# another Vancouver real estate article



## Hawkdog (Oct 26, 2012)

http://www.vancitybuzz.com/2013/11/why-vancouver-real-estate-is-not-going-to-crash/


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## andrewf (Mar 1, 2010)

Here are the "this time is different" arguments from the article:



> 1 Wealthy offshore investors purchase homes in cash (not credit). Therefore less leverage making the market more stable.
> 
> 2 Local residents mortgage themselves up with real estate they can’t afford, but they’ll get by through renting out the basement, spare upstairs bedroom, and eating canned soup.
> 3 There’s no real trigger for a crash as “thousands of owners flood the market with listings” because the majority of Vancouver real estate are all long term holders and not flippers.
> 4 American mortgages are different than Canadian mortgages with respect to the fact that in the United States, you can literally just mail the bank the keys to your place and move out. In Canada, when you default on your mortgage they come after the mortgage owner’s personal assets.


1. Perhaps. But the buyers behind it in China are not necessarily unleveraged. They may be forced to sell to deal with liquidity problems at home.

2. Is that true? Can you double your rents when the interest rates rise to 6%? Here a hint: no.

3. This is just ridiculous. Vancouverites are special.... 

4. This difference is overplayed. When people start defaulting on mortgages, they tend to not have much if any other assets. Recovery rates in bankruptcy are very low.

How can the government help? They can put in place regional insurance limits and down payment requirements. CMHC should, if anything, only be insuring entry-level properties, so insurance limits should probably be lowered to $500k. And markets with stretched valuations should have higher downpayment requirements. Vancouver should have 20% minimum downpayments to qualify for mortgage insurance, to help protect CMHC and the taxpayers from excessive risk of loss.


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## Charlie (May 20, 2011)

article's from November and it was pretty shallow and simplistic back then...

....at 20% downpayment there's no need to qualify for mortgage insurance. Limits are currently set at $1m. $500K would exclude all but very small condos in Vancouver. Given single family homes start at about $700K, perhaps the $1m ceiling is in the ballpark?


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## andrewf (Mar 1, 2010)

Why should Canadian taxpayer help inflate the housing bubble in Van?

Insurance limits should be capped at perhaps 3 or 4x median income in the CMA/province. Raising the limit because prices are high it was you call pro-cyclical credit expansion.


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## Charlie (May 20, 2011)

fair enough.

just pointing out that your proposal effectively eliminates mortgage insurance for Vancouver and other large urban centres. Median family income for Vanc and Toronto is about $70K. So at 4x we're at max insurable of $300K. Maybe there just shouldn't be mortgage insurance, but that's a pretty significant policy change. 

They've gone back to 25 year amorts, and introduced $1m limits (same concept you mentioned, but with a higher (more realistic?) limit. I don't know where it should be pegged. $1m seems a bit high. $500K (or $300K) seems low. We're in the range. Perhaps there isn't much more tinkering CMHC can do here?


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## andrewf (Mar 1, 2010)

They can always ease or tighten lending standards. I'm not suggesting they do it overnight, but getting to a more reasonable (and less risky) underwriting regime should be a goal. The cap should be lower than $1 million to be sure, and the minimum down payment should be higher. They should continue to tighten so long as the housing market remains stable until standards return to saner levels like what we had around 2000. The massive loosening of CMHC standards since then has contributed to the excessive increase in house prices (and household debt) in Canada.


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## Hawkdog (Oct 26, 2012)

andrewf said:


> Here are the "this time is different" arguments from the article:
> 
> 
> 
> ...


