Vancouver Property Bubble is Bursting



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ORIGINAL POST

POSTED BY Ed (11 mths ago)
When a week ago we reported that in a long-overdue decision, the British Columbia government finally cracked down on Vancouver's unprecedented "Chinese hot money" driven housing bubble by implementing a 15% property tax (which we had advocated for one month earlier), we said that "with today's tax, Vancouver's real estate nightmare in which local housing had become the "new normal" anonymous Swiss bank account, and also made real estate virtually unaffordable to local, hard working Canadians, is finally set to end."

However, not even we were confident that a 15% tax would be "prove to be a sufficient deterrent to future Chinese buyers." Now thanks to the Financial Post we now know that not only was the tax sufficient, but it has led to the prompt, much anticipated, and generally welcome bursting of the Vancouver housing bubble.

As FP writes, on Thursday and Friday of last week, realtors and lawyers were desperate to get in under the tax hike deadline, and filed a record-setting 15,000 property transfer applications on the last two business days before B.C.’s punishing new 15-per-cent tax on foreign property buyers went into effect. As a result, more than 9,200 transactions were filed on Friday, breaking the 2007-2008 record of more than 8,400 in a single day, according to the B.C. Land Title and Survey Authority. It also reported over 5,800 transactions on Thursday, representing nearly as many deals registered at month’s end in April.

The demand was so heavy that it crashed the land titles office’s electronic filing service on both days, the authority said.

That was last week. What about now that the tax is in place? As a new dawn breaks in Metro Vancouver’s real estate market, realty companies and real estate boards are reporting the first anecdotes of deals falling through as foreign buyers forfeited deposits on binding deals rather than pay the new tax.


Worse, if only for the unprecedented local housing bubble, and certainly better for potential local homeowners who were locked out from the massively overpriced market, they report evidence of local buyers withdrawing offers in expectation that the market will soften.


More http://www.zerohedge.com/news/2016-08-03/deals-are-collapsing-vancouvers-housing-bubble-has-just-burst

COMMENTS

Ed (11 mths ago)
Vancouver Housing Bubble, Meet Pin

The short sellers are coming: “a money-laundering-induced market.”

The Canadian province of British Columbia may have gotten what it asked for in instituting the now notorious 15% transfer tax on home purchases involving foreign investors.

Benchmark prices of Vancouver still exhibit astounding year-over-year increases, with apartment prices up 27% and detached house prices up 38%, now at C$$1,578,300. But overall sales plunged to 3,226 homes, down 27% from the record in June and down 19% from a year ago.

“This is the first time since January 2016 that home sales in the region have registered below 4,000 in a month,” admits the Real Estate Board of Greater Vancouver. While apartment sales dropped “only” 7% year-over-year, sales of detached homes plummeted 31%!

And it’s spreading beyond Vancouver. For example, housing-refugees make their way to the Fraser Valley, which borders Metro Vancouver. The formerly bucolic and more affordable Langley Township is now highly developed and getting more so.

Who else is taking more than a casual look at BC’s real estate phenomena? Legendary billion dollar hedge fund manager Mark Cohodes, now retired from his career as a successful Wall Street short seller.

“I think it’s a money laundering-induced market,” said Cohodes in his scathing indictment of the status quo. “Where the local politicians, or the BC Liberals, are kept or in cahoots with the real estate brokers, developers, lawyers, that angle. And they have sought Chinese money to keep the market propped up and it won’t last,” he said.

“China has capital controls on, and Vancouver has become the money laundering mecca of either the world or North America and something is going to change and change drastically.”


More http://wolfstreet.com/2016/08/03/vancouver-housing-bubble-bc-15-percent-transfer-tax-foreign-buyers/

gdep (11 mths ago)
keep hoping . Low interest rates, lots of chinese millionaires and billionaires. 15% tax is nothing for them .. round off error.. similar to HK market .. super level of taxes, sales have declined , but prices have marginally corrected..

Ed (11 mths ago)
When it's a money laundry ... 15% may not matter...

rs2000 (11 mths ago)
ED
you have had commendable success at predicting the great recession in HK market

:D

Ed (11 mths ago)
You will note that I did not write either of those articles.

Ed (11 mths ago)
Why B.C.’s Foreign Buyer Real Estate Tax Won’t Really Matter

The province of British Columbia shocked the real estate market last week by slapping a 15% additional land transfer tax on property in the province bought by foreign buyers.

