Thurs Post #2: Lower Mainland Real estate developer starts accepting Bitcoin

Abbotsford developer Quantum Properties says they are accepting Bitcoin for a deposit on any of their residential developments.

The company is currently marketing more than 400 condos in Abbotsford and Port Coquitlam.

President and CEO of Quantum Properties Diane Delves says she has been following the digital currency for a while and thinks it is the way of the future.

“I was fascinated by the concept. We have been looking at it for a while. Finally as of today, we made it official that we are going to accept Bitcoin.”

Delves says they have yet to see what the buying public thinks of it.

“We wanted to offer it as an option. It was sort of like –let’s throw it out there and see."

Delves says as far as she is aware, no other developer is accepting Bitcoin.

The average value of a condo that Quantum Properties is marketing is $250,000, and the deposit is usually within a 10 per cent range.

Delves says she is aware of just how volatile Bitcoin can be, but it is not a big concern for them.

“We might win some, we might lose some. We will convert it to currency and if we suffer a loss, we will count it as a marketing cost.”

Source: Global BC

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Sat Post #1: Global TV reports Vancouver Real Estate Prices To Fall 10% in 2013

Buried in a piece of about the economy, Global reports that Vancouver Real Estate will drop another 10% in 2013.

Naturally is is couched with the rationalization that this drop will be - at best - a correction, not a crash because interest rates aren't heading up anytime soon.

But it's significant to note we have now moved from the "prices are flat" mantra to this is a "correction, not a crash" mantra.

(hat tip GreenhornRET)

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The media barrage about real estate continues

In conjunction with the Maclean's story, the media barrage about the dismal real estate market continues.

The latest is Global TV, whose intro to the news story above starts:

The image may be attractive, but the reality sure is ugly when it comes to Vancouver real estate. New numbers for December show a bloodbath for residential sales.

To provide 'balance', the real estate industry gets to add the spin denied by Macleans.  And the message is the same: there is no bubble.

The ray of hope being proffered?  HAM will return!

Global ends with the R/E mantra that while sales are down and prices are holding firm.

Which brings us to the 2nd Global clip which focuses on the release of the new assessment values:

And it's the Global commentary that catches the breath of the bear observer used hearing the pro-R/E mantra from Global TV:

Your property assessments are now in the mail. And for the first time in years, house values in some of the Province's hottest markets have actually declined. While most assessments will reflect a slight change from last year, others will come as a quite a shock, reflecting a definite 'cooling-off' of the real estate market in places that were once white-hot.

Naturally the real estate 'experts' are trotted out to tell you prices are actually 'flat' and not falling... and that the 'fundamental's' mean real estate can only go up.

Curiously even our buddy Tsur Somerville let's slip that we are seeing a "slight easing of prices."

With Global TV now clearly highlighting the bearish style of the equation, it's clear the media can no longer simply gloss over what is going on.

(hat tip to GreenhornRET for the archiving of the video clips)

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"The price increases of the last decade are long gone."

You've got to wonder just how significant the shifting mindset amongst the public is regarding real estate when even Global TV is now openly saying the following:

"... there hasn't been a crash, thankfully, but Ottawa and the Bank of Canada are desperate to raise interest rates once the economy improves. Economists are expecting the rates to start inching upwards by late 2014 - meaning the price increases of the last decade are long gone."

Kinda kills the whole campaign to get people to buy the current dip, doesn't it?

Of course the same talking heads who want you to buy the current dip also want to insist there is no dip - prices are just flat and will remain flat (real estate never goes down, don't you know?).

Meanwhile Cameron Muir wants you to know that:

Last year’s figures must be taken “with a grain of salt,” Muir said because the prices were inflated by a large number of luxury homes for sale in West Vancouver, Richmond and Vancouver’s West End.

Really?

In all the breathless monthly reports we saw last year from the BCREA, does anyone recall being told to take those figures with "a grain of salt?"

Muir also wants you to know that:

"The federal government’s decision to reduce the maximum amortization period for a government-insured mortgage to 25 years from 30 years also affected home sales.

That could add up to $160 on the monthly payment of a $350,000 house.

That no doubt has squeezed some potential buyers out of the market."

So buyers are extending themselves so thin that an extra $160 a month collapsed the real estate market?

If so, imagine what a few interest rate points might do?

(hat tip to LM and GreenhornRET)

On another note, isn't the world supposed to end tomorrow?

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Mon Post #1: A Vancouver condo for 34% off original sale price?

