The Elusive Canadian Housing Bubble

[GRG55]

Re: Va Va Voom Vancouver...

It is not just the Chinese. Not by a long shot. The Chinese are not buying up every damn house in the Greater Vancouver Regional District. But every one of those houses has achieved escape velocity with prices on their way to the moon. I just got the BC government assessment office's notice for the old family home my brothers and I inherited that is 16 miles east of downtown Vancouver in what used to be a working class district when I was growing up. According to the tax assessment office this 1960 vintage tiny bungalow property has risen a ludicrous 24% in the past year alone.

This is the government aiding and promoting the bubble. The appraisers use the assessments. The banks and mortgage brokers use the appraisals to lend against. This nonsensical system means every home on the block (and maybe the whole district) can be leveraged up on cheap mortgage crack even more than last year. And that extra "equity" extracted can be recycled into more VancouverGoinUp working class houses. This is typical of every great property bubble anywhere. Nobody is afraid of debt and "we are all going to get rich" in a very short time and without breaking a sweat. Ya right.

It's the banks, the mortgage brokers, the real estate Boards, the realtors, the developers and our worthless politicians driving this. The Chinese are just grabbing the headlines in the tiny west side enclaves of Point Grey, Arbutus, Dunbar and Kits. It's not the Chinese buying the houses where I grew up (although I wish it were as I would love to sell to such a foreign greater fool).

From Garth Turner's blog today:

...What a strange country we’ve wrought. Two years ago the economy expanded by 2.5%. Last year growth crashed by half. In 2015 Canadians (households and governments) increased their debt by $78 billion – more than all the borrowing taken on during the great recession in 2009. We’ve run a trade deficit now for almost seven years. This year, after clawing back towards a balanced budget, Ottawa will plunge into $20 billion of red ink...

...About 150 drilling rigs in western Canada are about to be permanently idled, costing 20,250 more jobs. “We’re losing people,” says the industry association, “that are never coming back.” Meanwhile commodity prices are at 1990s levels, employment levels have sunk, the banks are laying off, Bombardier’s cooked and economists warn that consumers are on a high-speed journey towards the wall.
At the same time a house in North Toronto that shocked the locals four years ago when it was sold for $400,000 more than asking has been levelled, and a McMansion is rising in its stead. In Kitsilano, as reported here, some dork paid $735,000 over asking in a bidding war (five offers) for a regular home listed in excess of $3 million sitting on a normal 33-foot lot...

...In fact that are two Canadas at this time – the one descending into economic stress and the other leveraging its way up a towering cliff. The first group heads for despair. The second grows euphoric. The first taste fear. The second, profit and greed. Standing at the Ritchie’s Auction in northern Alberta, Brad sees dreams being sold for pennies on the dollar. On the Westside of Vancouver a dentist friend is paying $3 million for a forty-foot lot. ‘But if I wait,’ he protested to me, ‘it’ll be $4 million.’...

[Thailandnotes]

Re: Va Va Voom Vancouver...

On a crisp Sunday morning in November, Weymi Cho picked me up at my hotel, in downtown Vancouver, in her new car, a white Maserati GranTurismo with a red leather interior. She had slept only two hours the night before. A new karaoke machine had been installed in her apartment, a four-million-dollar condo with a view of the city’s harbor, and she and some friends had spent the night singing and drinking Veuve Clicquot. Weymi is twenty years old and slim, with large eyes and waist-length hair that cascaded, on this occasion, over a silk Dior blouse. She has a reserved, almost aristocratic air. It was a little past ten, and we were going shopping.

Holt Renfrew, Vancouver’s equivalent of Barneys, is one of Weymi’s customary weekend haunts, though she is aware of its limitations. “It doesn’t compare to Vegas, where there is obviously a better selection,” she explained as we drove there. Weymi speaks English with a subtle but noticeable accent, and was relieved when I switched to Mandarin. Her speech was punctuated by European brand names, which functioned as a kind of currency. A maid’s monthly wages, she said, were probably the price of a pair of Roger Vivier satin pumps. A night out can cost half a suède Birkin bag. On Weymi’s last birthday, in March, she’d spent more than two Fendi totes—around four thousand dollars—on drinks in less than an hour.

