Eastern European countries

Eastern European countries that joined the EU recently are being flooded with Western buyers of properties, making it impossible for local people to buy housing, or land. I have seen some property prices, which are not much lower than here, with incomes way below, even our minimum wages.

Basically the same is happening here, with foreign buyers desperate to get rid of their worthless US dollars, while they can, and before the inevitable collapse, and Canada is one of the few countries stupid enough to accept them.

The banks are still creating imaginary capital for people to acquire properties, waiting for the collapse, when they can repossess and hold.

As far the big guys are concerned, they've learned their lesson from 1929 and are investing their imaginary, junk monies into resources, so when the collapse comes, they'll be in control of the world and can establish their long planned global dictatorship over the desperate population.

Their stocks won't be worth a damn, but with resource control, they can sit tight, maintain and increase their powers.

The neoclassical market economy, combined with deregulated money creation powers by private banks has now become the biggest crime wave in human history, with people and governments walking into the trap.

Look up the secret negotiations for the SPP and NAU and what they're planning.

Ed Deak, Big Lake.

bubble to pop

"Nobody credible has predicted a price decline." - Somerville says...I agree....we are not talking about a regional market, many buyers are from asia and europe...and compared to many citiies worldwide, property in vancouver is less expensive per sq. foot. What is more vital - is the lack of affordable public housing - and the lack of any policy of merit by the city, province or federal government. Surely, this implies increased poverty for working and non-working persons and their families, children --with housing eating up far to large a portion of their income. A story the Tyee ought to write about is, - what is the 'profile' of the those buying up the high rise condo's downtown vancouver, and is there any equity in this -for the workers and their families who constructed them at all. Also, who are the big property development companies, what are they all about, what are their profit margins, etc.

Housing Bubble

The idea that prices can't drop is a strange one - as recently as the end of last year the benchmark price on a vancouver house dropped $20,000 between September and January. I don't know about you, but $20 grand is a fair chunk of money to me.

With rates going up and credit tightening from the sub-prime implosion in the states the least affordable markets have the most to lose. That doesn't mean we're in for a quick correction like 1981 where house prices dropped in half in one year, but in the very least we'll be seeing some fluctuation.

Liberals favour free market - not!

The Liberals proclaim that they favour a free market. In fact, they only favour a free market for those who already have money. People who actually work for their money are being held down. The cost of labour is a component of the free market system, yet our government works to find ways to hold labour costs down while cost of living expenses (especially housing) has been encouraged to rise.

Union-busting and imported labour strategies have also exascerbated the problems created by the "red hot" West Coast real estate market. The market has thus been able to price itself higher than what locals can afford. Outside "investors" using "capital" created through the purchase of our own resources/real estate and increasing book values of those resources continue to put upward pressure on a market that is insanely high and unaffordable to working people. Should the bubble (magically) not implode, TILMA, NAFTA and other mobilization of labour (race to the bottom) schemes, ensure that local working people will never catch up and conditions will increasingly mirror those of California. Disparity between the exceedingly elite and the rest of the people will further increase. This link to a Vancouver Sun article has UBC economics professor David Green showing some economic morality in stating the obvious:

http://www.canada.com/vancouversun/news/editorial/story.html?id=7219cc4a-aa33-49e3-9f04-bfd397a1b921

Even if complete world economic collapse is held at bay, the working people of North America are generally destined to be working poor. Up-and-comers in the real estate/commodities game having been leveraging themselves in a game of tag, optimistic that they will not be caught once the game switches to musical chairs. History has told us many will lose, and the old, wide-bottomed money will have its seat.

Many of the smoking hot (cheap labour economy) businesses have been able to borrow for acquiring means of production and resource assets with as little as 7%-10% down. As long as they are making their payments, the businesses can siphon off the invented capital for investment in solid commodities/real estate (not attached to the debt) or to use for leverage in acquiring other resources or more plant and equipment. In any case, this causes inflation in real estate/commodities markets and huge problems for many fine, working, contributing human beings not geared toward a making a life of musical chairs. People on the fringe - many of whom have health issues (be they mental or physical) are not in the game at all.

The black hole of Vancouver

I recently came to the conclusion that Vancouver sucks up money or wealth for the entire planet more so than anywhere else!

