The Property Bubble is About to Burst!
You have been warned!
Renovation is a sure way to inflate property values
It’s been reported in the news that the changes in the HST is causing confusion among Vancouver property owners. In the past, there have been homeowners grants available for renovations and upgrades that have benefits to the owner as well as the environment.
There are other benefits to renovations for home owners too–increasing the value of the property. Adding some structural changes, even aesthetical changes such as painting can make a big difference to a property’s value, as well as its looks.
In the BC lower mainland alone, there are several good Vancouver house painters and decoration companies to choose from. I recently got my home painted by Riva’s Painting. They did a great job and I was really happy with their service.
There were more reports of the Vancouver property bubble in the news lately, with most of the industry “experts” saying there is no Vancouver property bubble. Either way, improving your home is guaranteed to increase its value.
HST is also causing confusion when it comes to buying/selling real estate in Vancouver. According to the Vancouver Sun, the 12-per-cent HST applies to new home sales, while under the GST-PST regime, new home buyers only paid the five per cent GST. With no transition rules, it is uncertain what the PST will apply to when it is reinstated in 2013. In terms of renovations and HST, the recent change is affecting home renovation projects with HST on them because consumers don’t know what to do
Australian Property Market Focus
In our look at residential property markets around the world we head down under to the home of Mick Dundee and Chopper Read to see how the Aussies are faring these days.
The main cities such as Sydney, Melbourne and Perth all seem to be doing well, whereas other backwater towns such as Hobart and Darwin have seen a drop in house prices.Predictions of an Australian property bubble have yet to materialize.
What about the property rental market in Australia? Well all indications point to a healthy rental market, which suggests that property investment in Australia remains attractive.
While we look at the Canadian housing market news regularly, we think it’s important to keep things in perspective by looking at other countries.
If you’re an Australian, here is some news for you: the cost of renting a home in Melbourne continues to decline according to the latest Rental Market Report released by Australian Property Monitors. Gumtree is a great place to look for rentals if you’re in Australia. For Gumtree rentals in Melbourne and Gumtree rentals in Brisbane, visit Gumtree today.
It’s good to see that there are a few healthy housing markets left in the world.
If you’re an Australian, here is some news for you: the cost of renting a home in Melbourne continues to decline according to the latest Rental Market Report released by Australian Property Monitors. Gumtree is a great place to look for rentals if you’re in Australia. For Gumtree rentals in melbourne and Gumtree rentals in Brisbane, visit Gumtree today.
Image: http://therazorreport.blogspot.com/
The “Vancouver property bubble” has hit the headlines three times in the past few days in the mainstream media so this has motivated me to get off the couch and pen a brief post on the subject. So after years of rose-glazed garbage headlines about how great the real estate market is doing, have the main stream media finally woken up to the fact that the Vancouver property bubble is about to burst? Not really, I’m afraid. These types of headlines are still few and far between. More emphasis should be put on the bubble risks, and the potential effects it will have on the whole economy.
The National Post article sort of focused on real estate commissions. It said that “the Competition Bureau is claiming to stand on guard for Canadians by breaking the real estate brokerage cartel and its 5% commissions”. It also said “the Office of the Superintendant of Financial Institutions is looking into the impact of foreign investment on Canadian real estate -which has reportedly been a factor in Vancouver, and recently featured a $28-million condo purchase in Toronto.” One alarming thing jumped out about the last bit; “reportedly been a factor in Vancouver”. This has factually been the case in Vancouver for a long while now, and it seems the government was lapping up all the investment thus far. It’s only when local Vancouverites can’t afford a home anymore that anyone in parliament seems to start caring.
In terms of house prices, the article highlighted the differences in the current state of the US housing market and the real estate market in Canada (the U.S. house prices down 4.2% and Canada being up 8%). The article claimed that “those thinking of buying or selling should perhaps be more concerned about the future of price levels than commission rates, although the latter are certainly also an issue.” Really though, who cares about commissions? There are dozens of flat fee real estate websites now that have put the issue of overpriced realtor fees to bed. Some in the realtor community have seen the opportunities out there of not ripping off their clients and giving them good value and service when buying or selling property. The article mentioned the Competition Bureau’s battled with the Canadian Real Estate Association to make these types of flat fee realtor websites possible. Commissions are one thing, but there is not a whole lot that the government bodies can do about the foreign investment raising the prices in Vancouver and Canada.
