Real Estate

Vancouver housing bubble?

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  • Sep 15th, 2019 12:51 am
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Deal Addict
Dec 4, 2016
1280 posts
512 upvotes
choclover wrote:
Jun 25th, 2019 10:57 am
I don't think people voted for NDP in the last election because they like NDP. Instead, they really, really didn't like the Liberals because they felt like there was a lot of corruption. Not sure if people will ever trust the Liberals again. If you ask me, it might be time to either houseclean the Liberal party, or start a brand new common-sense party with a strong ethical platform that is not bought and paid for by special interest groups.
Problem is, everyone wants to vote for such party, no one wants to run for such party, especially for positions other than party leader.
Deal Addict
Apr 10, 2011
1265 posts
753 upvotes
Vancouver
There it goes again in the U.S.
Cheap credit, low interest rates, lots of buying power to anyone, no desire to ever pay-off a mortgage, or even move-in. Looks familiar.

Excerpts from your new article link...

New York Times
June 20, 2019

"Want a House Like This? Prepare for a Bidding War With Investors"

This house in Atlanta was sold three times in one year, a
sign of exploding investor interest in starter homes that is
reshaping the nation’s housing market and driving up prices.

What is happening in Atlanta is partly a familiar story of gentrification pushing up prices and driving out longtime residents. But those trends are being spurred by a fast-growing industry that promotes investment in single-family homes: lenders who provide the capital, brokers who handle transactions, wholesalers who buy homes by the dozens and sell them before they even take possession.

The investors take many forms. There are fix-and-flippers who buy homes cheaply and resell them for a profit (sometimes to owner-occupants, sometimes to out-of-towners who rent the homes out on Airbnb). There are those who buy and hold, generally larger institutional investors who rent the properties out. There are traders who acquire properties and try to resell them once they appreciate, sometimes in weeks, sometimes in years.

But Ms. Ceesay has spent more than two years trying to buy a home. Time after time, she has put in offers, only to be told she was beaten out by a cash buyer. Some sellers don’t even give her a chance to bid: They specify they want cash right in the listing. Other times, listings disappear in hours, before she has put in an offer — often to reappear on the market weeks or months later, with $100,000 or more added to the price.
Deal Guru
Jan 27, 2006
11182 posts
4561 upvotes
Vancouver, BC
choclover wrote:
Jun 25th, 2019 10:57 am
I don't think people voted for NDP in the last election because they like NDP. Instead, they really, really didn't like the Liberals because they felt like there was a lot of corruption. Not sure if people will ever trust the Liberals again. If you ask me, it might be time to either houseclean the Liberal party, or start a brand new common-sense party with a strong ethical platform that is not bought and paid for by special interest groups.
Good luck with that in any political party. The NDP is a great example of being bought and paid for by special interest groups that has been around forever. Think of all of the labour unions that support the NDP (at least publicly) and how they quickly changed the government procurement process so that only companies which employ union members of unions friendly (or approved) by the NDP will get contracts.

Also, remember that the BC Liberals actually won the most seats in the house of any party so they weren't exactly thrown/wiped out like the Ontario Liberals... we are really talking about a small percentage of the population who caused the balance of power to shift. And it wasn't necessarily a matter of trust but of promises made by the NDP which got them that small percentage to shift especially for those voters South of the Fraser who benefited from the removal of tolls.
Deal Guru
Jan 27, 2006
11182 posts
4561 upvotes
Vancouver, BC
BlueSolstice wrote:
Jun 24th, 2019 11:39 am
For what it's worth, BCNDP is not leaving office anytime soon, if latest polls are to be believed:

https://www.vancouverisawesome.com/2019 ... rals-slip/

The best hope for a RE rebound is for Horgan to stab Eby in the back so he get start getting paid by Rennie.
Realistically, the BCNDP is running a bit scared especially seeing what's been happening at the Federal level and how the Federal NDP seems to be imploding. If the BCNDP really believed in the numbers, they would be thinking about calling a snap election in order to get a majority government and kick the Greens to curb.
Deal Addict
Dec 4, 2016
1280 posts
512 upvotes
craftsman wrote:
Jun 25th, 2019 3:01 pm
Realistically, the BCNDP is running a bit scared especially seeing what's been happening at the Federal level and how the Federal NDP seems to be imploding. If the BCNDP really believed in the numbers, they would be thinking about calling a snap election in order to get a majority government and kick the Greens to curb.
BCNDP does not care about what voters in Toronto or Alberta think about them, just like BC Liberals didn't care about the struggles of federal liberals. On the other hand, BC Greens are also reasonably popular, and calling an unnecessary election could turn voters against the party that called the election.
Deal Guru
Jan 27, 2006
11182 posts
4561 upvotes
Vancouver, BC
BlueSolstice wrote:
Jun 25th, 2019 3:06 pm
BCNDP does not care about what voters in Toronto or Alberta think about them, just like BC Liberals didn't care about the struggles of federal liberals. On the other hand, BC Greens are also reasonably popular, and calling an unnecessary election could turn voters against the party that called the election.
I'm not talking about Toronto or Alberta... I'm talking about the recent Federal by-election in Nanaimo for the NDP in a strong NDP seat that has voted NDP soundly in the past provincial by-election and election where the Federal Greens took it. The Federal seat should have went back to the NDP but didn't. The BCNDP can't afford to find out what the real story is -> the recent provincial by-election where they won by a large margin OR the recent Federal by-election where the Greens won....

As for the BCGreens, they ain't looking forward to calling an election not because they are afraid that the public might turn on them for calling one, they are afraid of the recent provincial results in that same riding of Nanaimo where they didn't fair very well provincially but was good Federally later on. They don't know which voter would turn out...
Deal Guru
Jan 27, 2006
11182 posts
4561 upvotes
Vancouver, BC
Motoss wrote:
Jun 25th, 2019 6:47 pm
Foreign ownership main culprit for Vancouver’s unaffordable housing, a top destination for Chinese funds, ‘unimpeachable’ study says

https://amp.scmp.com/news/china/money-w ... ssion=true
Hmmm.... I don't know how much faith you can put into this study. I mean, just look at the first graph that they show in the article ->

Image

If you remove the context from the graph (ie that bit about foreign ownership), you can easily argue that the farther a suburb was from Vancouver, the cheaper the housing got which is what typically happens in any large city... hence why people move out to the 'burbs. And as for West Vancouver, as in every major metro area in the world, the area where the rich live is typically unaffordable to average income owners. This might be the perfect example of 'correlation does not imply causation'.
Deal Expert
User avatar
Feb 9, 2003
17765 posts
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Langley
craftsman wrote:
Jun 25th, 2019 7:26 pm
Hmmm.... I don't know how much faith you can put into this study. I mean, just look at the first graph that they show in the article ->

(SNIP)

If you remove the context from the graph (ie that bit about foreign ownership), you can easily argue that the farther a suburb was from Vancouver, the cheaper the housing got which is what typically happens in any large city... hence why people move out to the 'burbs. And as for West Vancouver, as in every major metro area in the world, the area where the rich live is typically unaffordable to average income owners. This might be the perfect example of 'correlation does not imply causation'.
The study recognizes that possibility, and goes on to address it.

The thing is, in other places, the immigrants don't concentrate in the richest areas.
Deal Guru
Jan 27, 2006
11182 posts
4561 upvotes
Vancouver, BC
i6s1 wrote:
Jun 25th, 2019 7:33 pm
The study recognizes that possibility, and goes on to address it.

The thing is, in other places, the immigrants don't concentrate in the richest areas.
Yes, but it doesn't necessarily show that immigrants caused the issue... it just shows a correlation. The expensive areas will always be unaffordable to average income earners. They need to normalize the numbers to show exactly how much they believe affordability has been affected by foreign ownership - ie. compare these stats with a 'regular' city where foreign ownership isn't a problem.

