Really? Price acceleration and real estate overvaluation is moderate?
According to the data collected from real estate boards and CMHC to create the charts in this site, here are the price increases over the last 10 years of Single Family Detached houses to June 2017:
The "peaks" in "moderation" over 10 years of Single Family Detached house prices were:
CMHC and the Bank of Canada as federal government agents along with provincial, municipal and the banking and finance industry agents have wrecked the Canadian housing market by permitting the wholesale flipping of properties and the entrance of off-shore speculators into the Canadian housing supply stock.
Paul Krugman - Patrimonial Capitalism
Chronically low interest rates since the Pit of Gloom in March 2009 have fueled a huge credit bubble in Canada. StatsCan as far as I can tell does not highlight luxury sales, but the Bank of America credit card division does as the chart shows. I have added to the mashup a sales chart of detached housing in West Vancouver, one of Canada's most expensive postal codes for real estate. Is the FEAR OF MISSING OUT shifting to the FEAR OF GETTING IN for hopeful West Van buyers?
Asian buyers won 28% of Christie’s offerings world-wide. but a big reason for the drop in the list of sales below was the disappearance of the heretofore relentless Chinese bid. (Year/Year Data)
Art Sales down 33%
Auction Sales down 37.5%
Private Broker Art sales down 10%
Contemporary Art sales down 45%
U.S. Art Sales down 50%
Europe Art Sales down 12%
Hong Kong Art Sales down 11%
Rival Sotheby's Art Sales down 22.6%
Tefaf Art Market Report: Global Art Sales down 7%
Asian Art Sales down 33%
Christie’s said only 29 artworks it sold during the first half achieved prices exceeding $6.5 million—compared with 47 the year before—with nothing selling for anywhere close to the $180 million that Pablo Picasso’s “Women of Algiers (Version O)” brought in 2015."
- JUL 2016 The late Alan Bond’s Perth mansion sells as the price of Australia’s most luxurious homes plunge
- JUL 2016 The Hamptons Housing Market Has Crashed: Luxury Home Sales Drop By Half As Prices Plunge
- JUL 2016 Dramatic Luxury Sales Drop, Fresh Data Shows
- JUN 2016 Luxury L.A. Home Prices Down First Quarter 2016 As Global Volatility Dampens Buyer Demand
- JUN 2016 Luxury retailer Neiman Marcus reports decline in both sales and profit
- MAY 2016 Hong Kong’s retail sales drop hardest in 17 years
- MAY 2016 Luxury condo boom in Lower Manhattan turns to glut, prices sag.
- MAY 2016 Luxury-Home Sales Fall in London, NYC With Rich Shifting Focus
- MAY 2016 Across the world, luxury-home sales get a reality check
- MAY 2016 The Premium Plunge: Sales of the Most Popular Luxury Cars in America Are Nosediving
- MAY 2016 At China’s Biggest Yacht Show, the Party Feel Fizzles
- MAY 2016 Business-Jet Sales Sink Most Since 2011
- MAY 2016 Luxury jeweller Tiffany posts steepest sales drop since financial crisis
- MAR 2016 Luxury watchmakers gloomy about 2016 sales
2008-09 FINTRAC disclosed 197 cases out of 556 involving transactions through the MSB (Money Service Business) sector.
Businesses suspected of being involved in ML/TF (Money Laundering and Terrorist Financing):
Of the case disclosures involving the use of an MSB, FINTRAC identified and focused on 126 cases from 2008-2009, which were the most illustrative of how MSBs could be exploited for money laundering and terrorist financing purposes. Complete 2010 Fintrac Study
COOLING OFF THE BC REAL ESTATE MARKET
FROM THE TOP DOWN
June 10, 2016 at linkedin.com/pulse
Hat Tip to BenRabidoux @BenRabidoux
In our real estate law practice we have seen houses steadily rise over the past seven or eight years and jump drastically since January of this year.
For example, homes in Vancouver on Connaught Drive which were selling for $3-4,000,000 a few years ago are now on the block for $10-15,000,000 (a client of mine recently turned down an offer on her home in this area at $15.8M. The home was purchased for $6M!)