The Globe and Mail article rather focused on the price of property in Canada in comparison to the average family income:
The article was based off a report by BMO Nesbitt Burns which said “the average house now costing “an astounding” 11.2 times a family’s average income — more than double the national average.”
It warned that “Vancouver’s housing market looks primed for a correction”.
“Vancouver’s house prices have nearly tripled in the past decade, spiralling beyond the reach of most first-time buyers or non-lottery winners.”
Does this mean the Vancouver property bubble is about to burst? Well if “correction” means a burst bubble, then yes. The BMO Nesbitt Burns report said that “high valuations in some regions, coupled with elevated household debts, suggest Canada’s real estate market is vulnerable to a correction in the event of a rapid increase in interest rates (due to higher inflation), a sharp increase in unemployment (because of a U.S. double-dip), or a slowing in foreign investment (because of a hard landing in China).” All these factors could happen very easily in the near future.
The CTV article gives a stern warning based on a U.S. report examining the U.S. property crash and says similarities in what happen there are happening here in Canada with the fact that both the growth of Toronto and Vancouver are constrained by development restraints; Vancouver having geographic restrictions and Toronto having greenbelt preservation regulations.
All these things mentioned in the three articles should give the community a wake up call about the possibility of a bubble burst coming in the near future.
For those of you that don’t care about the property bubble, and would rather keep dreaming, I titled this piece “Vancouver’s House Prices Beyond the Reach of Non-Lottery Winners” based off a line in the BMO Nesbitt Burns report. The Lotto Max jackpot is at $15 million this Friday. So lets look at what a lottery winner might buy:
At $39 million this piece of Vancouver real estate is sadly out of budget. This listing at 2190 Camelot Road West Vancouver is on 5.44 acres which encompass three legal lots and is located at the top of 21st Ave in West Vancouver overlooking Downtown, the Lower Mainland, Vancouver Island & the US. The listing claims that this property is very private, has views from all angles and is populated with beautiful trees and a picturesque creek. According to the listing description the zoning allows for three buildings up to 70,000 sf, however, the current designs call for an amazing 21,000 sf rancher home with Olympic size negative edge pool plus, 16 car garage, a 7000 sf rancher guest house (also with negative edge pool) and a 2600 sf two level home office and a maid’s quarters (essential these days). Once constructed, this will be Canada’s most impressive estate. (I would be very interested in keeping an eye on this one. Sadly a $15 million lottery win wouldn’t even come close in this case).
This $4,950,000 English Country Manor is an affordable piece of Vancouver real estate in comparison. This property is situated on 0.93 acres at 6576 Blenheim Street Vancouver, and seems like a a must for any lottery winner. There’s would be lots left too for flash cars, helicopters and the like.
How about this luxury Port Moody condo which is a modest penthouse for $918,900 at 301 Capilano Road Port Moody? This is a little more realistic for any lottery winner. This unique home offers two levels of living with vaulted ceilings in living area, unobstructed ocean and mountain vistas, and a 690 square foot private rooftop terrace. You could buy 15 of these if you so like!
Read the three articles yourself for more:
Vancouver primed for housing correction: BMO – Globe and Mail
and
Low rates stoke housing bubble – National Post
Housing bubble linked to restrictive development rules – CTV.ca
Canadian Housing Bubble Should be a Federal Election Issue
Vancouver Property Bubble
WOW…it’s all I can saw to see an article like this appearing in the mainstream media…The Globe and Mail ran an eye-opening article (hopefully eye-opening to those caught in the slumber of the Canadian housing bubble) about the current state of the Canadian real estate market titled “Signs Point to a Severe Housing Correction in Canada”. This is especially apparent because of the current state of the real estate market in Vancouver, where house prices have gone beyond the reach of many.
