Is it a myth?

Some bear blogs are having a discussion as to whether the HAM buyers are driving our market or not.

My opinion is simple, in some areas they ARE they market. In others, like Pitt Meadows or Langley they are not much of a factor.

Take the North Shore. here is my anecdotal info. This year, I have had 3 friends sell their places. One bought smaller and banked the difference, one is renting and one moved to the Island with his family. ALL 3 sold to mainland Chinese buyers for MUCH higher than they had ever hoped for and in two cases for higher than their listing price as a HAM bidding war broke out.

Over the week-end I carried out my own unscientific experiment. I called up 5 newly listed rental homes in West Van on craigslist. 3 had Chinese agents who quickly admitted that their clients had just bought the homes and in fact two of them didn't even have possession yet. The other two were professionals agents- one volunteered that their client was from the Mainland and had just purchased it as an investment and had no intention of occupying for now. the last one would not reveal the ownership.

Based on my experience therefore it would seem that in some parts of Vancouver, the HAM money ARE the buyers PERIOD. The likelihood of being able to compete in the higher end market after 40% taxes unless you run a goldmine or are the CEO of Lululemon is zero...

Remember Landcor said that they estimate 74% of buyers in certain areas of Vancouver to be from off-shore. That is an astounding number and were it anywhere else in the world, there would be an outcry to legislate and regulate, but not here where we are the keepers of Hot money!

The only up-side I can see is that some people are making out like bandits, like my friends who sold, and some realtors who will hopefully be paying some taxes, and the Province will be getting the property transfer tax. It is btw desperate for any money it can get it's hands on with the deficit soaring, so if you think they are about to kill this golden goose, think again.

Any guesses for November's numbers..

MOI

Price change MOM, YOY - average or median or Benchmark for the 3 categories.

Here's mine:

MOI 6.5

MOM price change -1-2% in most of the categories (attached is always an odd one)

YOY- I think we will still be up 4-5% YOY after October's disappointing rebound.

For now the HAM frenzy seems to have moved to the North Shore..

Will the Market lead Housing..

As I noted in previous posts, our stock market has been leading house prices..

See here

The market topped in April and our home prices peaked in May. So we would seem to lag the stock-market by a month or so as you will see from Larry's excellent chart

In October the stock-market dropped and then rapidly rebounded and lo and behold, we had an unexpected bounce in our home prices. What now?

Well, we have had another shellacking in stocks in November. and the market is down 8% in two weeks. IF this relationship still holds we should see a dip in our prices too.

IF...

The sad state of the MSM

I know that you all move around the bear blog world. However in case you missed it here is the sorry state if our MSM which cannot even bother to check the most basic facts.

Here is the exchange between me and vreaa. Sad that we have such shoddy reporting

Fish10 on 22 November 2011 at 7:45 pm said:

Well done to everyone for pointing out the crass error of the National Post.
This is a great line from the Editor:

“We have confirmed that you are correct and the person used in the story works in condo marketing. If we had known this it would have been disclosed, and that change has been made in the online story.”

No kidding!

So how weak exactly is the journalism on this paper? They ask someone – what do you do? ‘Marketing’. They don’t even bother to ask, “marketing WHAT?” and then they run a rah rah RE storey.

This is what passes for information and analysis at this sorry paper.

Reply ↓

vreaa
on 22 November 2011 at 8:01 pm said:
Actually, it’s probably more sinister than that.
The reporter very likely knows that she works in RE (probably got the lead to interview her via contacts in the RE industry). Then intentionally omits the fact in the article.

Reply ↓

Fish10
on 22 November 2011 at 8:11 pm said:
You are probably right. It is inconcievable that they asked every other question except what she actually does for a living.

If the storey was a plant via the RE industry then things are truly messed up, in fact it shows what little respect we have for the integrity of the MSM (particularly some papers) that we even consider it possible.

Brazil tries to limit Chinese land purchases..

SAO PAULO, (Reuters) - Brazil's government is working on a new rule to further limit the purchase of farm land by foreigners, arguing that the current legislation has been ``insufficient,'' a Brazilian newspaper said Saturday.

The new rule, which could come as a decree, aims to close loopholes that buyers have been using, such as purchasing land through Brazilian companies, Folha de S. Paulo newspaper said.

It could also impose restrictions on investment funds joined by foreigners and force international banks to sell land received as collateral of a defaulted loan within a year.

Brazil is one of the world's largest producers of food and biofuels, and the expansion of its production is seen as crucial toward addressing growing demand for these products, especially from emerging economies such as China.

Brazil's attorney general last year reinterpreted a land law that now limits purchases of rural land by foreigners, or by Brazilian firms that are controlled by foreigners, to areas no larger than 250-5,000 hectares () depending on the region.

The current rule has been fueling uncertainty among agricultural investors and proving a handicap for expansion, according to analysts.

The new legislation should set clearer mechanisms for foreigners to partner with Brazilian companies, especially for agricultural projects, Folha said.

The land legislation is aimed mainly at stopping the advance of China, which has been buying land in other countries through its sovereign fund, the newspaper said.

Official records show 4.3 million hectares of Brazilian land owned by foreigners, but it could be as much as three times bigger than that, the newspaper added.

Reporting by Inae Riveras; Editing by Paul Simao

This Emperor has no clothes....

While Mark Carney is being feted around the world as the wise Central banker who 'saved' the Canadian financial system and has now been chosen to run an international financial regulatory agency...we may want to look a little closely at his achievements.

