# Vancouver crashing.......down $300,000



## sags (May 15, 2010)

Home prices in Vancouver are collapsing.

Average prices are down $300,000 from the peak.

www.garthturner.ca

Vancouver home sales have come to a full halt. People are backing out of deals.

http://www.huffingtonpost.ca/2016/0...tate-mayhem-foreign-buyer-tax_n_11322488.html


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## AltaRed (Jun 8, 2009)

Why doesn't someone report on the REAL data, i.e. median house price? Average means absolutely nothing when it is the high end sales that have fallen off. Didn't any of the journalists go to elementary school?

Added: The RE market was so screwed up, I imagine the Libs decided to have balls today to cap the market and hope it passes by election time.

http://www.huffingtonpost.ca/2016/08/19/vancouver-home-sales-crash_n_11609766.html

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


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## Zipper (Nov 18, 2015)

The foreign buyers tax pricked the bubble.

What were they thinking?

Now it's disaster time.


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## mrPPincer (Nov 21, 2011)

It's Y2K all over again!
Time to go long generators & gold coins again fer shur :cower:


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## carverman (Nov 8, 2010)

sags said:


> Home prices in Vancouver are collapsing.
> 
> Average prices are down $300,000 from the peak.
> 
> ...



Just watched Money-Talk on BNN. The host (Kim Parlee) had a real estate "expert"; Don Campbell, Senior Analyst, Real Estate Investment Network, provide his opinion on what is happening in the Greater Vancouver area not even quite a month later, since the province applied the 15% land transfer tax for foreign buyers on August 1. 

Apparently not even the real estate deals that were in progress before the new LTT were grand fathered either.

Prospective condo/homeowners from the US that were coming up to work there are backing away from the deals after discovering they need to come up with another $30K or more to pay for the LTT depending on the sale price of the property they were buying. Not to mention the Chinese foreign investors. . 

http://www.bnn.ca/money-talk/moneytalk-b-c-s-foreign-property-tax-one-month-later~932458

Too early to say what will happen long term, but if the province and city of Vancouver wanted foreign investors to stop purchasing property there and cool their heels.. it is working..at least in the short term..but bad news for sellers.

The GTA (at least city of Toronto) were thinking the same thing as it's a nice cash grab for the province and
Toronto has already a city LTT on top of the provincial LTT.

if they do decide to go ahead with the additional LTT on foreign buyers,that will crash or certainly cool
the Toronto real estate market.People pay enough property taxes as it is..adding yet another inflationary
tax may be the " last straw that breaks the camels back" for Toronto as well.



> Land transfer tax rates in Ontario – Updated in 2013
> Purchase price of home	Land title transfer fee
> First $55,000	0.5%
> On $55,000 to $250,000	1.0%
> ...


That's 2% on a 1 million dollar home in Toronto..over $16K that the Ontario gov't collects already.
If they go ahead and add a 15%? additional LTT for foreign buyers,that would be another $150,000 instead of $32k added to the purchase price (and mortgage) of a million dollar home. 



> Enter the purchase price: $ 1,000,000
> 
> Provincial Land Transfer Tax (PLTT) Amount $16,475.00 (applies to all Ontario properties including Toronto)
> 
> ...



More than likely an additional LTT amount added on to what is already in place, could help to burst the housing bubble in Toronto.


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## james4beach (Nov 15, 2012)

Too early to tell. Just like price graphs anywhere else in financial markets, it takes a while -- maybe even 1-2 years -- to really know if you've hit a peak.


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## sags (May 15, 2010)

Earlier in the week, BNN had a guest on who is a high end realtor.

He said all of his sales are to Chinese clients and they weren't at all concerned about the new tax.

Maybe the slowdown has more to do with the Chinese crackdown on illicit money transfers.

They announced they arrested 450 people.

It is hard to get a handle on the facts, when the CREA won't publish sale prices.


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## Pluto (Sep 12, 2013)

AltaRed said:


> Why doesn't someone report on the REAL data, i.e. median house price? Average means absolutely nothing when it is the high end sales that have fallen off. Didn't any of the journalists go to elementary school?
> 
> Added: The RE market was so screwed up, I imagine the Libs decided to have balls today to cap the market and hope it passes by election time.
> 
> ...