The article was written by George Athanassakos, a finance professor who holds the Ben Graham Chair in Value Investing at the Richard Ivey School of Business, University of Western Ontario.
Here are just a few quotes taken from the article. They are a refreshing change from the constant rosy press releases issued by real estate associations here in the Lower Mainland:
“Canada’s high house prices in relation to incomes, combined with record household debt levels and over-investment in residential construction, will cause a severe correction in the real estate market.“–This sounds like any of the other countries that just had their property bubble burst and their economy ruined…ever heard of Ireland’s recent property crash and the consequences of that?
“Home prices are simply way out of line, especially when viewed in relation to household income. The ratio of house prices to income has historically averaged about 3.5 in Canada. It now stands at about 5.5.“–This is true and a sad state of society where a lot of people just can’t afford their own home.
“It is difficult to see how income growth in the future can bring this ratio close to the historical average within any reasonable period – so it follows that house prices will have to decline.“–This looks like an obvious prediction, but one that sadly never gets much mainstream media coverage.
“The housing market in Canada is already in bubble territory. Average house prices have doubled in the last 10 years, while rents have risen by only about 30 per cent. The ratio of house prices to rent is now higher in Canada than in any other developed country.“–This is another sad fact about the Canadian economy, and one that politicians running in the federal election should address. Is anyone talking about it on the political podiums?
“Canada is past the point of no return. What has propped up the housing market in Canada and delayed the correction is artificial demand from Asian investors. While it is not clear when this demand will dry up, it eventually will. Once it does, watch out.“–Another sorry reality. There is talk of the Hong Kong property bubble. Even the slightest dip in the real estate market there will have knock-on effects for the Canadian real estate market and economy.
Read the full article and just think about the points being made: Signs Point to a Severe Housing Correction in Canada.
In truth I hope the Canadian/Vancouver real estate bubble never bursts, I hope people can keep on paying millions for properties in Richmond, Burnaby and all the other suburbs of Greater Vancouver, I hope we can keep on living in Moo Moo Land, but when the real estate bubble does go pop society will be hit hard. It will filter down to every section of the economy. There are so many other recent examples of this: the U.S., Ireland and other European countries. The political parties should make this a federal election issue.
Vancouver’s Olympic Village Nightmare Continues
Looks like Vancouver’s Olympic Village is turning into a real nightmare for some owners. This comes just after the big marketing push in February to sell some of the vacant Olympic Village condos. Many were sold at up to 45-50% off their peak value.
Almost a quarter of the original buyers in the Olympic village have filed lawsuits to get their money back, …Lawyer Bryan Baynham, filed the suits last week on behalf of 62 clients in five buildings claiming their condos are not worth what they paid because they leak or the doors don’t work properly or the work is shoddy – or all of the above…owners taped videos showing water streaming out of a bathroom light fixture, a ceiling sawed open to get at malfunctioning capillary heating mats, bedrooms that are so small the owners can’t open closet doors without hitting the bed, and cracks in hallway ceilings.
The Province also ran the story last week and listed some of the Olympic Village complaints including…doors that won’t close properly, uneven floors, ventilation problems, smaller-thanexpected rooms and dysfunctional appliances. How are the people who bought in the Olympic Village last month going to feel after reading these articles?
Imagine how the strata fees are going to be affected in the future if there in major work required on these buildings!
Although February generally seen property prices in BC rise, the Olympic Village was the exception. You have to wonder, with the rest of downtown Vancouver booming, why did they have to drop the prices so much for people to buy in the Olympic Village?
social housing protests in Vancouver
I would rather buy real estate in Surrey than buy in the Olympic Village. I also don’t think we have seen the end of the protests by the social housing radicals who want the City of Vancouver to use the Village for social housing projects. Mayor Robertson and the City will have more protests at their door in the coming months if the social housing issue is not sorted.
House price gains likely to recede?
The Globe and Mail has an article titled “House price gains likely to recede“. In the article the Canadian Real Estate Association claimed that gains in house prices are likely to “recede” starting next month as shorter mortgage terms keep some buyers out of an already softening market.