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## Hawkdog (Oct 26, 2012)

http://www.cantechletter.com/2013/02/vancouvers-tech-scene-emerges-from-the-drizzle/


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## andrewf (Mar 1, 2010)

That's the thing about confirmation bias. You can always find data to support preconceived notions (I'm guilty of it too). I find it helps to think about the reasons why 'this time is different' and really attack them. Is Vancouver the only city with foreign real estate investment? Does that really prevent significant market corrections? What happens when China hits a rocky patch and the flow of money stops or reverses? What makes Vancouver special amongst all cities that Chinese buyers don't move to other, more affordable cities? Livability is a bit of a red herring. People don't care about rankings, and all the cities in the top 20 or 30 are essentially equivalent.


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## Hawkdog (Oct 26, 2012)

andrewf said:


> That's the thing about confirmation bias. You can always find data to support preconceived notions (I'm guilty of it too). I find it helps to think about the reasons why 'this time is different' and really attack them. Is Vancouver the only city with foreign real estate investment? Does that really prevent significant market corrections? What happens when China hits a rocky patch and the flow of money stops or reverses? What makes Vancouver special amongst all cities that Chinese buyers don't move to other, more affordable cities? Liability is a bit of a red herring. People don't care about rankings, and all the cities in the top 20 or 30 are essentially equivalent.


True enough about confirmation Bias, I don't doubt there will be a correction I just don't think it will be one for the ages.
If you have buyers coming from Hong Kong, which has the highest prices in the world, Vancouver is a deal.
Similar cities would be Sydney and Melbourne Australia and Auckland New Zealand and those cities are having similar housing price issues as Vancouver.

The biggest complaint I hear from relatives in NZ is that the Chinese are coming in and buying up all the farms which is driving land prices up there.

How many cities in the top 20 to 30 can you go skiing/snow boarding and surfing (in the ocean) in the same day?


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## andrewf (Mar 1, 2010)

Better question: how many Vancouverites actually go skiing and surfing in the same day?


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## Hawkdog (Oct 26, 2012)

andrewf said:


> Better question: how many Vancouverites actually go skiing and surfing in the same day?


If I lived there I would just because. regardless you get the point. Vancouver is planning their Cherry Blossom Festival that starts next week. What are the flowers doing in TO?
http://www.vcbf.ca/


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## steve41 (Apr 18, 2009)

Surfing in Vancouver? I lived there all my life, and have never seen anyone surf except for kite surfing. Now.... skiing, golf and scuba diving on the same day.... that's another story.


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## andrewf (Mar 1, 2010)

Hawkdog said:


> If I lived there I would just because. regardless you get the point. Vancouver is planning their Cherry Blossom Festival that starts next week. What are the flowers doing in TO?
> http://www.vcbf.ca/


Cherry blossoms bloom a few weeks later. Not sure why this matters. TO has TIFF in September. What does Van have?


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## Cdnwife (Sep 10, 2013)

andrewf said:


> Cherry blossoms bloom a few weeks later. Not sure why this matters. TO has TIFF in September. What does Van have?


Not likely to bloom in a few weeks this year. My sister came to Vancouver to escape the snow of Ontario. I hear there is more to come. It is like the winter that never ends. This is why I pay more to live here. No snow shovelling. Or at least very limited shovelling, like once a year. I can do that kind of novelty.


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## kcowan (Jul 1, 2010)

andrewf said:


> Cherry blossoms bloom a few weeks later. Not sure why this matters. TO has TIFF in September. What does Van have?


Golf all year round for one. But if you are not a golfer, there is hiking and biking year round too. And seeing water not clogged with ice. But then who cares?

Have you ever heard of VIFF? Not that it matters much.


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## Just a Guy (Mar 27, 2012)

I've lived in both Vancouver and Ontario, must say I prefer not having 110% humidity when it's hot, but could also do without the rain every day...

At least in Ontario they admit it snows and don't shut down the city for a week every year when it does...but in Ontario they probably should when you get the dump of several feet of the wet stuff.

You'd think, in a country as large as ours, we'd have some middle ground somewhere...I could really go for nice summers, mild winters, and moderate cost of living.


