Real Estate

Vancouver housing bubble?

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  • Jun 18th, 2019 1:26 am
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Deal Guru
Jan 27, 2006
10677 posts
4233 upvotes
Vancouver, BC
adamtheman wrote:
May 9th, 2019 11:19 pm
It's funny to look back at all the people who insisted that Vancouver RE prices were not influenced by foreign money or illicit funds. "Vancouver is just a really desirable place to live"...... "There's no more land"....... and comparisons to major cities like Toyko and New York and London. Once this cookie crumbles, Vancouver is just going to be regular old Vancouver again for a while and there will be no shortage of housing, guaranteed. Looking forward to it.
Realistically, if you look at the numbers in question - $5 Billion into real estate in 2018 - and you put in the context of the total residential sales in Greater Vancouver for 2018 (about $25 Billion), the percentages are BIG - about 20%. But remember that all of that laundered money is for BC and not just Greater Vancouver and we are talking about all real estate and not just residential real estate so the percentage is actually smaller as the totals include commercial real estate as well (about $6.5 Billion for commercial and $55.8 Billion for BC in residential in 2018). So, that would be $5.3 Billion over $62 Billion or so or less than 10% of all real estate funds were laundered money.

What we don't know is how much of that laundered money was used to be re-laundered again - ie buy house A to do laundering, sell house A and buy house B and really laundering that money twice). And how much of the estimated 5% increase in housing prices helped drive speculation from 'clean' money - ie real investors using clean money looking to make a quick buck rather than doing some laundering?

It looks like some influence was from 'dirty' money but that might be a smaller influence than what it was made out to be especially if you consider that during the same time, more money was laundered in Alberta and the Prairies than BC and they didn't see an explosion in housing prices during that time period. It may be that housing was the preferred laundry mat in those areas.
Newbie
Dec 5, 2009
73 posts
13 upvotes
A lot of great points here but im also keeping in mind that the 5 billion estimate is very conservative (and we know how analyst and govt reports are always extremely conservative in both directions (particularly down)). Theres also the psychological factor and the chain reactions that laundered $ might have had on pulling the entire real estate market up. Ie. if you neighbour sells for x, you will likely ask for x+y. The next neighbour will ask for more and so on and so forth... sparking new comparables and a chain reaction.
Sr. Member
Dec 30, 2012
800 posts
835 upvotes
Toronto
JayLove06 wrote:
May 9th, 2019 7:51 pm
People are so easily influenced. Last year it was about rent controls and landlords.....now 2019 is about money laundering. What will happen when our government spends a crapload of tax payer money to stop all money laundering and home prices are still unaffordable. lazy government unable to address issues directly. Good luck Vancouver!
I thought you said the Vancouver market was finished?

So which is it? Will Vancouver decline or will it remain stable or rise?
Deal Addict
Oct 7, 2007
4596 posts
1482 upvotes
civiclease wrote:
May 10th, 2019 6:09 am
I thought you said the Vancouver market was finished?

So which is it? Will Vancouver decline or will it remain stable or rise?
If you ask me, Vancouver is on its way to a hard crash. Unless the government forces taxpayers to bail out the "poor" developers as if they already don't get tax breaks that no one else gets.
Deal Fanatic
Feb 29, 2008
7690 posts
2880 upvotes
civiclease wrote:
May 10th, 2019 6:09 am
I thought you said the Vancouver market was finished?

So which is it? Will Vancouver decline or will it remain stable or rise?
You really do read things differently. It’s going to be a mess and guess what? The people crying the most now STILL will not be able to buy. Get it?
Member
Feb 13, 2018
435 posts
382 upvotes
So basically, the dirty money drove up the market and the locals jumped in blindly in fears of missing out...
Why does it take so long to find out this well known facts is beyond me.

Confidence is gone. Who is the right mind would get in now.
Deal Addict
Apr 10, 2011
1196 posts
667 upvotes
Vancouver
rfdchan wrote:
May 10th, 2019 1:25 pm
So basically, the dirty money drove up the market and the locals jumped in blindly in fears of missing out...

Why does it take so long to find out this well known facts is beyond me.

Confidence is gone. Who is the right mind would get in now.
Good summary of the situation.

The real estate association says they'll fix the problem by giving more education to their agents. Yes, that will fix it, as real estate sales people are always more concerned about morals than their commission cheques.

+

"Homemakers buying multiple homes, layers of shady mortgages and other signs of dirty money in B.C. real estate"
CBC NEWS
May 9, 2019

Almost 500 different properties with four to 29 mortgages each, registered and repaid in rapid succession.

Hundreds of individuals and numbered companies that own property with only the address of a law firm on title.

Titles to more than 3,000 residential properties — worth more than $3 billion — that have ownership addresses located in high-risk financial jurisdictions. Of those properties, 473 list owners' addresses in offshore financial centres and tax havens.

https://www.cbc.ca/news/canada/british- ... -1.5130163

.............................