This is contrary to what we have been hearing during the last two months from every real estate “expert”. In the article the Canadian Real Estate Association claimed that gains in house prices are likely to “recede” starting next month as shorter mortgage terms keep some buyers out of an already softening market.
35-year amortizations will not be an option by Friday, and many believe the strong sales levels over the past month and a half were solely due to this fact. Things should really start to slow down in the real estate market as many people will not be able to afford mortgage payments on a 30 year mortgage. Interest rates rising will also be a factor.
Bank of America Merrill Lynch said yesterday in a report that while prices appear high and affordability is stretched, there isn’t a high probability of a sharp crash because the economy continues to improve and the number of new housing starts remains low. That is garbage.
Property prices are way too high, especially Vancouver property prices, wages have not risen on par. Something has got to give. With the crisis in Japan we have seen the canadian dollar dropping. This shows that we just can’t know what external factors will affect the Canadian economy.
Expect the property bubble sooner rather than later.
Vancouver Property Prices February 2011
Property prices are going up, up , up! (Well read the small print, as some sectors are down, down, down).
Housing demand has increased in Greater Vancouver in February according to the Real Estate Board of Greater Vancouver (REBGV) report released today (March 2).
Benchmark prices have increased in all areas of Greater Vancouver. “Benchmark prices” are the estimated sale price of a benchmark property. Benchmarks represent a typical property within each market.
Richmond and Vancouver Westside have seen particularly high sales volumes occurring. Richmond seen an increase of 25.1% in benchmark prices, while Vancouver Westside saw a 11% increase. Other notable increases were Port Moody with 19.1% increases on February 2010 prices. It wasn’t all positive however; some sectors saw decreases in the benchmark prices: attached properties and apartments in South Delta, Maple Ridge & Pitt Meadows, and Port Coquitlam saw some decreases.
Benchmark Vancouver Property Prices:
The benchmark price of a new home in Greater Vancouver is now $605,544. This is the average prices for homes across all the areas that the REGBV represents.
This can be broken down by property type:
The benchmark price of a new detached home in Greater Vancouver is now $848,645 (an increase of 6% from February 2010).
The benchmark price of a new attached home in Greater Vancouver is now $507,118 (an increase of 2.2% from February 2010).
The benchmark price of a new apartment in Greater Vancouver is now $399,397 (an increase of 2.3% from February 2010).
Benchmark Burnaby Property Prices:
If you thought the price increases in Vancouver were big, get this: Real estate in Burnaby increased 9.5% on February 2010.
The benchmark price of a new detached home in Burnaby is now $847,864 (an increase of 9.5% from February 2010).
The benchmark price of a new attached home in Burnaby is now $505,287 (an increase of 5.2% from February 2010).
The benchmark price of a new apartment in Burnaby is now $358,753 (an increase of 1.7% from February 2010).
Benchmark Port Moody Property Prices:
Some of the biggest property price increases can be seen in Port Moody. Real estate in Port Moody has increased by a whopping 19.1% for detached homes.
The benchmark price of a new detached home in Port Moody is now $746,726 (an increase of 19.1% from February 2010).
The benchmark price of a new attached home in Port Moody is now $414,456 (an increase of 1.8% from February 2010).
The benchmark price of a new apartment in Port Moody is now $288,869 (an decrease of -3.1% from February 2010).
Richmond has seen the craziest increases, reportedly from the plane loads of mainland Chinese that are coming over to buy up big houses. 25% increases on 2010, 42% increase on last 3 years, and 88% increase on last 5 years. This is absolutely nuts! You and I may never be able to afford a house in Richmond, nor will we be able to afford a Vancouver condo, but out there in the suburbs, where it’ll take you an hour’s bus ride to get to the Skytrain station–that’s where you could afford.
You can read all the stats from the official Real Estate Board of Greater Vancouver (REBGV) February report.
Vancouver’s Olympic Village – Billion Dollar Ghost Town
As Vancouver just finished celebrating the one year anniversary of the 2010 Winter Olympics, the legacy of the games are in the news: the Olympic Village condos are being sold off, fire sale-style. The discounts range from as much as 50 per cent on the most expensive condos to as little as five per cent on some of the cheapest and smallest studios.