We've posted an example of a Richmond home selling for 33% below assessed value and now are we seeing similar 30%+ plunges in Vancouver?

According to this Craigslist ad (click on above image to enlarge) from Rennie Associates, an Olympic Village penthouse now has an asking price 34% below the original asking price.

Not as spectacular, but now less significant, the add notes that the asking price is 25% below original purchase price:

Penthouse suite, 2 bedroom and den, over 1,000sf in Olympic Village. Priced reduced by $370,000 for immediate sale!! Huge deck with a nice view of the water. Perfect for entertaining. Make an offer now and get a nearly new Penthouse condo at a 25% discount from the original purchase price!! Call today for a private showing.

Will the final sale come in at 30%+ below the original sale price?

Tuning into Global TV the past few days might convince you it would.  First the most bullish of TV stations talks about the 'Death of the Condo Presale in Vancouver':

And then a story on 'Vancouver's Deflating Real Estate Bubble' (hat tip to GreenhornRET for posting the clips):

I wonder if IAMWILL is going to question Global's agenda?

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Are bloggers Public Enemy No.1 in an attack on the fundamentals?

Watching the news this week, you can  can see the real estate industry mounting their latest counter offensive to spin their message.

And that message will be... 'fundamentals don't matter'.

Despite having rejigged they way the benchmark price is calculated (twice this year, actually), the reality of the market is becoming hard to ignore.

Sales in May for all forms of housing across the Multiple Listing Service were down over 15.5% from last year, and the lowest for the month of May since 2001. For detached homes sales, the news is  even worse: They were down 25% for the same period last year.

While sales have fallen, the number of listings has risen. In the Vancouver westside, which is held up as the main beachhead for the Asian invasion, the total of active listings — those homes for sale that haven’t sold — has risen to 1,100 properties at present from 600 a year ago.

The pathetic attempts to neutralize the impact of these figures prompted Vancouver Sun columnist Pete McMartin recently to state the obvious:

Commenting on these numbers, the resolutely sunny Real Estate Board of Greater Vancouver decided this was “indicative of balanced market conditions.” But then the board would have viewed the crash of the Hindenburg as the result of “normal deflationary conditions.”

Yesterday we drew your attention to one of the latest piece by Global TV (Global reports the facts, concludes ours is now a 'depressed market', but then claims we're 'different').

 Global has also been unable to ignore the obvious:

Vancouver Real Estate had defied trends and showed steady growth for far longer than anybody believed possible. The evidence is not in the polls, which very often contradict one another, but on the ground, in the neighbourhoods where plum properties have always sold quickly and at a profit. Sellers are finding the days of multiple, over-asking offers have disappeared... and buyers are getting the pick of the crop with buyer reduced signs popping up all over the place.

They were even forced to admit that Vancouver is now "a depressed market".

So if the spin no longer works and the ugly numbers cannot be ignored, what do you do?

Invalidate the usefulness of the numbers, of course.

You could see the strategy launched when Bob Rennie spoke to the Urban Development Institute on May 17, 2012. Rennie said:

I joked with the CHMC’s board a couple of years ago, that the Vancouver market never went up on fundamentals, so why would we go down on fundamentals.  

However, our market really does have fundamentals but our fundamentals cannot be captured in a 90 second elevator conversation, at the water cooler, in a sound bite, and especially not on a blog or 140 character tweet.

And what are those fundamentals that cannot be captured in a 90 second conversation?

I think we saw that in the Global TV piece yesterday as well.

The spin we are going to see is the same as we have heard over and over before. "Rich people wanna live here.  We have limited area due to the mountains and the ocean.  And we have the scenic and lifestyle advantages of those same mountains and ocean." 

This is basically what Global TV said when they trotted out Tsur Sommerville:

Sommerville: Now we have a situation where prices aren't rising, they're flat. We have a situation were listing are rising, sales are falling and there isn't any of the kind of angst or anxiety out there in the marketplace. Instead what it's replaced with is less worries about people driving prices up and more worries about Greece blowing up the world economy.

Global Reporter: Vancouver is that market that is way different than any other kind of market.

Sommerville: Vancouver is very hard to figure out because so much of the purchases are done by wealth. Either people immigrating with wealth or people receiving wealth from parents or relatives so the normal 'what are incomes doing and what are prices doing', that just doesn't work out here well.

Global Reporter: And that may explain that while there are price reductions, average selling prices just aren't going down. Unlike other depressed markets in the world, there's no pressure to sell. And with our geography, the mountains and the ocean, it's not likely to change.

I suspect this will be the theme for the foreseeable future.