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## Jon_Snow (May 20, 2009)

The east-west debate is entertaining enough I guess. I have no desire to live anywhere else but the west coast. I went to Alberta for work last year and was struck at how lifeless it felt there - I couldn't wait to leave. Just today I saw a group of transient orcas hunting some sea lions in Active Pass. This is the stuff that makes me tick, and why I choose to put up with the flakiness of Vancouverites and the high cost of living here.


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## marina628 (Dec 14, 2010)

Anywhere with a ocean is good to me  Been lucky that we have family in BC and Newfoundland ,definitely BC offers better weather.Been to Telegraph Cove a few times and seeing the whales and other wild life is amazing .Here I am though at home in Ontario for 9-10 months a year and praying the snow will be over soon!


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## My Own Advisor (Sep 24, 2012)

Having lived in Ottawa and still coping with winter...I will gladly take Vancouver's weather over Ottawa's.


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## Hawkdog (Oct 26, 2012)

Just a Guy said:


> I've lived in both Vancouver and Ontario, must say I prefer not having 110% humidity when it's hot, but could also do without the rain every day...
> 
> At least in Ontario they admit it snows and don't shut down the city for a week every year when it does...but in Ontario they probably should when you get the dump of several feet of the wet stuff.
> 
> You'd think, in a country as large as ours, we'd have some middle ground somewhere...I could really go for nice summers, mild winters, and moderate cost of living.


More prevalent on the Island but its there,

http://www.wannasurf.com/spot/North_America/Canada/West_Coast/Ambleside_Park/


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## Hawkdog (Oct 26, 2012)

Cdnwife said:


> Not likely to bloom in a few weeks this year. My sister came to Vancouver to escape the snow of Ontario. I hear there is more to come. It is like the winter that never ends. This is why I pay more to live here. No snow shovelling. Or at least very limited shovelling, like once a year. I can do that kind of novelty.


The beauty is that if you want to play in the snow its not that far away.


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## Hawkdog (Oct 26, 2012)

andrewf said:


> Cherry blossoms bloom a few weeks later. Not sure why this matters. TO has TIFF in September. What does Van have?


I am just pointing a few things that makes Vancouver different from other affordable cities in Canada (as per your question), I wasn't trying to pit the east against west.

"What makes Vancouver special amongst all cities that Chinese buyers don't move to other, more affordable cities? Liveability is a bit of a red herring. People don't care about rankings, and all the cities in the top 20 or 30 are essentially equivalent."

I disagree that Liveability isn't a consideration.


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## Hawkdog (Oct 26, 2012)

Just a Guy said:


> I've lived in both Vancouver and Ontario, must say I prefer not having 110% humidity when it's hot, but could also do without the rain every day...
> 
> At least in Ontario they admit it snows and don't shut down the city for a week every year when it does...but in Ontario they probably should when you get the dump of several feet of the wet stuff.
> 
> You'd think, in a country as large as ours, we'd have some middle ground somewhere...I could really go for nice summers, mild winters, and moderate cost of living.


The Okanagan could be a candidate for middle ground. 120 days with 20 degree or greater weather. Winters are relatively short. +12 in Kelowna today.
There are pockets were housing isn't that expensive.


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## andrewf (Mar 1, 2010)

Hawkdog said:


> I disagree that Liveability isn't a consideration.


That's not what I said. Obviously Vancouver is better to live in than Dhaka, and that makes a big difference.

But among cities at the top of the livability 'rankings', the distinctions are very minor. So Vancouver is not unique as a 'very livable city'. And other very livable cities like San Diego (whose climate is nicer than Van's) had significant real estate corrections.

By the way, it's 12C in Toronto today, too.


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## dogcom (May 23, 2009)

The rain in the Vancouver area is not that bad as long as you live in the south. Living close to the mountains means you will get significantly higher rain fall.


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## Hawkdog (Oct 26, 2012)

Glad to hear it finally warmed up TO. Whether or not Vancouver is unique is up for debate.


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