1) Today we have consumer inflation running at 2.9%. What would a reasonable interest rate be in such a scenario? 3%? 4%? Not 1%. This is theft from savers.

2) Due partly to his Zero interest rate policy and lax lending, Canadians are the most indebted EVER! He may keep saying he wants people to pay down debt and save, but folks are not stupid. Why save, when you LOSE money every year?

3) He proclaims that he is against bail-outs and TBTF (too big to fail). yet our monolithic banks have a built in bail-out in the form of the potentially-ruinous CMHC, who's liabilities could bring the house down.

A recent report stated that while Canadian government debts were not as bad as many other countries, the high level of consumer debt, RE bubble and liability transfer to the Fed government..meant that we were actually at the same over-all debt level as any one of the PIIGS.

There was another Central banker who was lauded as a great genius and has now been shown to be a complete and utter fool, blowing up bubble after bubble..Alan Greenspan.

Lets hope that Carney ( and us ) do not end up in the same mess.
The fundamental problem is that Central bankers surround themselves with bankers, traders, investment bankers and sepculators. They go to their dinners, they come from that back-ground, they leave office and go back to big paying money-moving jobs. So when times are good, they hear the phrase..'Don't do anything' and when it finally hits the fan, 'help us, do something'. The result is the huge imbalances we have now.

The fact that one unelected official can have so much power over a country's fate is the biggest problem.

Restricting Off-shore ownership picking up steam..

Big piece on CBC BC News about the up-coming civic election and calls for restricting RE ownership by off-shore investors.

An astounding number was revealed. I cannot unfortunately find a link yet (doesn't seem to be up)

74% of recent buyers of Richmond and Vancouver RE are thought to be from Mainland China according to Landcor. Money escaping possible future restrictions.

One listing 'boasted' that it had never been lived in and it's ten year old appliances were never used.

In my building we have absentee owners from Korea, China, Taiwan, Russia, Israel and Dubia. Some units are rented and others are left permanently empty- though there is someone who comes round to pick up the mail and pay bills on the empty ones.

How did we get into such a mess? Lax rules for one. even Australia has restrictions on off-shore ownership, even China does, but we don't. Why not?

The only people to bring it up was Peter Ladner, after he left office, and a solitary councillor who says 'we should look at the matter'.

Too late!

And I doubt one solitary Vancouver councillor can do much. The Australian rules came form their Federal government, not from one city councillor, however well intentioned. Can you imagine our own Premier and Prime Minster making such a pronouncement.

Lets start with punitive taxes on any house not occupied for 6 months a year. We have a city that is unaffordable for those who work here and make it liveable for the parvenues, and keeps the city safe and sound for their investments.

The piece on the CBC ended with a Chinese candidate in Richmond saying how Chinese investors should be directed to investing in businesses instead of RE. Quite right.

Funny...

I often visit Garth Turner's blog. He is an ex-MP, Cabinet Minister, Investment writer, investment adviser and speaker who most bear blog readers know well.

He keeps a regular blog going here and sometimes he gets things right and sometimes not, however he has an interesting turn of phrase. There was one such in the latest post which had me laughing and I thought it worth reprinting:

'Since this pathetic blog crawled from the primordial ooze (I should clean the Bunker more often), I’ve argued against our infatuation with the physical. For reasons I have pounded into sand, real estate will disappoint mightily in the years ahead, now completely unsupported by economic fundamentals and held aloft by duct tape, HGTV, fleeting aspirations and delusional mothers-in-law. No match for debt, lost jobs or swampy incomes.'

BTW

That latest post highlights the situation in Whistler (which has a MOI of over a year), which like the Sunshine Coast and the Okanagan and Victoria is not rosy and not the frenzy that is Vancouver.

Whowouldathunkit...

THE BCREA comes out with a bearish forecast on home prices..

Vancouver to drop 3.5%.

BC to drop 2.5%

....in 2012.

All from the pen and mouth of our very own Cameron Muir.

and here is what they say about Victoria

' Prices in Victoria will remain below the $504,561 average in 2010, however, slipping to $499,000 this year, then up to $501,000 in 2012.

“The Victoria market is being impacted by slower growth in employment, reduced interprovincial migration flows and continuing weakness in US tourism,” said the report.'

VICTORIA....

Big drop in the Average and flat median YOY. Looks the opposite of what is happening in Vancouver, where only the very wealthy are still buying. It seems like in Victoria lower priced housing is still selling:

Total Greater Victoria SFH

October 2011

Average $595,836

6 month Ave $619,828

Median $539,750

October 2010

$641,780

$627,263

$539,500

SOURCE

The Good the Bad and the Ugly

Larry has his numbers out and they paint a mixed picture.

The Average prices showed:

Detached and attached moved up and condos lost value. Detached went up about 5% MOM. Just when you think this market has started it's descent up it pops like dracula ready to bite some flesh off unsuspecting buyers.

I said that I expected one of the indices for one of the categories to be flat YOY and it seems like apartments will fit the bill.

The YOY rise in average apartment prices is about 1%. Less than inflation.

Detached is up about 9% YOY with higher inventory and flat sales. What does that mean - it means more expensive houses are being sold. The 1% are buying more than the 99%.

If so the HPI or median may paint a different picture.

So what now?

Well we got a pop in the most expensive segment, detached, with the same sales and higher inventory. I don't think this is a sustainable and I would have to say that detached SHOULD have a big drop in even the average price next month.

We have moved from challenging each other and nit-picking to calling our shots, and if we are wrong, so be it.