This is the third time condos in the Olympic Village, or Millennium Water condos, have come on the market. Vancouver taxpayers are still owed $740-million or so after the city took over the loan. The average discount on the Olympic Village condos is about 30 per cent. The area has been one big billion dollar ghost town for the last year.
The court appointed receivers, Ernst & Young, has listed pricing on the 230 units in the Bridge and Kayak buildings as:
- 59 units will be less than $500,000
- 61 units will be between $500,000 and $750,000
- 51 units will be between $751,000 and $1 million
- 59 units will be more than $1 million
Out of the remaining 244 units in the troubled real estate complex to be sold, 127 along the back row of the complex will be rented out temporarily to help fill out the village population. The remaining units which are in mostly in the vacant Canada House towers, and which are apparently the most valuable, will be sold later–a riskier move possibly, depending on how the real estate market goes.
Have a look at the brochure…the place looks amazing: The Village on False Creek (renamed yet again?) However, there have been numerous reports about the quality of these condos, with unfinished appliances, faulty fittings, shoddy pipe insulation other stories coming out. So buyer beware is the phrase of the day.
My advice: wait until the fourth or fifth time these condos go on sale, and you will get some value.
March-the Month of the Great Canadian Property Crash?
According to those impartial people over at the The Real Estate Board of Greater Vancouver (REBGV), Vancouver residential property sales fell 5.4 per cent in January compared to January 2010 and 4.2 per cent from December, yet prices still rose!
Where is the logic in that? Normally, the law of supply and demand would dictate that lower sales will lead to a price decrease, not a price increase.
So who is still buying these over-prices properties? According to a Vancouver Sun article, builders and new immigrants are snapping up properties two at a time–in cash purchases. These are the types that we have little sympathy for, when the crash/correction comes, as they are the ones driving up prices and putting affordable housing out of the reach of many.
There could be just another month or so of this overpriced property madness however. Many experts, such as Garth Turner, have been predicting a property bubble or major price correction in Canadian and Vancouver property prices for the last few years and March could be the month this happens.
Capital Economics, a company which provides independent economic analysis to institutional and corporate clients across the globe, warned that the housing market is likely to suffer the same sort of crash that has plagued countries such as the United States.
What catastrophic reasons could cause such a collapse? Well higher interest rates, which are expected in March, could “easily” cause Canadian home prices to collapse, they say. The thinking is that as the Bank of Canada raises interest rates, mortgages will become more expensive for consumers (pretty obvious really).
There is also the double whammy combination of higher interest rates and new mortgage rules, coming into effect March 18, which could devastate the real estate market this year. The new federal rules will reduce the maximum amortization period to 30 years (down from 35 years) for government-backed insured mortgages with loan-to-value ratios of more than 80%. The government brought in these new mortgage rules to rein in Canadians from taking on more debt at a time when it is at record highs.
So folks, mark your calendars and let’s see how the real estate market reacts to both these events.
Vancouver Real Estate Comedy
The Globe and Mail website had a funny article a few days back in which it pokes fun at the real estate situation here. Funny but true…
Q: Why is residential real estate so expensive?
A: Good noticing, it is expensive. The average price of a bungalow in the city is $890,000.
The cost of housing remains high because the Vancouver real-estate market is a pyramid scheme teetering atop a cloud of ephemeral hope and, simultaneously, eternal fear. If a single homeowner begins to doubt the prudence of their investment, the pyramid will collapse. Which is why there is a bylaw prohibiting homeowners from ever expressing out loud regret for their real-estate purchase. Regardless of how leaky it may be.
Q: But then, how do regular working people afford to live in the city?
A: They don’t. Unless you define “regular working people” as “a partnership consisting of one doctor and one lawyer (or some combination thereof) with no children.” Otherwise, they bought in the 1980s, live in a basement suite, inherited a pile of money, or they have a grow-op.
These questions and answers are pretty much tongue and cheek, but it’s what everyone is thinking in Vancouver in regards to real estate here.
Read the full article “glad you asked pithy responses to visitors FAQ“