Correspondingly, homes which were $1-2,000,000 are now $4-5,000,000.
Even condominiums which were valued at a half a million dollars a last summer are now worth $800K to $1M.
Prices are rising so fast, one has to buy a property BEFORE putting one's own property up for sale, for fear of being priced out of the market!
Before the completion date occurred, another client of mine who bought a home in North Vancouver for $1.5M was offered $250,000 by the seller NOT to complete the purchase!
In my view, this lunacy is being fueled to a large extent by foreign money which is pouring into the Lower Mainland at an unprecedented rate and pulling the prices UPWARDS from the top end.
This inflow of money (Chinese principally, but there is also a lot of Iranian, Indian and American capital coming in, as there is still a very substantial discount on the Canadian dollar for those who deal in USD), is destabilizing the BC real estate market for everyone who lives and works here.
Tragically, the only people who can't seem to see this are the provincial and federal politicians and the many pundits who make a living commenting on things they t know nothing about (newspaper columnists, economists, business school profs and other so-called experts).
They remind me of the referees at a World Wrestling Entertainment match. Everyone in the stands is screaming that the bad guy has a concealed weapon and the only one in the building who can't see it is the referee!
However in the WWE the refs are paid to look clueless.
Our politicians are paid to govern in the interests of Canadian citizens, not foreign speculators -but looking at their behavior, one would never guess that.
While it is reported that foreign ownership may be as little as 3-5% of the housing stock that is more than enough to affect the entire market adversely -and it has done so in spades as few can now afford to own a house in Vancouver and even condominium ownership is becoming a stretch.
WHAT TO DO?
1. Make foreign buyers confirm the source of their funds
Right now any foreign buyers can wire any amount of money into their lawyers' or notaries' trust accounts from any bank in the world to buy a property in BC with no questions asked.
Realtors and mortgage brokers are required to fill in a bunch of useless FINTRAC forms and obtain client identification documents, but NO ONE is asking where the money came from in the first place!
I have heard many stories from realtors of bidding wars where a property is listed at a certain price and then a half a dozen or more offers come in steadily bidding up the price by fifty or one hundred thousand dollar increments and then the final offer comes in at a half a million dollars over everybody else's!
A lawyer in our office recently had the same experience in BC Supreme court on a foreclosure sale. The offer the court was asked to approve was $1.5M and a six or seven other buyers showed up at the hearing. As is the court's practice, everyone was advised of price of the original offer and given the opportunity to bid or re-bid in a sealed envelope. The Master opened the sealed bids at $1,55M, $1.65M, $1.725M, $1.9M and the WINNER was $3.1M!
It would appear that the winner wanted to pay AS MUCH AS POSSIBLE.
It has been our experience that much like locals, foreign buyers usually don't want to pay a penny more than is necessary to purchase a property here (much less an extra million dollars on a foreclosure purchase).
As most foreign buyers have local realtors who are well aware of the market prices, the only explanation which seems to make any sense is that some foreign purchasers are using the Canadian real estate system to launder their money.
Once a house is purchased in BC the seller has effectively washed it and it can be moved anywhere in the world easily by selling the property (as the seller then has the contract of sale and all the documents necessary from the lawyer's office to "prove" that his funds came from the legitimate sale of Canadian real estate). No foreign country will look past the most recent transaction to confirm the legitimacy of the funds.
In the criminal world, the fee to launder money can be 50% or more. In Canada, it seems to be NIL.
I believe that many foreign buyers when confronted with a requirement to show where their funds came front would balk and refuse to complete the purchase.
Stemming the flow of dirty money into Canadian real estate would terminate a number of high end purchases, which may push down some of the prices at the $10M - $15M range which would in turn push down the medium high end prices and so on.
2. Increase taxes significantly on those who purchase property in Canada but do not live here or pay taxes here.
It is commonplace for foreigner investors to park some of their money in Canada (as they do not trust their own governments). They typically put the title of a property into the names of their wives or children (it is always interesting to look at the occupation listed on the titles to high end real estate like "worker," "student" or "home maker"). The wife and kids live in the property as their principal residence and pay no taxes as they have no income.