So the bubble is not about to burst IMO since most of the money in Vancouver is laundered into this place; that is the only way I can explain the crazyness. And it will keep getting laundered in. As good as gold. Last week Vancouver Sun coverage on the HK anniversary was referring to the Vancouver real estate as the new "Swiss Bank".

This being said, the Vancouver real estate remains valued in $C and there will most likely be a big correction in a near future. Some kind of a SARS crisis, terrorist act, or other "random" event generated to profit the mischiavious. So the ones crazy enough to extend themselves via bank financing (i.e. the good old way) are bound to suffer big times when these interest rates take a hike. It will most likely happen. The black hole will however persist for the well off.

economic bust

You're postings are so thoughtful, Ed and Peter. I hadn't considered the Argentine comparison before you made your posting, Peter. Those of us with but a lick of economic understanding (or just a knowledge of history) should see the recurring theme happening, but how do we change things? I want to spend my life being productive and contributing, but I can never (fully) buy into a userous capitalistic system. I think I am like most people when I say I can never see myself as being one of the ones who follows the: "If you can't beat them, join them" crowd. I just don't like spending my days scheming about making money off of others' labour or misfortune. I don't feel good about myself when I live in that world.

When the bust inevitably hits, those with unleveraged capital will do what they have always done: foreclose on and/or purchase resources and assets at rock-bottom prices and/or build infrastructure with reduced labour and material costs to prepare for the for the next generation of milking the non-elites.

Prices will Dive In Vancouver !

Spoken like a true Pundit who's Vancouver-centric perspective is so full of B.S., it's hard to imagine someone being more wrong. One of the biggest problems with the real estate scene in Vancouver is its inability to see beyond itself. Why would someone spend a million dollars in Vancouver when there are so many other global options with far better value. If there is such a thing as a narcissist City, Vancouver is surely to be it. Where else can you go in the world where it openly pronounces itself as "The greatest Place on Earth" - I personally find this blatant and perpetual tooting of our own horn distasteful and indicative of a culture grossly naive of the rest of the world.

Vancouver's real estate will experience a crash far worse than what we saw in 1981 for two reasons:

1) There is and will be far more inventory than ever before. This is exacerbated by the huge amount of vacant homes and condos owned by non-resident, non-existent foreign speculators

2) The degree of speculation in this current market is higher than it was in 1981 - even though the pundits would have you thinking otherwise.

Too many opportunists in Vancouver have too much of their own financial interests tied up in the Real estate industry to be genuine and truthful about the situation; Builder/developers, real estate sales people and the local media (Vancouver Sun/Province), mortgage brokers, banks and Credit Unions as well as pundits. All of them will tell you a great story with rose-colored glasses and blinders permanently affixed to their faces.

Bankers who subvert their currencies

The thing about Mr. Deak's famous capital-creating bankers is that the name for that is counterfeiting. And the consequences of widespread counterfeiting are well documented and known.

During the early Eugenics wars, that is from the Boer war to the Korean war, the enemy always used widespread counterfeit currency as a weapon. The Third Reich produced millions of undetectable 5 pound notes and tried to circulate them in Britain. The goal: to ruin the country's ability to manufacture or even function domestically by collapsing the currency.

The value of a pound, (or a dollar or a zlotnik), is the value of all goods and services divided by the number of zlotniks in circulation. The more zlotniks there are, the less they're worth. Doesn't matter at all who printed them.

After several decades of credit card use, on top of the capital creation schemes described by Mr. Deak, I would like to ask exactly how many dollars are there?

Credit card transactions are covered by no real currency or standard. Even mortgages and business loans are barely stable. I'd be very surprized to find that banks are maintaining even a nominal 10% reserve of actual money. All this is simply counterfeited, to all intents and purposes.

A run on any market, whether real estate, banks, stocks or bonds will be a very dangerous thing without any actual currency in existence to cover the panic demand that characterizes a run.

Our own bankers are treating their own currencies exactly like the Nazis treated the British pound in 1943.

And didn't I read that the Bush family has recently bought a large estate in Paraguay?

