Book and Weblog – Authored by Garth Turner — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate: "Our stock market was among the world’s worst performers. Our currency was at the bottom on the heap. We lost 36,000 jobs in the last report. The economy was in recession. Yikes.
And yet Vancouver detached house prices rose by 24% year/year in December while for 2015 as a whole sales increased 48%. Compare this to an inflation rate of 2%, and wage gains in the area of less than 1.5% – and see what a bubble truly looks like. This is a market riding a wave of debt, facilitated by voracious lenders whose risk is being wiped away by a federal agency called CMHC.
When looking at the number of $3+ million homes selling recently in YVR, Bloomberg had this to say yesterday: “It’s one of the starkest examples of growing imbalances in Canada’s household sector that includes record indebtedness, inflated home valuations and over-investment in condominiums.” The world thinks we’re nuts. We are.
Worse, this mania is being exaggerated, fed and institutionalized by the BC government. The province’s BC Assessment office has become one of the most aggressive real estate-pimping outfits in the country, valuing properties at the extreme leading edge of the market. No wonder. The more housing is worth the greater the potential property tax bill municipalities can collect. And yet, perversely, homeowners (and the sycophantic BC media) cheer every bump higher, since it makes people with big mortgages feel rich.
The latest numbers are stunning. Total assessments for Vancouver jumped almost $100 billion, or 16%, in just one year. East Van (where the poor people huddle around barrels of burning newspapers) rode a 28% rocket higher, beating out the lousy 23% increase on the Westside (where the rich dentists live). Says the assessors, “Increases of 15-25% will be typical for single-family homes in Vancouver, North Vancouver, West Vancouver, Burnaby, Tri-Cities, New Westminster and Squamish. Single-family market movement in Whistler, Pemberton and the Sunshine Coast is less dramatic, with typical increases in the zero to 15%. Typical strata residential increases throughout the region will be in the five to 10% range.”
In fact for the entire province, where houses are now worth a collective $1.34 trillion, values soared last year by almost 1% a month. Bizarre. Unsustainable. Dangerous – in a country where the economy expanded by only 1.5% in an entire year, our trade with the world plunged into deficit and the national currency lost almost a fifth of its value. This is what house lust does. It foments delusion, pushing people to take on greater amounts of debt as they grow increasingly blind to the augmenting risk.
The most interesting thing about bubbles? You can’t see out of them. Thus people trapped inside the Nortel bubble, the Alibaba bubble, the Be-X bubble, the US sub-prime bubble or the East Van bungalow bubble think they’re being smart. Until they aren’t."
'via Blog this'
And yet Vancouver detached house prices rose by 24% year/year in December while for 2015 as a whole sales increased 48%. Compare this to an inflation rate of 2%, and wage gains in the area of less than 1.5% – and see what a bubble truly looks like. This is a market riding a wave of debt, facilitated by voracious lenders whose risk is being wiped away by a federal agency called CMHC.
When looking at the number of $3+ million homes selling recently in YVR, Bloomberg had this to say yesterday: “It’s one of the starkest examples of growing imbalances in Canada’s household sector that includes record indebtedness, inflated home valuations and over-investment in condominiums.” The world thinks we’re nuts. We are.
Worse, this mania is being exaggerated, fed and institutionalized by the BC government. The province’s BC Assessment office has become one of the most aggressive real estate-pimping outfits in the country, valuing properties at the extreme leading edge of the market. No wonder. The more housing is worth the greater the potential property tax bill municipalities can collect. And yet, perversely, homeowners (and the sycophantic BC media) cheer every bump higher, since it makes people with big mortgages feel rich.
The latest numbers are stunning. Total assessments for Vancouver jumped almost $100 billion, or 16%, in just one year. East Van (where the poor people huddle around barrels of burning newspapers) rode a 28% rocket higher, beating out the lousy 23% increase on the Westside (where the rich dentists live). Says the assessors, “Increases of 15-25% will be typical for single-family homes in Vancouver, North Vancouver, West Vancouver, Burnaby, Tri-Cities, New Westminster and Squamish. Single-family market movement in Whistler, Pemberton and the Sunshine Coast is less dramatic, with typical increases in the zero to 15%. Typical strata residential increases throughout the region will be in the five to 10% range.”
In fact for the entire province, where houses are now worth a collective $1.34 trillion, values soared last year by almost 1% a month. Bizarre. Unsustainable. Dangerous – in a country where the economy expanded by only 1.5% in an entire year, our trade with the world plunged into deficit and the national currency lost almost a fifth of its value. This is what house lust does. It foments delusion, pushing people to take on greater amounts of debt as they grow increasingly blind to the augmenting risk.
The most interesting thing about bubbles? You can’t see out of them. Thus people trapped inside the Nortel bubble, the Alibaba bubble, the Be-X bubble, the US sub-prime bubble or the East Van bungalow bubble think they’re being smart. Until they aren’t."
'via Blog this'
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