The second graph in the article ->
Image
Comes close but even then it's expected that in any metro area, the areas where it's more desirable to live will increase faster than less desirable areas so it would make sense that more money (foreign and domestic) would be 'invested' into those areas causing the price to go up faster there. They need more supporting evidence to explain that spike between 2013/2016 before it really becomes a smoking gun argument - ie did we see a massive influx of immigration from various countries or how about foreign funds inflows?
Deal Fanatic
Feb 29, 2008
8270 posts
3286 upvotes
"foreign money responsible for all the ills of the world...more at 11"

People are getting swindled so bad it's sad.
Deal Expert
User avatar
Feb 9, 2003
17765 posts
2394 upvotes
Langley
craftsman wrote:
Jun 25th, 2019 7:46 pm
Yes, but it doesn't necessarily show that immigrants caused the issue... it just shows a correlation. The expensive areas will always be unaffordable to average income earners. They need to normalize the numbers to show exactly how much they believe affordability has been affected by foreign ownership - ie. compare these stats with a 'regular' city where foreign ownership isn't a problem.

The second graph in the article ->
SNIP
Comes close but even then it's expected that in any metro area, the areas where it's more desirable to live will increase faster than less desirable areas so it would make sense that more money (foreign and domestic) would be 'invested' into those areas causing the price to go up faster there. They need more supporting evidence to explain that spike between 2013/2016 before it really becomes a smoking gun argument - ie did we see a massive influx of immigration from various countries or how about foreign funds inflows?
You should read the paper before we continue discussing this.

The authors are well aware that correlation doesn't prove causation. They attempt to address the issue in the paper. To discuss the imaginary shortfalls of a paper that you haven't read is not a good use of your time or mine.
Deal Guru
Jan 27, 2006
11182 posts
4561 upvotes
Vancouver, BC
i6s1 wrote:
Jun 26th, 2019 11:34 am
You should read the paper before we continue discussing this.

The authors are well aware that correlation doesn't prove causation. They attempt to address the issue in the paper. To discuss the imaginary shortfalls of a paper that you haven't read is not a good use of your time or mine.
For those who are interested in reading the actual paper. here's a link to it -> Solving Wozny’s Puzzle which the author of the SMCP article didn't post.

To the point of 'correlation does not imply causation', Gordon states the following:
A common rejoinder is that “correlation is not causation”, but that is unlikely to be a valid critique here. We have a good causal theory for the relationship to exist, and there does not seem to be any other plausible contending factors that might account for the pattern, as noted above.11 Indeed the strength of this relationship is striking; it is rare in social science research to see a relationship this strong. This is compelling evidence that when it comes to the extreme “de-coupling” seen in the Vancouver housing market, foreign ownership is the primary culprit
- on page 8 of his study.

Basically, he is saying that this isn't the case because it's not the case as he can't find anything that he believes his a factor other than what he believes in. He doesn't comment on whether the pattern I highlighted would be a possible explanation, in fact, he basically paints the entire region with the same level of desirability.

Also, he doesn't make any distinction between foreign investment/speculation funds and domestic investment/speculation funds. He basically assumes that any extra funds coming into the local market is foreign.

As far as immigrant concentrations are concerned, immigrants typically settle in areas where other immigrants from the same culture settle for a sense of familiarity. Many of the areas highlighted in the report already have a high concentration of immigrants so it would make sense that any new immigrants from those countries in question would want to settle there as well.

And as for concentrations are concerned, the paper only uses information that is based on Non-Resident ownership which means that they may be foreigners or Canadians but they have a primary address outside of Canada - not exactly immigrants. Also, the paper is talking about owning the property, not living in/residing in the property -
To test the hypothesis, I looked at the non-resident ownership data generated by Statistics Canada andCMHCthrough the Canada Housing Statistics Program (CHSP). The measure I present below defines non-resident ownership as a situation where there is at least one individual on title that has an address abroad as their primary residence (i.e., they do not typically reside in the country).8Non-resident ownership is not exactly the same thing as foreign ownership. Foreign ownership is best defined as “ownership primarily based on foreign income or wealth”, and this is distinct from residency. Nevertheless, non-resident ownership usually entails foreign ownership, since non-resident owners are likely to be using foreign money to purchase or maintain ownership – otherwise they’d be working and living in Canada.
- page 6

He goes on to make assumptions/generalizations to the source of funds in order to create support for this paper as I highlighted above. If you use his assumption, then a retired Canadian living overseas with a home in Canada would be included in his figures.

NOTE> If you go through my postings over the years in this thread, you'll see that I share many of the same observations and/or conclusion Gordon makes. What I find troubling in this paper is that some people are holding it up as a smoking gun when it really isn't. At best, it's a good supporting document for the issue but really can't stand on it's own.
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Feb 9, 2003
17765 posts
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Langley
craftsman wrote:
Jun 26th, 2019 5:12 pm


To the point of 'correlation does not imply causation', Gordon states the following:

- on page 8 of his study.