Agreed. Median is more telling. According to this article the average is 1.1 mil while the median is 710,000. 

http://www.theprovince.com/business...cline+27average+vancouver/12136178/story.html


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## carverman (Nov 8, 2010)

sags said:


> Maybe the slowdown has more to do with the Chinese crackdown on illicit money transfers.
> 
> They announced they arrested 450 people.
> 
> It is hard to get a handle on the facts, when the CREA won't publish sale prices.


I'm sure that if the sales are to the "nuveau riche" Chinese entrepreneurs, the additional 15% tax isn't going to be a problem at all, what's another $30K to $40K in LTT?, when they have millions at their disposal, and nothing as far as decent real estate to buy in China, where pollution is so rampant these days that everyone has to wear masks walking outdoors. 

Maybe they prefer the clean air and mountain scenery of Vancouver/North Vancouver instead? 

It's only that other possible foreign buyers, such as the US high tech employees etc, may balk at buying real estate with the new added LTT , which can be significant when added to the already high real estate prices there.


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## new dog (Jun 21, 2016)

I noticed before the tax driving around that nothing was selling, possibly it was the time of the year or something like that. The tax just made an already rolling soccer ball move much faster and sales have stopped for now. Prices will have to adjust down to a more solid footing which I think was coming anyway. I remember the house across the street from me selling for 1.8 million in April when the same house would have sold for 1.2 million in January. That is a nice air pocket that does need some deflating I would think.

The big problem like carverman mentioned is the turning away of higher end foreign workers from our real estate market. I think the government should rethink the tax size on these individuals as they are good for our economy.


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## peterk (May 16, 2010)

> *Some tech workers worried*
> 
> The foreign buyer tax could make it harder for Vancouver to reach its goal of becoming a major North American tech hub, Bloomberg reported Wednesday.
> 
> ...


Oh no... Poor poor Eric. I'm sure there aren't any engineers and computer guys from Waterloo or Toronto that would want to move to that dump of a city Vancouver. They are probably all far to busy working for Blackberry and the thriving auto industry in Ontario. :cool2:


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## sags (May 15, 2010)

Vancouver is becoming a North American tech hub ? I thought London, Ontario is becoming the North American tech hub ?


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## kcowan (Jul 1, 2010)

sags said:


> Vancouver is becoming a North American tech hub ?


Here is a sampling of tech employers in Vancouver. Not as much as Toronto but probably as good as Ottawa. ISTR MS also has a big software lab here.


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## cheech10 (Dec 31, 2010)

Carverman, your numbers are off by an order of magnitude. For a $1,000,000 property, the new tax is $150,000. That's a significant change from the ~$40,000 that it used to be, even for a well-off foreigner. And as a tax, rather than a run-up in price, can't be recouped at a future sale. Probably won't cause the market to dry up completely, but I could certainly see it having a significant effect.


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## My Own Advisor (Sep 24, 2012)

No disaster yet. Homes are up, what, something like 400% over the last 15 years? Crazy.

When things come down to _half their current price_, I will believe a major correction has occurred.


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## james4beach (Nov 15, 2012)

peterk said:


> Oh no... Poor poor Eric. I'm sure there aren't any engineers and computer guys from Waterloo or Toronto that would want to move to that dump of a city Vancouver. They are probably all far to busy working for Blackberry and the thriving auto industry in Ontario. :cool2:


I'm a Waterloo-educated computer guy working in the USA and if it was affordable to live there, I would consider living in Vancouver.


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## new dog (Jun 21, 2016)

What we really need to find out is what happens between Nov. and April of the coming year to see where we are in sales and price. If sales remain slow through this period then we may have a good correction on our hands besides the normal correction from prices running up way to much in such a short period of time.


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## Prospector (Jul 25, 2014)

I haven't researched this whole tax thing much (not in the area) - but what is preventing a guy like me from opening a shop that holds real estate on behalf of foreign investors. I guess that would be a REIT. For that matter, what prevents foreign investors from buying up Canadian REITS?


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## carverman (Nov 8, 2010)

cheech10 said:


> Carverman, your numbers are off by an order of magnitude. For a $1,000,000 property, the new tax is $150,000. That's a significant change from the ~$40,000 that it used to be, even for a well-off foreigner. And as a tax, rather than a run-up in price, can't be recouped at a future sale. Probably won't cause the market to dry up completely, but I could certainly see it having a significant effect.


I wasn't sure about it actually going up to 15% of the sale price, that seems to be a bit excessive. 
It just boggles me to think of the greed of provincial and local governments to impose on buyers of expensive real estate these days.
But if this tax scheme was to stop the foreign takeover/ownership of some parts of Canada, maybe it will work to some degree, I suppose.

