Real Estate

Vancouver housing bubble?

  • Last Updated:
  • May 26th, 2019 4:02 am
Tags:
None
Deal Guru
Jan 27, 2006
10518 posts
4155 upvotes
Vancouver, BC
RxMills wrote:
Feb 6th, 2019 1:47 am
"Metro Vancouver homeowners losing big in a plunging market"

Vancouver Sun
February 5, 2019

Here's a look at five examples highlighted on Twitter of homes in Vancouver and West Vancouver where the owners took a bath, or are at least one foot away from a nasty fiscal scolding.

https://vancouversun.com/news/local-new ... ing-market

Image

... Just as money laundering washed their money in Vancouver Real Estate, they could also be urgently getting out at any cost.

... From the article, Zi Min Yang lost $780,000 in 2 years of ownership.
... Arman Memarzedeh is getting out fast after losing $420,000 in his two year "investment".
... Takari Investments lost $480,000 since they bought 2 years ago.
... etc.

Nothing like buying high and selling low. And it's going lower.

Several people I know have been waiting to list for the spring buyers. Things have always gone way up in the spring right?

Actually, they'll more likely be meeting all the spring sellers.

Maybe they'll wait it out another year and watch it drop another 15-25%.
Classic cases where the smart money sold to the dumb money who are left holding the bag.
Deal Guru
Jan 27, 2006
10518 posts
4155 upvotes
Vancouver, BC
i6s1 wrote:
Feb 6th, 2019 12:54 pm
Wow, I've been watching my local market in Langley and plenty of houses now are getting reductions after just ~30 days on the market. Didn't see that happening late last year.
Langley is going to be the tip of the iceberg. As the Langley market drops, we will see more people thinking about moving out there from places closer to Vancouver removing demand from those areas which in turn will force prices to drop in those places. Once that happens, demand will slow going to Langley causing it to drop more in order to pull those buyers... Of course, that drop in Langley will cause other prices drop... A classic feedback loop!
Deal Guru
Jan 27, 2006
10518 posts
4155 upvotes
Vancouver, BC
adamtheman wrote:
Feb 6th, 2019 12:10 pm
Let's not forget - those developers who plumped up the media and newspapers by buying ads are probably now cutting back. Suddenly the media isn't so nice anymore when their cash cow goes down for the count.
If anything, many developers are buying MORE ads to try to unload their inventory before they have to lower the prices again. You have to remember that many of these properties were built to a certain price point with a fixed profit margin in mind. To make things worse, many of these price points were working on the premise that prices have no-where to go but up the target price point was typically HIGHER than the actual price point during planning and construction. So, they are hit with the double whammy of the disappearing target price point (ie when the market levelled off) AND the dropping actual price point. Things will get really ugly in a year or two when the projects in the planning stage last year (ie figuring out what price point to target) start moving into the completion phase with lower initial selling prices as they saw these prices coming. The older properties will need to adjust their selling prices much lower OR face sitting on the property.

BTW> The media doesn't care which side the market lands on as long as they get more eyeballs. And since many of the developers need to push their remaining unsold properties out NOW, the media can't be happier.
Deal Addict
Aug 21, 2007
4443 posts
369 upvotes
i6s1 wrote:
Feb 6th, 2019 12:54 pm
Wow, I've been watching my local market in Langley and plenty of houses now are getting reductions after just ~30 days on the market. Didn't see that happening late last year.
Just wait until some seniors that thought they were going to ride their equity to the moon panic.
Sr. Member
Dec 30, 2012
772 posts
802 upvotes
Toronto
craftsman wrote:
Feb 6th, 2019 2:10 pm
Langley is going to be the tip of the iceberg. As the Langley market drops, we will see more people thinking about moving out there from places closer to Vancouver removing demand from those areas which in turn will force prices to drop in those places. Once that happens, demand will slow going to Langley causing it to drop more in order to pull those buyers... Of course, that drop in Langley will cause other prices drop... A classic feedback loop!
I take the opposite view. I think the far-flung areas like Langley will be the last to fully correct. The bubble was not nearly as massive there.