Claim prices simply can't go down here.  Tell everyone that wealth wants to be here. And desperately try to convince you to "buy now or be priced out forever".

And to the one segment of the community that the industry can't influence the peddle this message - the blogosphere - Rennie summed up his frustration in that May 17th UDI speech:

I do have a huge concern over what Tracie McTavish, the president of our company calls, your “Keyboard Courage”, referring to what is becoming a dangerous and apparently acceptable practice which is, negative market commentary that is nothing but speculation.

Speculation made by spineless, signature‐less, individuals on a blog, on a blog that in most cases has less than 500 followers.

Then the next thing you know, the mainstream media picks up on the negative as fact and all of a sudden, it’s breaking news and our industry spends the next 6 months attempting to dispel the rumors and sound bites.

The dispelling of the "rumours and sound bites" of the basic market fundamentals (ie. the inescapable reality of the hard sales data) has begun.

And it would appear that in this attack on the fundamentals, the blogosphere is being cast as Public Enemy No.1.

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Real Estate correction predicted by MSM

Global TV's newscast today did an piece on a looming real estate correction and started off:

"The Bank of Montreal is putting a scare into anyone heavily invested in Real Estate or heavily in debt."

Predictions of a correction in Vancouver Real Estate have now gone mainstream.

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Blame the HST

On Monday we posted that the big news for real estate watchers in the Village on the Edge of the Rainforest was that not one single detached new home had sold in the month of September on the west side of the City of Vancouver.

This is significant because the west side is an area that has been considered the hottest real estate market in all of Canada.

One of the rationals being offered to defend this 'temporary aberration' is the decision of BC voters to rescind the Harmonized Sales Tax (HST) in a referendum last month.

The HST was to replace the old PST (provincial sales tax) and the federal GST.  But the new tax would tax items not taxed under the PST/GST arrangement. Specifically it would tax newly constructed real estate that sold for over $500,000, which in Vancouver is just about everything.

The HST has been voted out, but it will be over a year before the Province switches back to the old PST/GST tax structure.  Are we to believe that construction and buying has all but stopped as buyers wait for the levy to disappear more than a year from now?

Above is a story by Global TV which is making that very claim.

• "Squamish developer Douglas Day says home buyers want to wait until the HST is completely scraped to avoid paying the extra tax... Right now home buyers pay HST on newly constructed homes until the Province unwinds the controverisal tax and goes back to the former PST/HST system. Developers say that's causing home buyers to sit on the wallets right now and wait."

Now the Global TV story focuses on lower end new homes which would be marketed to local incomes. But defenders are offering this rational for the west side of the City of Vancouver, where tear downs are going for $2 million and larger houses are going for twice that.

Over and over we have been told that the west side of Vancouver is an exception to the rule, an area that has been skewing Lower Mainland statistics because rich Asian money is buying up property there. Local incomes aren't supposed to be coming into play because, as a world class city, the west side is attracting a new reality - a buyer for whom money isn't an option.

So if this influx of foreign money is creating a new paradigm of values, what gives with September's stunning lack of sales?

Are we now to believe that someone laying down $4 million for a house will really be dissuade from buying over the next 18 months because they really care about a few hundred thousand more in tax?

Is foreign money really establishing a new paradigm in Vancouver, or (as Garth Turner has suggested) is the new paradigm of foreign money on the west side nothing more than realtor-created, media-infused, jingoistic marketing crap?

Rationalizations for last month's results abound. Curiously no one locally, except the blogosphere, is suggesting the bubble may be ready to pop.

Speaking of realtor-created, media-infused, jingoistic marketing crap, take a look at this realtor's site for an example of the hype which reinforces the notion that the Vancouver market is being driven by wealthy Chinese buying up real estate here.

Some of the content is re-printed below:

• Continually ranked and voted as the “Most Livable City in the World,” Vancouver, BC is still relatively inexpensive compared to other top global cities.
  
  Vancouver has seen a decade of real estate price appreciation and new developments. The price of multi-million dollar estates, state-of-the-art Downtown Luxury Penthouses, and Waterfront Dream Homes have risen dramatically in the past 10 years. Some people call it a real estate bubble; I like to call it sustainable demand for arguably the best city in the world.
  
  The Chinese influence on Vancouver real estate has been a huge factor in the substantial home values increases since the turn of the new millennium. However, in the past 6-8 months the number of Chinese home buyers coming from mainland China and Hong Kong has intensified and boosted some home prices by up to 50% in the past 2 years, with their focus being on Richmond, Vancouver’s West Side, and now West Vancouver.
  