Basically, he is saying that this isn't the case because it's not the case as he can't find anything that he believes his a factor other than what he believes in. He doesn't comment on whether the pattern I highlighted would be a possible explanation, in fact, he basically paints the entire region with the same level of desirability.
Your explanation is based on prices being lower as you move farther out, while the graph shows price/income ratios.

In typical cities, the people who make more money purchase the most expensive houses. In the GVA, this isn't the case. The average Langley or Maple Ridge resident has a higher (reported) income than a Vancouver resident, and far higher than a Richmond resident.

The reason that most cities have more expensive property downtown, or close to downtown, is because that's a desirable location. But in Vancouver, the "rich" people in Langley and Maple Ridge aren't the ones buying property in Vancouver and Richmond, driving up prices. That money is coming from something other than domestic incomes.

To put it another way, if domestic rich people generally move to desirable areas, why are they choosing Langley and Maple Ridge?
craftsman wrote:
Jun 26th, 2019 5:12 pm
Also, he doesn't make any distinction between foreign investment/speculation funds and domestic investment/speculation funds. He basically assumes that any extra funds coming into the local market is foreign.
By definition, any extra money entering the local market has to be from somewhere outside the local market. But I don't see at any point where he makes the assumption that it's all foreign money. There would be no way to know that, and the author is very careful not to speak in absolutes.

craftsman wrote:
Jun 26th, 2019 5:12 pm
As far as immigrant concentrations are concerned, immigrants typically settle in areas where other immigrants from the same culture settle for a sense of familiarity. Many of the areas highlighted in the report already have a high concentration of immigrants so it would make sense that any new immigrants from those countries in question would want to settle there as well.
Of course. The paper doesn't suggest anything different. It's making the point that the places where foreign residents by property are highly correlated with the decoupling of house prices from local incomes.
craftsman wrote:
Jun 26th, 2019 5:12 pm
And as for concentrations are concerned, the paper only uses information that is based on Non-Resident ownership which means that they may be foreigners or Canadians but they have a primary address outside of Canada - not exactly immigrants.
He doesn't say they're immigrants. In fact, I searched the paper for the terms "immigrant" and "immigrants" and got only two hits, and they were in a footnote referencing another paper.

We have no choice but to make the reasonable inference that for most people living outside Canada, the bulk of their income comes from outside Canada. Nationality is unimportant, the paper is focused on the effect of foreign-sourced capital, not the citizenship of buyers.
craftsman wrote:
Jun 26th, 2019 5:12 pm
Also, the paper is talking about owning the property, not living in/residing in the property
Not sure how that matters. Prices are driven up with any new money entering any market with fixed supply, regardless of end use.
craftsman wrote:
Jun 26th, 2019 5:12 pm
He goes on to make assumptions/generalizations to the source of funds in order to create support for this paper as I highlighted above. If you use his assumption, then a retired Canadian living overseas with a home in Canada would be included in his figures.
It's not really an assumption, it's a reasonable inference that foreign residency and foreign income are very closely related.
craftsman wrote:
Jun 26th, 2019 5:12 pm
NOTE> If you go through my postings over the years in this thread, you'll see that I share many of the same observations and/or conclusion Gordon makes. What I find troubling in this paper is that some people are holding it up as a smoking gun when it really isn't. At best, it's a good supporting document for the issue but really can't stand on it's own.
I take issue with your phrasing here - "What I find troubling in this paper is that some people are holding it up as a smoking gun..." What's in this paper is separate from what people are saying about it. You can't complain about a reaction to this paper being a part of this paper, anymore than you can say that a review of movie is a property contained within the movie.

Personally, I think it's clear that the paper demonstrates clearly that non-resident buyers are highly correlated with reduced affordability. I think it also makes a very effective case that that the best explanation for this relationship is causal.

There are 4 possibilities that we can consider. Non residents buyers are causing higher P/I ratios, higher P/I ratios are causing more non-resident buyers, some third factor is driving both, or that the two effects are coincidental. So far, the only plausible explanation is for the first one.

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