To buy that million dollar house in Vancouver, not only costs the seller (5% in commissions; $50,000) but the lawyers get a piece of the action if they don't charge flat fees but base the real estate deals on a percentage
of the selling/purchase price, as well as other expenses.
No wonder the price of housing in greater Vancouver and Toronto is getting out of control in terms of what the real value should be. Where is the "real value" at this point anyway? 

A tax on foreign ownership is something that doesn't bother most residents of Canada, but every time that same property changes hands in terms of foreign buyers, the 15% tax will be paid as a windfall to the province or city government , to hopefully defray costs of local improvements (if any) and should realistically relieve the local residents of continually increased property value assessments. 

Well, at least, in a Utopian world, that would seem to be appropriate, but in the real world, the wealthy foreign ownership takes over the properties, any Canadian resident that wants to think about moving or even retiring there can no longer afford the constantly rising property prices.

In the end, who are the losers..and who are the winners? 

Somebody is bound to make a profit from each transaction, and at what point will that real estate bubble finally burst?


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## sags (May 15, 2010)

Home prices in Seattle, Washington could be a good comparison for Vancouver, and it appears they experienced similar price growth.

Similar geographical locations, similar employment prospects, similar education levels.

Of course there are some notable differences in the two markets. 

The US home buyer can get a 30 year fixed mortgage rate at current low interest rates, and the interest is tax deductible.

The "median" home price in Seattle is $560,000 USD ($722,000 CAD at today's rate of 0.78)

http://www.zillow.com/seattle-wa/home-values/

The "median" home price in Vancouver is $710,000 CAD.

http://www.timescolonist.com/news/b...ne-in-average-vancouver-home-prices-1.2327591

It would appear that in "median" prices, Vancouver is slightly less than Seattle.

One notable difference between the two cities is median family incomes to support home prices.

Seattle has a median family income of $87,000 USD. ($112,000 CAD)

Vancouver has a median family income of $67,000 Canadian. 

The median family income in Seattle is almost twice as much as in Vancouver.

Although home prices are similar, Americans earn almost twice as much and have the above noted mortgage interest deductions.

It appears the Vancouver home prices may be significantly overpriced, when based on incomes to service the debt.


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## carverman (Nov 8, 2010)

sags said:


> The US home buyer can get a 30 year fixed mortgage rate at current low interest rates, and the *interest is tax deductible.
> *
> The "median" home price in Seattle is $560,000 USD ($722,000 CAD at today's rate of 0.78)
> 
> ...


i'm not arguing with any of the above facts you have stated..however...the interest being tax deductible on the mortgage
is the scheme that the US (IRS) uses to encourage home ownership, but it is not a free bee, where you can deduct
all the interest paid on your mortage against your taxes and perhaps get a sizeable refund..there is always a catch.

When they go to sell their principle residence, capital GAINS may be apparent, and depending on their exclusion criteria they will be paying back some of those taxes back to IRS based on what they deducted on their income taxes. 



> Under 26 U.S.C. § 163(h) of the Internal Revenue Code, the United States allows a home mortgage interest deduction, with several limitations. First, the taxpayer must elect to itemize deductions, and the total itemized deductions must exceed the standard deduction (otherwise, itemization would not reduce tax). *Second, the deduction is limited to interest on debts secured by a principal residence or a second home*. T
> Third, *interest is deductible on only the first $1 million of debt used for acquiring, constructing, or substantially improving the residence, ($500,000 if filing separately) or the first $100,000 of home equity debt regardless of the purpose or use of the loan.*





> In the United States, there are additional tax incentives for home ownership. For example, t*axpayers are allowed an exclusion of up to $250,000 ($500,000 for a married couple filing jointly) of capital gains on the sale of real property if the owner used it as primary residence for two of the five years before the date of sale*. Economists have demonstrated that high-cost high-income areas receive most of the tax benefit. For example, San Francisco, California receives $26,385 per home while El Paso, Texas receives $2,153 per home, a 1,225% difference.[23] The five highest income metros receive 87% of tax inflows, with over half going into California alone.[24]


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## sags (May 15, 2010)

Claim up to $1,000,000 in interest deductions from personal income and pay capital gains tax on excess of $500,000 equity ? 

I would agree to that trade off 8 days a week.