In the store, Weymi spotted a former classmate from a Vancouver fashion institute, who was now working as a salesgirl there. She talked about the attitude of Chinese customers. “They treat this place like a supermarket,” she said. “A three-thousand-dollar outfit is like a carton of milk.” Another salesgirl joined in and lamented that such profligacy negated any sense of exclusivity. Weymi agreed. “I can’t even look at Chanel bags anymore,” she said at one point. “Everyone and their auntie now has a boy bag…

http://www.newyorker.com/magazine/20...kids-head-west

[Fiat Currency]

Re: Va Va Voom Vancouver...

... Last week a delusional dink paid $4.23 million for a Kitsilano house. But not just any house. A normal one, on a regular lot – only 33 feet wide.

I'll see your $4.23M crap house, and raise it to $7.2M !!

Vancouver house left to deteriorate now on the market for $7.2 million

Sam Cooper, Postmedia News | March 1, 2016 12:42 PM ET
More from Postmedia News

Steve Bosch / Vancouver ProvinceAn empty house in the 4100-block West 8th Avenue in Vancouver as it appeared on Feb. 3.

VANCOUVER — A $6.2-million home in the Point Grey neighbourhood of Vancouver that has been left to rot by a Chinese real estate tycoon is now on the market for $7.2 million.

In early February, Postmedia News reported that the home — in the 4100-block West 8th Avenue, purchased for $4.6 million in July 2011 by Huaican Ren and his wife Xuepei Sun — was subject to a City of Vancouver “untidy premises” order.

Huaican Ren is the founder of a number of China-based companies with interests in real estate development, as well as gemstones, retailing, tourism, and restaurants. His wife is a shareholder in companies.

According to the Global Real Estate Institute, Huaican Ren is chairman of Kunming North Star Enterprise Company Limited and is among “the world’s leading real estate players.”

B.C. property documents say Huaican Ren and his wife bought the Point Grey home through a property transfer in a Beijing law office.

The previous owner, a Chinese investor, flipped the home shortly after buying it for $3.35 million in 2010.
In early February, a City of Vancouver “untidy premises” order made in June 2015 was left pinned to the Point Grey home’s door.

A neighbour said the wealthy couple had never been seen in the vacant home, which features broken windows and rotting structure.

Huaican Ren and his wife also own a $3.57-million Arbutus Ridge home that also appeared to be vacant.
The Province attended the Arbutus Ridge home last week seeking to speak to Huaican Ren for this story, and attempted to reach Huaican Ren through the listing brokerage for the Point Grey home.

No one answered the door at the Arbutus Ridge home. Windows were shuttered, but a phone book that could be seen left on the home’s porch in early February had been removed. Huaican Ren could not be located for comment.

The Point Grey home was put up for sale shortly after the first report by Postmedia News in early February.

[Milton Kuo]

Re: Va Va Voom Vancouver...

Last week a delusional dink paid $4.23 million for a Kitsilano house. But not just any house. A normal one, on a regular lot – only 33 feet wide.

Renovated? Sure. Palatial? Nah. Worse, the greedy sellers had asked for only $3.495 million, so the dink threw an extra $735,000 on the pile. More bizarre, the house has a rental apartment in the basement, so some person will end up sharing your $4-million digs while paying the same as if it were a $1 million shack.

The house, by the way, is not in the best hood. A good one, absolutely. But not where the rich people live. Oh yeah, and it’s made of wood and 104 years old...

For $4.23mn, this has got to be foreign buyer, right? You know the Canadian real estate market far, far better than I do but this kind of insanity has to be from foreign (Chinese) money. I cannot imagine Canadian banks lending rank-and-file Canadians that much money. I could scarcely believe loans to buy houses for $1.5mn but was able contort my mind to see how the lenders could concoct a reason justifying how a borrower could make the payments. $4mn is $18K/month = $216K/year at sub-4%, 30-year fixed rates.

Maybe a doctor who specialized (do Canadian doctors earn close to what American doctors make?) could afford that kind of payment but I'm aware of neurosurgeons in the U.S. who balked at paying $2mn for something really quite nice in Newport Beach.

I bring up the Chinese money issue again because it's difficult for me to believe that it hasn't meaningfully influenced Vancouver housing prices. Prior to the article on the $4.23mn home, the brouhaha was over the following $2.5mn shack:

http://www.cbc.ca/news/canada/britis...tate-1.3449869

I was mildly amused when watching the video to see that the visitors to the house are Asian, perhaps (likely?) Chinese.