Overleveraged people in Vancouver will be forced to panic-sell. With whatever equity they have, they may move further out thereby keeping the suburban/exurban areas afloat.
[OP]
Deal Addict
User avatar
Dec 3, 2004
4979 posts
3232 upvotes
Vancouver
craftsman wrote:
Feb 6th, 2019 2:18 pm
If anything, many developers are buying MORE ads to try to unload their inventory before they have to lower the prices again. You have to remember that many of these properties were built to a certain price point with a fixed profit margin in mind. To make things worse, many of these price points were working on the premise that prices have no-where to go but up the target price point was typically HIGHER than the actual price point during planning and construction. So, they are hit with the double whammy of the disappearing target price point (ie when the market levelled off) AND the dropping actual price point. Things will get really ugly in a year or two when the projects in the planning stage last year (ie figuring out what price point to target) start moving into the completion phase with lower initial selling prices as they saw these prices coming. The older properties will need to adjust their selling prices much lower OR face sitting on the property.

BTW> The media doesn't care which side the market lands on as long as they get more eyeballs. And since many of the developers need to push their remaining unsold properties out NOW, the media can't be happier.
It's my experience that when these properties don't sell, developers stop pouring money into them and dump them. They won't simply keep throwing money at a sick horse. Remember... if a developer has a $2 million dollar house sitting empty, the cost of maintaining that is significant. If house prices are dropping the developers will be the FIRST to drop prices and get rid of inventory, which in turns will drag down the market. Homeowners can hold out longer because they live in the house, and landlords of course are getting rental income. I don't think developers will therefore waste more money pumping out ads in papers - they will simply lower prices and dump the properties at some point. Then, with no new inventory being created (because building permits will drop temporarily) it means future ad revenue for newspapers will drop. Outlook, poor.
Newbie
User avatar
Oct 25, 2018
44 posts
31 upvotes
Kelowna
adamtheman wrote:
Feb 6th, 2019 3:04 pm
It's my experience that when these properties don't sell, developers stop pouring money into them and dump them. They won't simply keep throwing money at a sick horse. [..] Then, with no new inventory being created (because building permits will drop temporarily) it means future ad revenue for newspapers will drop. Outlook, poor.
Not what I'm seeing. I'm seeing tons more ads with desperate builders offering free Teslas, first year mortgage pre-paid, etc.
[OP]
Deal Addict
User avatar
Dec 3, 2004
4979 posts
3232 upvotes
Vancouver
EndlessRide wrote:
Feb 6th, 2019 3:09 pm
Not what I'm seeing. I'm seeing tons more ads with desperate builders offering free Teslas, first year mortgage pre-paid, etc.
The real crash hasn't *really* started yet. In the eyes of many this is still just a cyclical up and down, and things will rebound this spring. Developers are still in denial just like everyone else. Once those units are cleared out, ad revenue will plunge. People forget what it was like before this HOT housing market because it has been going on for so long. All those bus benches you see with realtors faces on them, good bye. There won't be anything left to fight over. But the good news is, they will be replaced with ads for "Debt Consolidation" and "We will pay cash for your home TODAY" ads. Remember, 30 detaches sales last month in Richmond. Less than 1 per day. It would be like watching 10 lions fight over the dead carcass of a wild dog. The # of realtors in BC has already dropped quite a bit.
Deal Guru
Jan 27, 2006
10518 posts
4155 upvotes
Vancouver, BC
adamtheman wrote:
Feb 6th, 2019 3:04 pm
It's my experience that when these properties don't sell, developers stop pouring money into them and dump them. They won't simply keep throwing money at a sick horse. Remember... if a developer has a $2 million dollar house sitting empty, the cost of maintaining that is significant. If house prices are dropping the developers will be the FIRST to drop prices and get rid of inventory, which in turns will drag down the market. Homeowners can hold out longer because they live in the house, and landlords of course are getting rental income. I don't think developers will therefore waste more money pumping out ads in papers - they will simply lower prices and dump the properties at some point. Then, with no new inventory being created (because building permits will drop temporarily) it means future ad revenue for newspapers will drop. Outlook, poor.
You are thinking about two different markets. Developers of houses typically won't advertise especially if it's a few houses spread out over a large area. The heavy advertisers have always been larger multi-tower condo developments who are selling those $500,000 condos as they have a lot of inventory concentrated in a small area. Of course, they will lower prices in order to move inventory but they will NEED to keep advertising in order to get people interested in the lower prices especially with the new developments coming online in a market with few buyers. Just lowering prices won't get people in... you need to be able to tell them you lowered prices!
Deal Guru
Jan 27, 2006
10518 posts
4155 upvotes
Vancouver, BC
civiclease wrote:
Feb 6th, 2019 2:46 pm
I take the opposite view. I think the far-flung areas like Langley will be the last to fully correct. The bubble was not nearly as massive there.