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## sags (May 15, 2010)

Seattle is considered a bubble area for real estate as well.

Americans can buy beautiful homes all over the country for less than $150,000.

There is no logical, economic, of financial reason why Canada's homes would cost so much more than in the US.

The most apparent reason for the difference in home prices is Americans have had their downward home price adjustment and Canada's hasn't arrived yet. Collapse, decline, correction are different words for the same thing. It will be a return to normal historic trends.


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## Pluto (Sep 12, 2013)

sags said:


> Home prices in Seattle, Washington could be a good comparison for Vancouver, and it appears they experienced similar price growth.
> 
> Similar geographical locations, similar employment prospects, similar education levels.
> 
> ...


I'm wondering how "house" is defined. 
I went to realtor.ca and set parameters 1. Vancouver 2. max price 750,000 3. House, 4. ownership type freehold.
Nothing in Vancouver meets that criteria. so whoever said the median was 710,000 they must be including strata condos, float homes, trailer parks and what have you.

Cheapest detached freehold I can see in Vancouver is 799,000


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## kcowan (Jul 1, 2010)

sags said:


> ...It appears the Vancouver home prices may be significantly overpriced, when based on incomes to service the debt.


Numbeo:
Cost of living comparison between Vancouver, Canada and Seattle, Washington, United States

How much money will you need in Vancouver? 12$ less than Seattle.

Food	-3%
Housing	-19%
Clothes	-9%
Transportation	-14%
Personal Care	-4%
Entertainment	-9%
TOTAL	-12%

Numbeo uses rental to compare housing costs. Not perfect but a start.


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## kcowan (Jul 1, 2010)

The US capital gains on primary residence can be deferred if another residence is purchased in (I think) 18 months.

Also AMT can undo the mortgage deduction if the amount is too much compared with income.


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## My Own Advisor (Sep 24, 2012)

he "median" home price in Seattle is $560,000 USD ($722,000 CAD at today's rate of 0.78)

http://www.zillow.com/seattle-wa/home-values/

The "median" home price in Vancouver is $710,000 CAD.

http://www.timescolonist.com/news/b-...ices-1.2327591


Unless you are making a family income of >$120k (net), I have no idea how you can afford a $700k home regardless where that is. Even that, that is a serious mortgage.

No way.....for me.


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## Market Lost (Jul 27, 2016)

mrPPincer said:


> It's Y2K all over again!
> Time to go long generators & gold coins again fer shur :cower:


Wrong metal; try lead.


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## Market Lost (Jul 27, 2016)

sags said:


> Earlier in the week, BNN had a guest on who is a high end realtor.
> 
> He said all of his sales are to Chinese clients and they weren't at all concerned about the new tax.
> 
> ...


The tax will likely have a slight effect on buyers who aren't so wealthy, but there were reports that these clients were already leaving the market due to the cost.
If it is the the tax, then you would expect that the prices would find a new equilibrium at around 13% lower, which will be the equivalent of the current market prices plus the 15%.


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## Market Lost (Jul 27, 2016)

james4beach said:


> I'm a Waterloo-educated computer guy working in the USA and if it was affordable to live there, I would consider living in Vancouver.


For some reason, since I read that you were living in OR I keep getting flashes from Portlandia running through my head.


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## Market Lost (Jul 27, 2016)

sags said:


> Claim up to $1,000,000 in interest deductions from personal income and pay capital gains tax on excess of $500,000 equity ?
> 
> I would agree to that trade off 8 days a week.


It's not as good as it sounds. In the US a deduction means a deduction from taxes, not from income like Canada. IIRC only about 50% of home owners actually make use of it, and it requires them to itemize certain other deductions. For most people it isn't worth it, and it doesn't normally bring a lot of benefit to those who can.


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## james4beach (Nov 15, 2012)

UBS has released a report saying that Vancouver's housing-bubble risk is unmatched on the planet -- the highest risk in the world

http://www.cbc.ca/news/canada/briti...tched-on-the-planet-says-swiss-bank-1.3781527

Remember that's a statement about RISK... it doesn't mean the price will imminently decline, nor that it will inevitably decline. But they are saying it is the highest risk in the world for a sudden sharp price drop


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## tavogl (Oct 1, 2014)

Besides the price drop, what are other things that would happen when the bubble bursts? Would rates go up?