I dunno. If I were a person renting in Vancouver and wanting to buy a home, I would have felt quite sick years ago and, at even higher prices today, would probably be suicidal by now. The fear of being priced out forever must be sky-high. It seems that outside of renting and hoping for the bubble to finally deflate, the only other options available to people looking for housing in Vancouver are to move to another part of the country or maybe even to emigrate.

[jk]

Re: Va Va Voom Vancouver...

in the article on that 47feet wide building the architect talks about the shear forces on the 2 lateral walls and what he had to do to deal with them. it's kind of fun to imagine someone taking that 33ft lot and building taller than the empire state building. the mechanicals- elevator shaft would take up a significant portion of the footprint, but imagine the views!

[GRG55]

Re: Va Va Voom Vancouver...

below is a building that is 60 feet wide, but 100 ft taller than the empire state building [without its antenna]

and here's a story about a building going up that is only 47 ft wide

This Pencil-Thin Tower Sets a New Bar for Skinny High-Rises

An upcoming residential tower on 44th Street in Manhattan is only 47 feet wide. Can super-slender in-fill projects help NYC's housing squeeze?

• KRISTON CAPPS
• @kristoncapps
• Apr 24, 2015
• 10 Comments

so maybe 33 feet is enough. and certainly if the owner can also get a hold of the 33 foot lot next door, he's got room a'plenty.

All skyscrapers are designed to allow a considerable amount of flex but these very tall, thin structures must have a lot of lateral displacement at the top floors. I also wonder how such designs will respond to vortex shedding. Amongst the other tall buildings of Manhattan this may not be a problem as a Von Karman vortex sheet is unlikely to form with all the mechanical disturbances, but try to replicate that elsewhere might be interesting.

The 33 ft lot frontage is an artifact of the 50 ft standard that was applied in the original surveys of most cities in western Canada. A 33 foot frontage comes about from the original developer buying two adjacent 50 ft surveys and securing permission to re-subdivide it into 3 separate lots. In the past 30+ years some cities are now allowing developers to build two infill homes on 25 ft frontages after knocking down the original house on a 50 ft lot. The first house I ever purchased in 1982 was one of these infills within walking distance of my downtown office, and perfectly comfortable for a young single engineer at the time. It had two bedrooms and a bath upstairs, living/dining + kitchen & 1/2 bath on the main level and a large finished area in the basement I turned into my audio room. Also had a small deck and a beautiful mature apple tree from the original home in the back yard, and a mountain ash tree in the front (I could cut the grass with my electric mower in 15 minutes) I bought it from a young couple who were starting a family and felt they needed more space. At the time i was earning about $44k a year and the 3 year old house cost me $98k (my mortgage was 12.5% however). Try that ratio of house price to income in any inner district in a major western Canadian city today.

[jk]

Re: Va Va Voom Vancouver...

below is a building that is 60 feet wide, but 100 ft taller than the empire state building [without its antenna]

• A
• A
• A

and here's a story about a building going up that is only 47 ft wide

This Pencil-Thin Tower Sets a New Bar for Skinny High-Rises

An upcoming residential tower on 44th Street in Manhattan is only 47 feet wide. Can super-slender in-fill projects help NYC's housing squeeze?

• KRISTON CAPPS
• @kristoncapps
• Apr 24, 2015
• 10 Comments

so maybe 33 feet is enough. and certainly if the owner can also get a hold of the 33 foot lot next door, he's got room a'plenty.

[touchring]

Re: Va Va Voom Vancouver...

Quite a few of the homes up the hill, off the beach have been torn down and replaced with apartments, so the densification of the area has been underway for decades.

Did the original home owners made a windfall by selling the land to the apartment developers?

[GRG55]

Re: Va Va Voom Vancouver...

is there zoning that restricts the height of a new building? in nyc there are some very tall slivers.

Most Canadian municipalities have comprehensive zoning by area or lot. For example, you cannot build a multi-family building, or build a non-permitted rental suite in a home on a lot zoned R-1, which is single family residential.

The District referenced in my earlier post, Kitsilano (or "Kits" as it is known locally) was mostly single family homes that were split into suites starting in the late 1960s (some legal, some not) because of its proximity to both downtown Vancouver (it's just across the Burrard St bridge) and to the University of British Columbia. Quite a few of the homes up the hill, off the beach have been torn down and replaced with apartments, so the densification of the area has been underway for decades. Two of my nieces and one of my nephews own condominium apartments in Kits and work in downtown Van. They are all UBC graduates (my nephew is an engineer, like his father and uncle) and none of them own a car. This is my study sample of the Uber generation.