What made the move especially surprising is most observers of the sector continually point out foreign money just doesn’t matter that much. One recent report indicated buyers from outside of the country were only responsible for 3% of all sales.

Housing bears, however, dispute this number.

Still, it was obvious the move is popular politically, as thousands of frustrated wannabe homeowners see a market that’s steadily climbing more and more out of their reach. This new law will hopefully help make property more affordable.

Many folks who closely follow the market think this new tax won’t matter one bit.

There are several reasons why. The first is an additional 15% tax doesn’t mean much to a millionaire who just cares about getting capital out of China. For these people, capital appreciation is just a bonus. The important part is owning assets in a stable economy like Canada’s.

Secondly, much of the cash used to buy properties is funneled through relatives and friends who are already in Canada. Foreign ownership rules don’t apply to immigrants who are already permanent residents or citizens.

And finally, Vancouver has a long way to go to be affordable. The average price of a detached house is well over $1 million, while median family income is less than $80,000. Vancouver would have to experience an epic crash for the market to be deemed affordable.

http://www.baystreet.ca/articles/baystreetschool.aspx?id=381

rs2000 (11 mths ago)
I totally understand ED

just that you have been saying about property market slump for years now . meanwhile the market rose 80%. A smart move would have been to buy

Ed (11 mths ago)
I have made no comment on the Vancouver property market.

But it - like all property markets -- will at some point collapse


You may recall my comment some years ago that 'money printing is not a viable economic system'


Cassandra was ultimately right too

Ed (10 mths ago)
Vancouver Housing Fever Shows Signs of Easing Even Before Tax

Canada’s hottest housing market may be cooling.

Home sales in Vancouver fell a third straight month in July, the Canadian Real Estate Association said Monday, with price gains also showing signs of slowing.

The data should be a relief to buyers and policy makers who have been growing increasingly worried about affordability in the city, and suggest Vancouver’s market was slowing even before the provincial government set a foreign buyers’ tax earlier this month. The realtor group cited lack of affordability for falling sales in a market where prices are growing at double-digit rates.

http://www.bloomberg.com/news/articles/2016-08-15/vancouver-housing-fever-shows-signs-of-easing-even-before-tax

Ed (10 mths ago)
The Pooh-Poohed Doom-and-Gloom Scenario for Miami’s Condo Bubble and its Lenders Has Arrived

http://wolfstreet.com/2016/08/15/doom-and-gloom-scenario-for-miami-condo-bubble-bust-and-its-banks/

Ed (10 mths ago)
Is the Metro Vancouver real estate market in free fall?

Vancouver Housing Market Implodes: Average Home Price Plunges 20% In 1 Month - "The Market Is Devastated"

There were only three home sales in West Vancouver between Aug. 1 and 14 this year, compared to 52 during the same period last year. That’s a decrease of 94 per cent.

“The market in West Van is up 450 per cent since 2001. So is everyone making 600 per cent more income than they were so they can pay their taxes and buy their houses? Of course not. So how is this inflation been financed? By off-shore money and record debt.”

And while Eilers says the slow-down is at least partly due to the implementation of the Metro Vancouver foreign buyer tax on July 25, which has caused a firestorm of anecdotal evidence saying it has killed the housing market, he adds sales were dropping even before the tax.

The pattern has left the market “devastated”, according to Eilers.

Zolo, a Canadian real estate brokerage, keeps track of MLS home sales in real-time and reports prices as an average rather than the “benchmark price” used by the REBGV.

It currently shows a major correction underway in most Metro Vancouver markets.

https://shawglobalnews.files.wordpress.com/2016/08/untitled-1.jpg

According to the website, the City of Vancouver currently has an average home price of $1.1 million, down 20.7 per cent over the last 28 days and down 24.5 per cent over the last three months.

https://shawglobalnews.files.wordpress.com/2016/08/vancouver-data.png


http://shawglobalnews.files.wordpress.com/2016/08/home-sales.png

More http://globalnews.ca/news/2887766/data-is-the-metro-vancouver-real-estate-market-in-free-fall/



Ed (10 mths ago)
Pension funds are looking to unload billions of dollars worth of commercial property assets.... are they trying to get ahead of the curve?


Suddenly Scared of Vancouver’s Commercial Property Bubble?

What do they see that the market doesn’t see, or doesn’t want to see?