Bailey, in Canada there are

Bailey, in Canada there are no reserve requirements since they were phased out from 1991-1993 or so. There is a small "capital reserve" requirement of about 1.5 cents in the till for each dollar on "deposit".

The number one way that new money is injected into the economy is via mortgages. Each new dollar is printed by the private banks, literally loaned into existence. Each new dollar is a debt owed to the counterfeiters. Because of interest, the debt obligation grows but without new money to take care of it. This ponzi scheme requires ever new injections to keep it alive, ever increasing mortgages. So what must be maintained? Rising property values, along with relaxed lending standards so that folks qualify for the larger mortgages.

Banking rules our lives. I'm sick of it.

Nobody credible has predicted a price decline

...but then again, "nobody credible" predicted a decline in U.S. housing prices two years ago...

Of course, there were a few Cassandras... but as we all know, they were proven wrong, and in spite of rising foreclosures, rising interest rates, the subprime mortgage CDO crisis, and rising inventories, housing prices have just kept on going up...

What's that you say? They have come down... Bummer!

O.k. So what we are being asked to believe is that Vancouver is somehow divorced from the rest of the world, that even though the foreign purchasers now being blamed for increased housing prices are going to take a bath in other countries, even though investors world wide are going at some point to start liquidating their holdings (there comes a point in every bubble when people stop worrying about the return on their investment and start wondering about the return of their investment) it's not going to affect Vancouver.

I hate to rain on somebody's parade, but just as the Asian contagion affected markets that were supposedly separate, so the collapse of US mortgage backed securities is going to affect the Vancouver market. Past results are not indicative of future profits.

For those of you who aren't following the debacle south of the border, may I suggest starting with the linked articles at

http://ml-implode.com/#ailing

It's not exactly bedtime reading material if you want to sleep.

In fact, from a contrarian viewpoint, the statement of Mr. Sommerville marks the top of the market. Get out now or live to regret it... (as in "feet, don't fail me now!")

R. Smiley

Amen brother. . .

Working Slog - you said it. I'm a big bull wrt Vancouver real estate. Things will get ugly and with so many people with so much wealth tied-up in their homes, the streets will run with blood when the sh-t hits the fans.

I'm so tired of talking to realtors (and it seems like everyone and their friggin' dog is a realtor) who have never seen a cycle and are used to ever-rising prices and completely ignorant of economics swear up and down that Vancouver is poised for perpetual growth - just because it's Vancouver.

There is an unwarranted arrogance that permeates this place - and it's quite pathetic. . . only a place suffering from acute insecurity would trumpet itself as the "best place on earth". Heck, I love YVR and am a Vancouverite, but I've seen the world and been places to be humbler. The sheer idea that anyplace could bill itself - and then believe - that it's the unequivocal best place on earth is juvenile braggadocio.

The condo prices should hold-up relatively well, because they are held by and large by the ex-pats, jet-setters, American cruise ship refugees, wealthy retirees and their children - but those $500K-$800K houses are going to fall big-time in value as all those suburban families who sold their starter townhomes in Burnaby for double what they paid to move into those massive 5 bd/4ba, 3 car garages, are going to feel it bigtime.

So, maybe it's not without a small helping of schadenfreude that I write this - but having lived and almost died (financially) due to some pronounced bubbles, believe me - I know a bubble when I see one, and Vancouver real estate? Big bubble, Big, HUGE. . .

Olympics backlash is right on schedule

POP CRASH FIZZLE - call it what you want. The result is the same.

According to real estate trends from past Olympic regions, the odds that the Vancouver housing market will take a major dive just like it did in past Olympics regions is great. After it Snaps, Crackles, POPS or Fizzles, relative sanity will then return to the market, and in a short time prices will slowly start to rise.

If you're currently house-less and waiting to buy, wait a bit longer for the Olympic backlash. If you want to make a profit, sell now while prices are still high and rent outside the city until the real estate market drops out. When it does, buy back in. If you bought at the peak of artificially inflated prices with a low down payment there's nothing you can do but hope mortgage rates don't drive you out.

If you think we can dodge this Olympic bullet when no one else in the free world has been able to do so, you're not as smart as you think, but you are as gullible as Olympic developers expected.