  Vancouver West Side is a very prestigious part of Vancouver with excellent schools and safe neighborhoods. It has also been the hottest Real Estate in Vancouver over the past several years, driven by offshore Chinese buyers and investors. Since August 2009, Chinese Real Estate Companies have been arranging tours of Chinese Buyers coming to Vancouver for a few days that often resulted in them buying multiple properties with cash offers. The average detached home price in Vancouver’s West Side is $1,698,925, up 46% from the January 2009 figure of $1,165,007. There have been many cases of homes in communities such as Point Grey, Kitsilano, Dunbar, and Shaughnessy listing and selling within days for $300,000 or 25% over asking price in some multiple offer scenarios.
  
  Chinese buyer interest in the Vancouver real estate market will continue to be driven by Canada and British Columbia’s strong benefits. Investors know that Canada’s stable banking system makes a US type over-lending disaster improbable. British Columbia’s rich natural resources are creating wealth and securing long-term interest in BC. Our safe and desirable multi-cultural lifestyle, superb educational system from Elementary to University and the fresh mild climate make Vancouver one of the most sought after and highly demanded global cities worldwide.

Asian savious aside, the fact remains, there were zero (0) sales of new, detached homes on the west side of Vancouver in the month of September.

There is more happening here than just the HST.

Lower Mainland September Statistics

Fellow blogger fish has posted stats for September over on his blog Vancouver RE and then some.

Of note, in Greater Vancouver sales rank as the third lowest in the month of September over the last 10 years. Months of inventory sits at 7.2.

In the Fraser Valley this is the third month in a row based where lower sales have combined with a higher influx of new listings. Months of inventory sits at 8.7.

In Victoria months of inventory has climbed to 10.8.

And on the Sushine Coast, months of inventory is a stunning 17.5.

Of course prices have not begun to fall yet.  With rising inventory, how long before the Real Estate industry starts to beat the drums that this is a 'buyers market' and that you need to support the market by buying now.

But if prices are still well above what local incomes can support, what can entry level buyers do?

Hmmm... perhaps it's time for yet another example of realtor-created, media-infused, jingoistic marketing crap.

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Tues Post #3: BC immigration turns negative because of high real estate prices

Global TV news story on how people are leaving BC because of high real estate prices.

And just how distorted is the market in Vancouver?

Perhaps the most stunning comparison is made with these two charts showing prices of homes in markets across Canada and household incomes in those same cities. (Click on images to enlarge)

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Tues Post #1: So what happened to all the Asian Money flooding into Vancouver?

Remember when HAM or 'Hot Asian Money' (and not cheap credit inducing Canadians to overextend themselves) was supposed to be the reason the Vancouver Real Estate market was remaining buoyant?

Back in June of 2010 we were told that Vancouver Real Estate had recoverd from the recession and that a surge in sales in the high end market was supposed to be trickling down to the lower levels and thus keeping sales up across the board.

And the source of that high end money?

China... or so we have been told by the media and Cameron Muir, Chief Economist of the BC Real Estate Association (BCREA) as this Global clip from June 12, 2010 attests to:

The clip tells us that all the money flowing into our Real Estate market is coming from Mainland Chinese who were buying homes here, upgrading their homes here or buying homes for investment purposes.

Muir is very specific, telling us that not only are the largest proportion of buyers of high end homes coming from mainland China, but their presence is what has been maintaining property values.

Global TV summarized and stated, "it means the rush of buyers from China is keeping the Lower Mainland housing bubble from loosing air."

Hmm... okay.  And since early 2010 that's all we have heard about in Vancouver:  'Chinese buyers are snapping up properties and keeping the market strong. No need to worry about a market collapse here, hot asian money is pouring into Vancouver.'

Translated... the message for you and I is the same as it always is from the R/E propoganda machine - buy now or be priced out forever.

Fast forward a year and a bit to today and the myth of HAM remains. Talk to anyone on the street and their view is that 'hot asian money' continues to flow into the market.

But wait! The tune from the likes of Cameron Muir has changed dramatically.

Over on the local CTV station, the dinner hour news last night had a segment on concerns our housing bubble is about to burst. You can find it at this link and watch the video broadcast itself (CTV News - Is Vancouver's housing bubble about to burst?)

CTV's story notes that our astronomical real estate prices combined with global instability have many locals wondering if the bubble is about to burst in Metro Vancouver.

Naturally CTV pops by to have a chat with Mr. Muir.