For pension funds, which have to achieve predictable and fat returns, this is a bleak environment, with the Canadian 10-year yield at 1.02%, and the US 10-year yield at 1.56%. Stocks are at dizzying levels, even as corporate profits and sales have declined for nearly two years. If these pension funds want to expand into government bonds and high-grade corporate bonds in Europe and Japan, they’ll make the acquaintance with negative yields.

So why are they selling hot assets with a predictable yield when the investment options for the proceeds are so dismal? Preservation of capital?

A commercial real estate bust can take 40% or more off the top. The last one in the US did. They take years to unfold. When prices go down, real estate markets become illiquid. Trying to sell a property at a survivable price might be impossible. And cutting the price far enough to where liquidity reappears might be devastating to the seller.

The key is to get out while optimism makes these transactions possible and before the market becomes illiquid. Perhaps find a Chinese company, such as Anbang Insurance Group, which already scooped up the Bentall Centre in Vancouver, a 1.5-million-square-foot office complex and shopping mall.


More http://wolfstreet.com/2016/08/23/smart-money-scared-of-vancouvers-commercial-real-estate-bubble/

Ed (9 mths ago)
Vancouver’s empty homes tax to be self-declared, up to two per cent of value

http://www.theglobeandmail.com/real-estate/vancouver/vancouvers-empty-homes-tax-to-be-self-declared-up-to-two-per-cent-of-value/article31877255/

gdep (9 mths ago)
Again a futile exercise . 2% is like ZIRP .

Ed (9 mths ago)
Luxury-Home Sales in Vancouver Plunge on Foreign-Buyer Surcharge

Deals at C$1 million or more fell 65% in August, broker says

Sotheby’s says Toronto and Montreal will benefit from slowdown


https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iLBGx4qWWGJQ/v2/-1x-1.png

http://www.bloomberg.com/news/articles/2016-09-14/luxury-home-sales-in-vancouver-plunge-on-foreign-buyer-surcharge



http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/08/27/vancouver%20prices.jpg

Ed (8 mths ago)
Vancouver home sales plunged 39 percent in October from a year earlier, the biggest drop since 2010, as new regulations chill Canada’s most expensive property market.

Sales in the Pacific coast city fell to 2,233 in the month, from 3,646 a year earlier, the Real Estate Board of Greater Vancouver said Wednesday. That was 15 percent below the 10-year average for October.

http://www.bloomberg.com/news/articles/2016-11-02/vancouver-home-sales-fall-39-as-new-rules-chill-market

gdep (8 mths ago)
its probably temporary.. if we learn from the HK experience ..

Ed (8 mths ago)
I suspect you will be right....

Ed (8 mths ago)
Tit for tat... drive buyers out of Canada... they go back to HK (or elsewhere) .... now HK responds...

http://www.reuters.com/article/us-hongkong-property-measures-idUSKBN12Z13L?il=0


The real problem is that there are trillions of dollars of QE surging through the world economy.... looking for investment opportunities.... creating the mother of the mother of the mother of the mother of the mother of the mother of all bubbles....

http://67.media.tumblr.com/tumblr_l5heo2yf331qz6f9yo1_r2_500.png

Ed (7 mths ago)
Vancouver Housing Market Freezes Up, Sales Crash, Prices Sag, For-Sale Signs Proliferate

“Entire Swaths of our neighborhood covered with For-Sale signs”

The numbers about the inglorious end of the totally insane house price bubble in Vancouver are bad enough. But the photos of “For Sale” signs along entire city blocks speak louder than the numbers ever could – in fact, they make us doubt the numbers.

The Real Estate Board of Greater Vancouver (REBGV) today reported that in November, residential home sales in Greater Vancouver plunged 37.2% year-over-year to just 2,214 homes. By category of home:

Sales of detached homes down 52.2%.
Sales of attached homes down 40.9%.
Sales of condos down 22.7%.
In essence, the market has frozen up, especially for detached homes.

The total number of properties listed for sale on the Multiple Listing Service (MLS) in Greater Vancouver rose 3.6% year-over-year to 8,385. Which leaves us wondering, given the for-sale signs along entire blocks – we’ll get to the photos in a moment.

More http://wolfstreet.com/2016/12/02/vancouver-house-price-bubble-collapses-sales-crash-for-sale-signs/


http://wolfstreet.com/wp-content/uploads/2016/12/Vancouver-3.jpg

http://wolfstreet.com/wp-content/uploads/2016/12/Vancouver-5.jpg

http://wolfstreet.com/wp-content/uploads/2016/12/Vancouver-0-Oct-19.jpg

Ed (7 mths ago)
Home-purchase inquiries from China have jumped in Seattle and Toronto since the Vancouver tax was announced, according to Juwai.com, the country’s largest overseas property website.