Not one house was sold in Park City (Vancouver's Whistler) during a 3 month spell surrounding their 2002 Games. It broke a record that stunned realtors across the country. Also, people who invested hundreds of thousands fixing up their homes in preparation for the Games lost a fortune.

Sydney Australia and Atlanta also experienced the same downturn respective of artificially inflated pre-Olympic frenzy. Don't fall so easily for the SPAM coming from Condo Kings who are only interested in making a quick buck off the back of our community.

Local newspapers reported that more real estate was sold in the month after we won the Bid (August 2003) than in any month in past history.

The biggest factor supporting a crash scenario is that other than real estate and natural resources jobs, there is very little other real world opportunity in BC, including and especially Vancouver. The recent Microsoft news is a start, but still only a hiccup in the global perspective. You can't call it the greatest place to live if you can't get a well paying job. Average wages don't cut it when your average house costs $750,000.

Once you get past the wilderness, all that's left is wilderness. I really love Vancouver and the people, and I like the wilderness, but you can't eat it.

Maurice Cardinal
Editor - OlyBLOG.com
Author - Leverage Olympic Momentum

Conunterfiet money and RE

Funny it is mentioned as a way for one country to subvert another. I remember the photos of Hizbolla giving out boxes of neatly pressed counterfeir currency in Lebanon to convince people they are a "humaitarian" organization. The money, of course, was counterfeit.

Back to housing. Prices are artifically high due to government bungling, interference in the private sector, overtaxation, and obsession with the DTES. Suggestions:
1. Remove the PTT.
2. Stop forcing developers to put in social housing for the poor, so middle class buyers can afford to buy without subsidizing others.
3. Learn to live within Property Tax increases that match the inflation rate. Vancouver's 8% increase is unnecessary and shows lack of governance.
4. Let commercial rental unit owners sell without paying capital gains if they put the proceeds of the sale into a larger property, this is done in the USA to attract private money to the housing sector.
5. City of Vancouver should sell all the real estate it owns (the city is one of the largest landowners in the city) and let it be developed.
6. Stop the obsession with social housing by all levels of government for the "poor and drug addicted" and give the money back to the overtaxed middle classes so they can actually afford to buy a place of their own. Why is the government competing with the private sector to be a land and property buyer and developer? they should stich to what they do best...Sewers and Garbage collection.

Some other suggestions

1. Put an end to real estate commission sales.
2. Make it illegal for foreigners to own Canadian property unless they live here in Canada. Make it illegal for people from other provinces to buy and hold investment properties in residential real estate.
3. Stop the capital gains and dividend tax giveaways. Every dollar earned should be taxed equitably - no matter where it comes from or how it's earned.
4. Capital Gains exemption on sale of principal residence should be capped at no more than $500,000. After that all capital gains should be taxed exactly as for other income.
5. Bring in a comprehensive program of inheritance taxes and duties on trust transfers.
6. Get the government more involved in assembling land for social housing - especially in areas of the lower mainland that are currently mostly single family dwellings where land utilization is horrendously wasteful.
7. Increase property taxes on real property valued at more than $750,000. - use the taxes so collected directly for public transit infrastructure costs.
8. Increase the cost of gasoline immediately to $3/litre and direct the additional revenue into public transit subsidies.
9. Establish tolls for all vehicles coming into the downtown core during daylight hours – charged electronically and billed at the end of each month – funds also to go to pay for better public transit.
10. For single family homeowners willing to create legal suites within their dwellings, the municipality should have special tax considerations.

G West

Congratulations!

Your suggestions, if implemented would tax the middle class to death. It would not eliminate "poverty" or make housing affordable, it would simply bring the middle class down to the poverty level. It would make vancouver an even more expensive place to live. I think you also need, to pay for your social engineering schemes, alot more than a 8% property tax increase per year!

I think the only municipality that "gets it" is West Vancouver, with a 0% tax increase compared to Vancouver's 8%. It helps to make West Vancouver more affordable, or at least helps you to buy a bigger house or a Hummer.

By the way, I also forgot to mention as my No. 7 to Get rid of the Agricultural Land reserve and allow development everywhere and while I am at it No. 8 More Highways.

I disagree! Obviously.