And the chief cheerleader for R/E in BC does not disappoint. "I guess the first question is - is there a real estate bubble at all?" says Muir.

Cameron goes on to tell us there is no bubble; that the average home price is actually being skewed, inflated by skyrocketing prices for detached homes in Richmond, West Vancouver and the West Side where prices have soared nearly 80% over five years - 27% in the past year alone.

A result of 'hot asian money', right?

It doesn't make the written transcript in the link above, but if you watch the actual clip there is a very insightful exchange at the very end.

The newscast host (Tamara Taggart) asks, "What about offshore people are they jacking up prices?"

Reporter: "That's kind of a fiction. The Chief Economist of the BC Real Estate Association says a lot of people have heard these rumours but he says only 2-3% of the buyers are foreign investors from mainland China"

Say wha????

Gee Cameron... and where would these 'rumours' have gotten started to begin with?

Muir quick shifts gears and attempts to belay concerns about a looming collapse by saying, "we had a financial crisis, the largest we've seen since the great depression, we had an ensuing global recession, and if that isn't a trigger or a tipping point for any kind of over-inflated market to see a major correction, I don't know what is."

Wow!

First off HAM is a myth, and now you're telling us that because the bubble hasn't popped yet, there isn't one?

One thing I can agree with Muir is that we did have a financial crisis, and it was the largest we've seen since the great depression. 

We also had an ensuing global recession.

But as the mainstream is starting to appreciate, that recession is nowhere near being over.

Up until now our government has moved heaven and earth to forstall its effects by slashing interest rates and coaxing our citizens to plunge themselves into record levels of debt by buying real estate and delaying the consequences of that financial crisis.

But the global recession marches on and we can't hide from what's coming.

Muir says, "if that wasn't a trigger or a tipping point for any kind of over-inflated market to see a major correction, I don't know what is."

Again, he's right. But the problem is that the trigger hasn't been pulled yet. Muir makes it sound as though the time for the trigger to be pulled has past us by.

It hasn't.  And when it does get pulled, we will see that tipping point.

It may already be upon us.

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More on the Canadian Housing Bubble

On March 18 new government rules for mortgages come into effect into Canada. Announced with a 60 day delay before implementation, the rules will reduce the amortization period Canadians can spread their mortgage payments over. Starting mid month, the term will be dropped from 35 years to 30 years. The newsclip above talks about the looming changes.

Check out how the news story uses a $300,000 mortgage to analyze the impact. First of all you have a Canadian mortgage broker who dismisses the $106 per month increase in monthly payments the amortization change will bring to that $300,000 mortgage example. She opines it's as easy to handle as 'skipping one meal at a restaurant' per month.

Now consider that Vancouver's average single family house price hit an outrageous $1,173,395 last month.

A $300,000 mortgage? For a shoebox apartment somewhere, perhaps.

As Canadians are consumed by record breaking household debt, consider that total household debt in Canada now tops $1.5-trillion, or three times our nation's national debt, with a debt-to-disposable income ratio now at more than 145%.

Warnings are now popping up all over about our looming debt situation and borrowing habits.

Bank of Canada Governor Mark Carney has warned several times that debt levels are bloated, and Finance Minister Jim Flaherty is bringing in the above mentioned mortgage rule changes.

Recently a visiting scholar at MIT's Sloan School of Management also commented on our debt binge.

Derek Dunfield, a neuroscientist and visiting scholar in behavioural economics and marketing at MIT, warned in a paper that Canadian consumers "may soon be overwhelmed" given the inevitable rise in interest rates.

High debt levels could have dire economic consequences and "the historically high levels of household debt present two possible problems for the Canadian economy," said Dunfield.

"One scenario is that interest rates rise, house prices drop, and more people begin defaulting on their credit card debt and mortgage obligations. An equally worrying - and perhaps more likely scenario - is that interest rates go up a little, and more of people's disposable income goes to repaying their debt, leading to a significant reduction in consumer spending. Since personal spending on consumer goods and services accounts for 58 per cent of the Canadian gross domestic product, this decrease would provoke a 'made in Canada' recession.".

With that theme in mind Action Canada has released a cartoon short as part of it's new website, debtcrunch.ca, to encourage Canadians to consider the reprecussions of their debt choices.

And for those who would like a primer on the role the Canadian Mortgage and Housing Corporation (CHMC) has played in our housing bubble, there is this cartoon that joins the Xtranormal craze for simplifying complex issues.

For our non-Canadian visitors, CMHC is Canada's version of America's Freddie Mac and Fannie Mae.

This is not going to end well,

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