For Vancouver investors, Seattle is a lure because it’s a waterfront city just a few hours away by car. It’s also more affordable than other West Coast destinations. Toronto, as one of the world’s financial capitals, already has an established base of foreign investment in condominiums and a large Asian population.

“Chinese money isn’t going to sit and wait," said David Ley, a Vancouver-based professor at the University of British Columbia’s Department of Geography, who focuses on housing. “Investors are going to find another city," and Toronto and Seattle are the top two contenders, he said.

https://www.bloomberg.com/news/articles/2016-12-04/vancouver-housing-tax-pushes-chinese-to-1-million-seattle-homes

Ed (6 mths ago)
Vancouver Goes For Housing Bubble #2: Will Fund Home Down Payments With Interest-Free Loans

Having allowed Chinese money launderers to create a massive bubble out of the Vancouver housing market for the past several years despite loud warnings from numerous sources (this site included) until its inevitable crackdown this summer, when it imposed a tax on offshore purchases, popping the ultra high end housing bubble and sending Chinese buyers south of the border to Seattle (although after a sharp drop may be staging a quick rebound

... British Columbia is now focusing on the low end of homebuyers, where the British Columbia government is repeating all the worst mistakes of the first bubble, and has offered to "help" first-time homebuyers to cover the cost of a mortgage down payment with an interest-free loan.

The B.C. Home Owner Mortgage and Equity Partnership program will provide a maximum of $37,500, or up to 5% of the purchase price, with a 25-year loan that is interest-free and payment-free for the first five years. In other words, homebuyers will soon be able to once again buy homes with no money down, leading to a repeat bubble, only this time on the lower end of the price range..

"The dream of home ownership must remain in the grasp of the middle class here in British Columbia," said Premier Christy Clark cited by CBC.

While the stated intention of the program is noble, to assist people who can afford the mortgage payments on a new home but are challenged to make the down payment, based on historical precedent, with no "skin in the game", buyers will now scramble to bid up everything that is available for sale, sending the green (and red) lines in the chart above soaring.

The province will start accepting applications for the program on Jan. 16, 2017.

Furthermore, homebuyers will pay no monthly interest or principal payments over the first five years as long as the home remains their principal residence. After the first five years, homebuyers begin making monthly payments at current interest rates. Homebuyers will repay the loan over the remaining 20 years, but may make extra payments or repay it in full at any time without penalty.

Making sure that Chinese oligarchs do not take advantage of Canadian generosity, the program is capped with a maximum purchase price of a home that qualifies for the loan is $750,000.

That said, there are substantial eligibility requirements. Applicants must be permanent Canadian residents for the past five years and B.C. residents for the past year. The income or combined income of applicants must be $150,000 or less. Homebuyers needs to be pre-qualified for a high-ratio insured mortgage and can buy anywhere in B.C.

The loan support will run for three years and the province estimates about 42,000 new homebuyers will take advantage of the program.

http://www.cbc.ca/news/canada/british-columbia/interest-free-home-loans-bc-1.3897832?cmp=rss

Ed (6 mths ago)
West Vancouver Housing Prices (are crashing....)

https://www.zolo.ca/west-vancouver-real-estate/trends

Ed (5 mths ago)
Desperation Invades Vancouver Housing Bubble, as Hot Money Still Pumps up Toronto, Hype Overflows

So the bottom has fallen out of the Greater Vancouver housing market, a process that started after the crazy peak in July. According to the Real Estate Board of Greater Vancouver (REBGV), sales of homes of all types – detached, attached, and condos – plunged 40% in January compared to a year ago, with sales of condos dropping 25% and of attached properties 32%. Detached homes got hit the hardest: sales plummeted 58%.

There was no way to put a positive spin on it, not even for a real estate board. REBGV president Dan Morrison put it this way: “It’s a lukewarm start to the year compared to 2016.”

Even as sales collapsed from the record-breaking bubble-pace a year ago, the number of homes newly listed for sales in January rose 7% year-over-year to 4,140. And the total number of homes listed for sale rose 9% to 7,238.

The benchmark price – a theoretical price that the REBGV uses instead of the more typical median price – for detached homes has fallen 7% since the July peak, to C$1.475 million.

http://wolfstreet.com/2017/02/05/desperation-vancouver-house-price-bubble-hot-money-toronto-house-price-bubble/


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