My methods would, in fact, require much lower rates of tax on earned income than is now the case. You might want to learn a little something about the way the tax system works now and who it currently favours. Certainly not the middle class.

Enough basement suites

"10. For single family homeowners willing to create legal suites within their dwellings, the municipality should have special tax considerations."

Many of the suites created within houses are not really proper living spaces. This is a very bad form of ad hoc densification that is way too come in Vancouver. These suites are often firetraps with a lack of sunlight and insufficient sound insolation. We need some decent quality housing not poor people living in the dank basements of the middle class.

Very disappointed in Sommerville

He totally dismisses some very persuasive evidence that Vancouver real estate could crash. I expect better from someone in his position.

He makes the "UBC Centre for Urban Economics and Real Estate" seem like shills for the real estate agents and developers.

I agree RE will crash

I expect sometime in late 2008, when developers cannot buy-demolish-build in time to flip it before the olympics.

You only hanve to stand on the cambie bridge and do a 180 and count the 12 or so cranes you can see...When Vancouver starts to look like Dubai, like it does now, you know something is out of whack.

Time to buy and hold some gold (or gold stocks) for the coming liquidity bubble collapse which will likely affect more than just RE.

patiently waiting

Au contraire. A carefully planned program of inspecting and enforcing upgrades (before the suite is declared 'legal') can be - and has been in some jurisdictions - a very successful approach to providing additional housing while permitting people to keep their homes and stay in their old neighbourhoods.

Victoria, for example, is having very good results with just such a program - you can check it out.

Your facts are incorrect

>In Vancouver, from 1994 to 2001, housing >prices were flat, meaning that adjusted for >inflation, they dropped in worth, but the price >tags themselves didn't change. He says that >could happen again.

This statement by the author is incorrect, both for my Burnaby house (assessment) and a lot I owned on Van Isle. Not only did my Van Isle lot drop in value, but it wasn't salable due to no buyers. The buyers would have been people moving to BC on retiring, something that seldom happened then.

I detect a desire by the author to protect a political party, which screwed up BC's economy during that period.

We don't inspect and enforce

Here in the GVRD, basement apartments are not being properly monitored, I guarantee it. I've seen enough substandard basement suites with my own eyes (even lived in one). Many older, smaller houses are simply not meant to have basement suites. But they put them in anyhow. Just go look at few open houses and see what passes for basement suites sometimes.

Meanwhile, we need more proper purpose-built rental housing. Such as four-plexes and townhouses for families.

Basically, we need to remove much of our "single family houses" and replace them with somewhat denser housing. Trying to convert a SFH into two or three units often makes for bad housing. Sometimes an old house is big enough, but usually it isn't.

great suggestions, Gwest

I'd be willing to support them all - even the $3 gasoline for Vancouver's transit - if Vancouver would be willing to keep its own garbage: recycle and compost what it can and generate electricity and/or steam heat for hospitals and low income housing with what is left over. Recover CO2 if possible.

Bottom feeders

While we're at it, maybe something can be done to eliminate this sort of practice.

Greater Vancouver Foreclosure Inner Circle

http://realestate.meetup.com/652/?gj=sj8

Cresting the Wave

The end of the boom is in sight because interest rates are rising. Vancouver's property market is well extended and it only takes an event- related or unrelated to property to precipitate a sell out. The US has sub prime lending which extended the property run, but that has contracted and the ripples are being felt as property prices have stalled. Canada doesn't offer such highly leveraged programmes so lenders and borrowers are at their maximum limits.

A bubble is sustained when there is a greater fool to pass the properties on to. The HK Chinese started this boom in the 90s with the False Creek developments. And in the inimitable Chinese speculative style, passed on the prices to other Chinese and finally onto the Vancouver buyers. Once the spec buyers dry up the existing spec property holders only need a bad event to create panic selling.

It boils down to to whether or not you believe most of those condos are held by speculators or investors with long term holding power.

Now I don't think the price correction will be as devastating as it was in the early 90s because the BC and global economy is still relatively strong. This means there are liquid buyers waiting in the wings to take advantage of any mass selling. Vancouver is still an attractive place to live as long as the economy is good. So there's no need to buy gold.