Overleveraged people in Vancouver will be forced to panic-sell. With whatever equity they have, they may move further out thereby keeping the suburban/exurban areas afloat.
One of the draws to the far-flung areas like Langley is the price of the homes. No-one likes an hour to two-hour commute to get to work or to see family. They do it because it's cheaper and they can afford the lifestyle they are looking for. If the housing prices closer to where they live and work become more affordable, people will make that calculus that those closer locations are more attractive - ie why would I pay close to the same amount of money so that I can take an extra hour to drive to work?
Deal Guru
Jan 27, 2006
10518 posts
4155 upvotes
Vancouver, BC
adamtheman wrote:
Feb 6th, 2019 3:47 pm
The real crash hasn't *really* started yet. In the eyes of many this is still just a cyclical up and down, and things will rebound this spring. Developers are still in denial just like everyone else. Once those units are cleared out, ad revenue will plunge. People forget what it was like before this HOT housing market because it has been going on for so long. All those bus benches you see with realtors faces on them, good bye. There won't be anything left to fight over. But the good news is, they will be replaced with ads for "Debt Consolidation" and "We will pay cash for your home TODAY" ads. Remember, 30 detaches sales last month in Richmond. Less than 1 per day. It would be like watching 10 lions fight over the dead carcass of a wild dog. The # of realtors in BC has already dropped quite a bit.
Remember - two different markets -> condos and detached. The condo market advertises, detached does not.
Sr. Member
Dec 30, 2012
772 posts
802 upvotes
Toronto
Can the Vancouver municipalities just amalgamate already? Does New Westminster really need to be its own city?
Deal Addict
Oct 7, 2007
4561 posts
1468 upvotes
Buggy166 wrote:
Feb 6th, 2019 11:17 am
lol millenials dont have 3 million to buy a previously 4 million house. They've got a long way to go to reach millennial household salaries in Vancouver. Maybe in 3-4 years.
I don't think those millennials ever had any intention of buying 3 million dollar houses. They actually don't like houses. They like density and would like to outlaw all detached houses in Vancouver and replace with shoebox condos all the way to the sky. They think anyone that lives in a detached house is privileged and should be ashamed of themselves.
Deal Addict
Oct 7, 2007
4561 posts
1468 upvotes
civiclease wrote:
Feb 6th, 2019 2:46 pm
I take the opposite view. I think the far-flung areas like Langley will be the last to fully correct. The bubble was not nearly as massive there.

Overleveraged people in Vancouver will be forced to panic-sell. With whatever equity they have, they may move further out thereby keeping the suburban/exurban areas afloat.
Vancouver west side certainly inflated more and faster than most other neighbourhoods so I expect that there is more room to correct on the way down in the same location.

Funny thing is, the annual median household income in Vancouver is something like $64k. If housing affordability is expressed as ratio of 7x median household income, house prices need to drop a substantial amount for locals to be able to afford to buy.

Top