BC Lawyers fought for, and received, an exemption to BC law compelling real owner names be disclosed. In effect, BC Lawyers can keep their client names confidential and BC Lawyers aren't responsible. Since most BC MPPs are current or former BC Lawyers, it's not a surprise.
Last edited by RxMills on May 10th, 2019 1:51 pm, edited 2 times in total.
Deal Guru
Jan 27, 2006
10677 posts
4233 upvotes
Vancouver, BC
Alpine84 wrote:
May 10th, 2019 4:28 am
A lot of great points here but im also keeping in mind that the 5 billion estimate is very conservative (and we know how analyst and govt reports are always extremely conservative in both directions (particularly down)). Theres also the psychological factor and the chain reactions that laundered $ might have had on pulling the entire real estate market up. Ie. if you neighbour sells for x, you will likely ask for x+y. The next neighbour will ask for more and so on and so forth... sparking new comparables and a chain reaction.
No one really knows how much was laundered as there isn't a 'laundry registry' but assuming that the study methodology was applied consistently across the country, then it would mean that BC doesn't have as much of a problem as Alberta/the Prairies/Ontario in relative terms. Of course, the $5 Billion may be $10 Billion or it may be $4 Billion - we just don't have an absolute number.

As for the chain reaction/psychological factor, that would be the same with just normal speculation funds - ie it won't necessarily matter if the money for the house next door was illicit or legal as a $1 is a $1 when it comes down to it. Yes, there's a bit of extra competition competing with the speculation dollar but the seller won't care if it was clean money or dirty as long as the bank accepts it.
Deal Guru
Jan 27, 2006
10677 posts
4233 upvotes
Vancouver, BC
Interesting article on how a former Vision councillor is now advocating for major developers to the current COPE/NDP Vancouver mayor - Why is a former Vancouver councillor bringing developers to meet the mayor?
Former city councillor Raymond Louie has been advocating for some of the city’s high-profile developers and joining them in a series of private meetings at city hall with Mayor Kennedy Stewart.

Louie participated in seven meetings in February and March in the mayor’s office, which included Ian Gillespie of Westbank Projects Corp., Bruno and Peter Wall of Wall Financial Corporation and Brian McCauley of Concert Properties.

Louie, who served 16 years on council with COPE and Vision Vancouver before retiring last fall, also met three times by himself with Stewart, according to the mayor’s monthly calendars posted on the city’s website.

The frequency of Louie’s visits to city hall are in contrast to a major plank of Stewart’s election campaign in which he called for new conflict of interest and lobbying rules for elected officials and senior staff members.
Member
Feb 13, 2018
435 posts
382 upvotes
Realtors and banks should be fined even jailed for allowing this to happen

Thats anti money laundering 101, check the source of the fund.

I guess all they see is commission
Deal Guru
Jan 27, 2006
10677 posts
4233 upvotes
Vancouver, BC
rfdchan wrote:
May 10th, 2019 3:23 pm
Realtors and banks should be fined even jailed for allowing this to happen

Thats anti money laundering 101, check the source of the fund.

I guess all they see is commission
According to the report, lawyers are actually the largest transit point for these types of funds and the hardest to police with the current system so if you are going to go after anyone first, go after the lawyers as the source of funds then hit the real estate agents (especially the ones connected to certain lawyers), accountants (surely they notice that 6 figure money transfer in from a foreign account in the books, right?), and the notaries.
Sr. Member
Dec 30, 2012
800 posts
835 upvotes
Toronto
JayLove06 wrote:
May 10th, 2019 12:29 pm
You really do read things differently. It’s going to be a mess and guess what? The people crying the most now STILL will not be able to buy. Get it?
How is it going to be a mess? Sounds like you’re saying it’s going to crash. You don’t think anyone appalled at the dirty-money fuelled bubble will be able to buy if prices fall 40-50%?

And you accuse so many people of “crying” but I have never seen more crying and whining on this site than I have from you about the stress test.
Sr. Member
Dec 30, 2012
800 posts
835 upvotes
Toronto
choclover wrote:
May 10th, 2019 11:36 am
If you ask me, Vancouver is on its way to a hard crash. Unless the government forces taxpayers to bail out the "poor" developers as if they already don't get tax breaks that no one else gets.
The unemployment rate is low enough that it will prevent a sudden crash. I think a continued slow melt for the next 2-3 years is more likely in Vancouver. At the end of that it could well mean a 40% fall from the peak, outside of prime central areas.
Deal Addict
Apr 10, 2011
1196 posts
667 upvotes
Vancouver
On CKNW news radio in Vancouver, they took rapid inbound calls on the latest money laundering report without prescreening.

The callers were very angry about what's been happening - and most of the anger was at the government for not taking action on the offenders.

People want to see confiscations, investigations and handcuffs now.

People know that the government has known about it for years and that it's not that difficult to chase up the registered owners of properties and cars bought by cash baggers. They can start with letters and requests for meetings.
Deal Fanatic
Feb 29, 2008
7690 posts
2880 upvotes
civiclease wrote:
May 10th, 2019 6:00 pm
How is it going to be a mess? Sounds like you’re saying it’s going to crash. You don’t think anyone appalled at the dirty-money fuelled bubble will be able to buy if prices fall 40-50%?

And you accuse so many people of “crying” but I have never seen more crying and whining on this site than I have from you about the stress test.
The funny thing is the stress test has zero affect on me. Can you say the same? Actually, you can't based on the info you provided. It's not about ME. I think the stress test in its current form is stupid.

And yes, I think many will still be unable to afford real estate even if prices drop 40%. I guess condos....not houses. People I know who can't afford high prices are moving. Even I am looking outside the city. So tell me who's the crybaby. The person who cries about not being able to buy anything and begs the government to do something rather than getting off their arse and changing their situation....or the person that doesn't beg the government for help and makes it work?

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