts of Canada. Hell, used cars are shipped by the thousands from here to Alberta because of their rust-free condition.
Unfortunately, lower mainland dealers fully realize this, and they give you bottom dollar for your tradein.

Alcibiades:

and ernies........

Considering that the whole of the BC economy is run on the windfalls of housing and O&G, we are indeed walking on the thin edge of the wedge......

And to those who figure they will pick up a few cheap houses when the bubble bursts, let's hope the acompanying inflation won't wipe out your bank accounts.............

Like many who have responded to this article, I hope that prices do come down so that more of us are able to buy a home. Having said that, I don’t think this is a bubble. I agree with Levy (I think it was) who said that it’s a balloon and the difference is that the air can be released slowly from a balloon.
First, there are the Olympics. It doesn’t make a lot of sense to me but the approach of this two week festival of sport means the housing market in the Vancouver area is not going to collapse. Not only do the games generate economic activity in the run-up period, they create a positive attitude amongst the population at large that will prevent the majority of people from believing that the sky is falling.
Second, the ripple effect: When the pebble dropped into the pond represents increasing real estate prices, the effect is spread over a large area. So, Chilliwack house prices might not be as high as Vancouver’s but they do rise relative to Vancouver’s prices. To use another metaphor, the incoming tide raises all boats.
And this year it seems like the ripple is a rather large wave. I’m from Manitoba and I had to spend some time there this year and people were complaining about real estate prices. Unless you’ve spent time on the prairies you might not know how unusual this is and if you check the MLS listings you might think that Winnipeg prices are pretty reasonable. And they are, but they used to be ridiculously reasonable. Property taxes were high but prices were low. Now, housing prices have almost doubled there (based on my anecdotal assessment) over the past few years.
This has nothing to do with the Olympics. This is that other pebble cum boulder – Alberta. You simply can’t have a house in Calgary at $600,000 and the same house in Winnipeg priced at $100,000. The house in Winnipeg is going to rise in price, maybe to $200,000.
What I’m saying is that there are fewer anomalies in the western Canadian real estate market. Sure, you can still find a dying small town in Saskatchewan where they’ll give you a lot if you promise to build a house, where a small house might sell for $10,000, but anywhere there’s a reasonably strong local economy prices are rising. There’s a new norm, a new benchmark. If $100,000 once got you a nice house in Winnipeg or Saskatoon now you need to spend closer to $200,000.
These new ‘lows’ provide the foundation that will help keep prices high in Calgary and Vancouver. I might wish it was a bubble but I think it’s a balloon.

So I want a raise!

RickW said:

"And to those who figure they will pick up a few cheap houses when the bubble bursts, let's hope the acompanying inflation won't wipe out your bank accounts............."

As long as I have, or continue to have my employment; inflation would be the least of my worries.

I work from a premise that BC , and especially the Lower Mainland as BC's real estate ground zero is on the International real estate "HOT LIST". I don't see that changing, perhaps never once one's City and area are on it.

Friend and I toured Whistler a few years back....the multi million dollar homes...NOBODY HOME in many of them...this was when DOT .COM types were buying homes for $10 Million....probably to keep up with the other peer group Joneses'. However, latest news was Whistler was actually experiencing a slump.

Same friend went a bought some houses in Tumbler Ridge area when the houses were as cheap -as -borscht due to mine closure...recall he paid about $50,000 for two houses approx. 25 years old...again this is in BC.

The Leaky Condo crisis...what has happened to all those...they must be selling...and I doubt at a fire sale. I would hazard a guess that upon repair, even those parties that have held onto their condos and not bailed have likely gained from a hot real estate market. That was a type of bubble that so -called burst, but the sky didn't necessarily fall.

Times change, and what is happening here is no different than other so-called World Class cities..... its simply that it has caught up to us. It's simply a chain of events following a formulaic cycle. Those seeking to establish themselves should perhaps think strategically and move where they can afford IF they feel ownership is their goal.

However, as a fellow I met who emigrated from Europe said, rental is more common where he originated from than ownership, but the lesser debt obligation allows for a much better " less mortgage enslaved " lifestyle..ie more disposable income for trips, vacations, etc. . I actually recall a local story on those who have chosen this rental lifestyle by actually selling their living unit which they had previously owned.

It's always about choices and avoiding the herd mentality.

One thing that both perplexes and amuses me is why people decide they must buy a home/condo only when the market gets heated and prices escalate???...if they had reasonable income and reasonable job security when the economy was less heated, why didn't they buy THEN...when things were at the bottom of the cycle...and far CHEAPER....its still the same house or condo..unless they are seeking a new unit. Otherwise what the hell changed and thus they feel obligated to pay more like many others in lemming -like fashion???

They end up their own worst enemies...and thus individually participate and collectively create an inflated market for ???? reasons.

Of course we're in the midst of a real estate bubble. How else do you describe it when debt is the size of an elephant and equity the size of a mouse? Currently, we are in a building boom. Booms are always followed by busts. The next bust is going to be catastrophic. I hope all those guys and gals making big bucks in construction are saving their money. They're going to need it.

freebear:

In the Great Depression, jobs disappeared overnight, and many of the remaining jobs saw wages slashed, in some cases by as much as 75%..........

dear vanessa,

just have to mention that those misguided souls who believe they have scored on the market due to their brilliance are not really suffering from (or enjoying) "schadenfreude," which the OED defines as "malicious enjoyment of another's misfortune." more likely is that they suffer from hubris or pride, which is known to goeth before a fall, or simple arrogance. just fyi.

v. interesting article otherwise . . . thx.