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## james4beach (Nov 15, 2012)

Things that could happen? Contraction in the BC economy due to the huge reliance on real estate. Many jobs are tied to real estate, directly or indirectly. So unemployment will rise, incomes will drop. And as a result, you'll get a contraction in consumer spending.

Another way to think about is to think of all the "good" things that happened due to rising home prices: like better availability of loans, more consumer credit, wealth effect, better profits for banks, people benefiting from leverage, boom in construction and tradespeople, etc. Now simply reverse all of those things.


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## tavogl (Oct 1, 2014)

And at the same time there is way too much people who can't get into the market, or won't do it because we know it's overvalued(me included). Strange the way economy works


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## mordko (Jan 23, 2016)

Four reasons behind the prices in Vancouver and Toronto:

1. Rich Chinese are looking for somewhere to park money. Their own houses are far more expensive for comparable location/land.

2. Low CAD makes our property even cheaper for the Chinese.

3. Bad economy resulting in ultralow interest rates. 

4. Shortage of land (amazingly) in the GTA and Vancouver. In the first case it's for bureaucratic reasons, in the second case it's geography.

Anything else?


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## new dog (Jun 21, 2016)

Yes, we don't know what liquidity will be unleashed onto the world, if things go south in the world, pushing central banks into overdrive.


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## sags (May 15, 2010)

mordko said:


> Four reasons behind the prices in Vancouver and Toronto:
> 
> 1. Rich Chinese are looking for somewhere to park money. Their own houses are far more expensive for comparable location/land.
> 
> ...


Perhaps a very important reason........parents these days are more willing to re-mortgage their own future to buy homes for their kids.

To be honest, if I bought a home for $70,000 and it was worth $2 million today, I would probably do the same.


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## lonewolf :) (Sep 13, 2016)

The rich around the world want a place to park there money. The more expensive the real estate, more money that can be parked.


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## mordko (Jan 23, 2016)

lonewolf :) said:


> The rich around the world want a place to park there money. The more expensive the real estate, more money that can be parked.


Yes, but herein lies the problem. China sneezes - Vancouver and Toronto will catch the cold. This has already started in certain segments of the market, like condos. China has its own property bubble to deal with.


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## peterk (May 16, 2010)

sags said:


> Perhaps a very important reason........parents these days are more willing to re-mortgage their own future to buy homes for their kids.


This is a huge issue in the western world, and is pretty much the only reason people are under the mistaken impression that the economy is fine, and the job market will work itself out for 20 somethings.

Without parental intervention there'd be college graduates living in the streets en-mass. And that parental help is only flowing so freely because the stock market and housing market are massively over valued, and all you older folks are feeling pretty rich these days.


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## Pluto (Sep 12, 2013)

It's not just Vancouver. Manhattan real estate recently tipped over. Apparently Donald's net worth has plunged by an estimated 800 mil due to falling real estate prices.


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## dchacon (Oct 13, 2016)

Wonder what this will mean for the Toronto market. We're planning on selling soon. The big question after that is rent or buy.


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## andrewf (Mar 1, 2010)

Pluto said:


> It's not just Vancouver. Manhattan real estate recently tipped over. Apparently Donald's net worth has plunged by an estimated 800 mil due to falling real estate prices.


Is his NW even $800 million? My understanding is that most of his NW is intangibles (ie, his personal brand). I'm not sure he even has that much in tangible assets.


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## OurBigFatWallet (Jan 20, 2014)

andrewf said:


> Is his NW even $800 million? My understanding is that most of his NW is intangibles (ie, his personal brand). I'm not sure he even has that much in tangible assets.


If Trump's net worth is mostly related to his personal brand, someone should do a comparison of before/after the election. His 'brand' takes a dive with every scandal he's involved in

I heard there is a Trump building opening in Vancouver and they are trying to delay the opening until 2017


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## andrewf (Mar 1, 2010)

^ Trump is most likely only licensing his name/brand for the building in Vancouver. I think that was the case with a development here in Toronto as well.


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## kcowan (Jul 1, 2010)

It will be fascinating to see what the Trump brand is worth after this election season.


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## Pluto (Sep 12, 2013)

andrewf said:


> Is his NW even $800 million? My understanding is that most of his NW is intangibles (ie, his personal brand). I'm not sure he even has that much in tangible assets.


Yes, it is possible he has a negative net worth, and it just got more negative.


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## Market Lost (Jul 27, 2016)

Pluto said:


> Yes, it is possible he has a negative net worth, and it just got more negative.


Especially after the past week.


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