[jk]

Re: Va Va Voom Vancouver...

Are we there yet?

February 26th, 2016

Hopped up on Starbucks and mold, Vancouverites are an excitable bunch. Especially when it comes to the local obsession, real estate. But lately this fetish is off the charts. Makes one think we may be nearing the end game.

Last week a delusional dink paid $4.23 million for a Kitsilano house. But not just any house. A normal one, on a regular lot – only 33 feet wide.

Renovated? Sure. Palatial? Nah. Worse, the greedy sellers had asked for only $3.495 million, so the dink threw an extra $735,000 on the pile. More bizarre, the house has a rental apartment in the basement, so some person will end up sharing your $4-million digs while paying the same as if it were a $1 million shack.

The house, by the way, is not in the best hood. A good one, absolutely. But not where the rich people live. Oh yeah, and it’s made of wood and 104 years old...

is there zoning that restricts the height of a new building? in nyc there are some very tall slivers.

[GRG55]

Re: Va Va Voom Vancouver...

...Vancouver is completely disconnected from this mortal world in every sense. Vancouver is starting to emulate Tokyo circa 1988. And we all know how well that ended...

Are we there yet?

February 26th, 2016

Hopped up on Starbucks and mold, Vancouverites are an excitable bunch. Especially when it comes to the local obsession, real estate. But lately this fetish is off the charts. Makes one think we may be nearing the end game.

Last week a delusional dink paid $4.23 million for a Kitsilano house. But not just any house. A normal one, on a regular lot – only 33 feet wide.

Renovated? Sure. Palatial? Nah. Worse, the greedy sellers had asked for only $3.495 million, so the dink threw an extra $735,000 on the pile. More bizarre, the house has a rental apartment in the basement, so some person will end up sharing your $4-million digs while paying the same as if it were a $1 million shack.

The house, by the way, is not in the best hood. A good one, absolutely. But not where the rich people live. Oh yeah, and it’s made of wood and 104 years old...

[vt]

Re: The Elusive Canadian Housing Bubble

Chart from Bespoke:

[GRG55]

Re: Canadian and B.C. Government Sponsored 0% Down - Unbelievable

Newfoundland and the low price of commodities aside, the Canadian housing bubble continues unabated. Sales are up, inventory is down and more houses being listed are being sold.

It's become the national obsession.

Prices down in Alberta, Saskatchewan and Newfoundland (not surprisingly the 3 main oil producing Provinces in the Dominion). Prices pretty flat in the Maritimes. British Columbia (actually just the south coast of B.C.), Ontario (actually just the Toronto metro area) and a continuing flood of cheap mortgages are carrying the entire real estate market in Canada now. It's like a Canadian property equivalent of FANGs complete with low cost margin accounts for retail investors.

This ain't over, but it does not seem like it will last much longer either (of course I thought that about Vancouver in 2010 so what do I know )

Canada sailed through the financial crisis in 2008/09; no subprime, no big housing bust, no huge bank bailouts. But now it looks like we may be entering the biggest recession since the 1980s because of the utter collapse of commodities and energy - what has devastated Alberta and is now chipping away at Saskatchewan and Newfoundland is going to ripple out across the entire Canadian economic landscape. The restructuring of the base economy that needed to be done earlier wasn't (humans, including politicians, rarely change anything if its still working). Now the cost of such policies as transitioning off coal, reducing the dangerous over-dependence on leveraged housing/construction in the economy and finding a substitute for hydrocarbons to drive the next capital investment cycle will be much greater in terms of unemployment, taxes and economic growth rates. Our changing the economic make up problem in Canada is not nearly as large as China is facing, but its still going to be a shocker for most Canadians including many of our ideologues in elected office today.

[santafe2]

Re: Canadian and B.C. Government Sponsored 0% Down - Unbelievable

Newfoundland and the low price of commodities aside, the Canadian housing bubble continues unabated. Sales are up, inventory is down and more houses being listed are being sold.

[santafe2]

Re: Canadian and B.C. Government Sponsored 0% Down - Unbelievable

Canadian housing up 17% YOY, Newfoundland down 10%. They just can't catch a break.