Patiently waiting

I won't dispute it isn't and hasn't been properly handled in Vancouver...after all, it's in this city where long-time Campbell Liberal bagmen lead campaigns to have the Province simply 'cut a cheque' to pay off the Musqueam and retain a golf course in perpetuity for the good burghers of Point Grey.

Now I know the funny money we use today is horrendously inflated scrip, but, suggesting that it is appropriate for the Campbell Government to use provincial tax funds to make a pay off to their close personal friends in the Premier's constituency is horrendously bizarre. We’ll see, in the next few days, whether the Premier recognizes this follow or not. It isn’t just the remediation of the mess created by Bill 29 that is causing the government to tear out its collective hair these days.

Relative to that kind of thinking (which also seems endemic among the Lower Mainland's civic administrations) I can imagine that housing and development decisions would not - and have not - been handled well.

I do agree that single-family conversions are just one of many possible ways in which more and more affordable housing options can be provided: Without, of course, turning the whole of Greater Vancouver into high-rise Condo Ghettoes for the indolent affluent.

Sharing: I certainly don't disagree that Vancouver's garbage should be Vancouver's problem and not just something they can shift up the valley for others to contend with.

Gerlib

Any facts to back up your assertion? I've been over this subject before with Martin and will happily provide real estate board numbers for the NDP era.

My house increased by 33% in the late 90's, sorry to hear yours didn't.

Vancouver Housing Bubble to Pop, no affordable housing

People complain about high prices and no affordable housing, but are they not really complaining that they want to live beyond their means and are not being allowed to. Vancouver is prime property and most people will have to work up to it. Most people don't start off by buying a Cadillic for their first car, it might be a Pinto instead. Not to many Pintos in Vancouver anymore. Look in Manitoba, Sask, most parts of northern Canada and eastern Ontario. Great deals for property there. And there are jobs in most of those locations.

Will the bubble pop, not until most of the baby boomers have passed away or we purchase a nice warm country down south or the U.S. gets tired of paying for our oil and rolls over on us.

Au contraire

Cities need workers, workers need a place to live. Ergo, full-time workers should be able to afford at least a small Pinto-ish house. Not a Cadillac house overlooking the ocean but something where with an hour's driving they can reach their jobs from.

As prices in Surrey, Langley, Coquitlam, Maple Ridge etc demonstrate, even a willingness to commute a few hours a day can't get that little bungalow with a small yard for the kids anymore.

I think if the only $700,000 houses were in Point Grey no one would be complaining.

Now if a city can't house workers with a family, I say that's a city with huge social issues about to hit the fan.

Like our neighbours

Can anybody say "foreclosure American style"?

Bubblicious

Quick! Someone think of something to promote after these history making, three weeks of Olympic Sports, in February 2010. Surely we can come up with a significant project to keep blowing air into this bubble. How about whipping up more interest in a bridge to Vancouver Island! Opening up this vast untapped region of mostly useless wilderness and forest into more resorts and retirement communities! Better still, how about a promise from Gordo that our economic future is so bright that we'll soon offer up our oil and gas resources to foriegn conglomerates in trade for a few thousand more jobs and lower corporate taxes! Only good economic news will drive the province forward and keep this bubble growing forever! Hey Premier Campbell, didn't we just find gas deposits off shore in the amount of 6000 trillion cubic yards? I'm sure I heard that some where recently. How about announcing that population growth in the GVRD is expected to add another million people by 2025? Surely that will keep prices topped up! Who needs all that useless farmland when we can build more single family dwellings that most aspiring capitalists drool over to own! We'll just import more fruits and vegtables from places like California and Chile and China.
(Anyplace that starts with a "C" apparently grows food. Hmmm, where do we live again?)

After all the wealth has been created, then the bill will be due. Those left after payment has been extracted are welcome to all the 12,000 sq. ft. ocean view properties they want. The original owners having found out that they can't eat the imaginary money they worked so hard to earn. Most died in defence of their last can of cocktail shrimp. The specialization of our societies complex and fragile economy implodded, the lesson will have been completed, again. But worse this time than before, collapse not only of the economy but the natural worlds ability to sustain even a few hundred million people. History will describe this era as the time of obscene consumption.