The father, who is a non-resident, continues to make money in a foreign state at a much lower tax rate. Canada taxes income on the basis of RESIDENCY, so the father pays NO CANADIAN TAX. The family enjoys the benefits of the Canadian health care system, school system etc. while paying nothing other than property taxes.
The misguided view of the premier of this province is that the above situation constitutes FOREIGN INVESTMENT IN BC, to be encouraged at every step.
With all due respect, that is nonsense.
As the BC government is perpetually short of money for every worthwhile endeavor (hospitals, schools, pubic housing, seniors, homeless shelters, transit, mental health, child poverty -the list is endless), it would seem obvious that one source of revenue which would be virtually unopposed by BC taxpayers would be to increase Property Transfer Tax and municipal property taxes on foreign buyers who are simply taking advantage of the laxity of the current legal and regulatory framework in BC.
An appropriate rate would be perhaps 20% Property Transfer Tax and triple current property taxes for those who choose to evade paying Canadian income tax (or pay only a token amount for appearance purposes) or simply leave their BC homes vacant.
A sale of a residence so occupied (or unoccupied as the case may be) should also attract income tax on any increase in value (not capital gains tax).
A capital gains exemption for a principal residence should also be disallowed for such owners (these two changes would of course require an amendment to the Income Tax Act which is a federal statute).
These even for so-called "legitimate" off-shore funds would also dampen foreign demand for Canadian real estate, however to the extent that it does not, then at least there is SOME benefit flowing back to the Canadian tax system.
Are these measures discriminatory? Absolutely! They discriminate against foreign buyers who are simply seeking to take advantage of the Canadian real estate system, while parking or washing their funds.
These changes should apply to ANY foreign buyer of any nationality (US, Europe, Britain and Australia included).
UBC already does this with foreign students who are required to pay much higher annual tuition than local students -and no one is complaining!
Will this "fix" the real estate affordability problem? Maybe not, but you have to start somewhere and you might as well start with the most obvious cause.
Are either of these measures likely to come to come to pass? I would not hold my breath.
Generally, by the time the government gets around to doing anything of consequence "the proverbial horses are already out of the barn and the farm has been sold off to a foreign syndicate."
Better Call Saul Explains Money Laundering
Residential Mortgage Debt as a % of GDP (Sep 2014 Source)
If it looks like Vancouver, it's probably San Francisco
Trapped in Silicon Valley
Record number of billionaires (now): 2325
Billionaires combined net worth: 7.3 trillion
New billionaires since 2013: 155
New billionaire growth since 2013: 7.1%
Billionaires in Europe: 775
Billionaires in U.S.: 609
Billionaires in Asia: 560
Billionaires in Middle East: 154
Billionaires in Latin American: 153
Billionaires in Africa: 40
Billionaires in Pacific: 34
Average time to become a billionaire: 45 years
Self-made billionaires: 55%
Inherited/Self-made billionaires: 26%
Inherited billionaires: 19%
Billionaires with university degree: 65%
Billionaires in private companies: 63%
Billionaires in public companies: 31%
Billionaires with over $50b: 4
Billionaires with $25-50b: 16
Billionaires with $10-25b: 88
Billionaires with $5-10b: 169
Billionaires with $2-5b: 732
Billionaires with $1-2b: 1316
Average billionaire cash holding: $600m
Philanthropic donations by a billionaire: more than $100m
Real estate held by a billionaire: less than $100m
Number of billionaires that are networked by a billionaire: 3
Number of billionaires by 2020: 3800+ "this might change eh?"
Data Source & Full Report
Real Estate Evaluation
Commute times say as much about the locations in which different employees choose to live as it does about the nature of the transport networks. In New York, where staff favour living more centrally, the average commute is just 19 minutes. By contrast, the more dispersed nature of Rio, Mumbai (3 times longer to commute than NY) and Shanghai means that people spend longer commuting, despite faster travel times on a per kilometre basis. Here, administration level staff live far from the centre, priced out of the best neighbourhoods and reflecting income inequality. (Source savills.com)
Overslept, so tired,
if late, get fired.
Why the pain?
Just go home,
do it again.
The Commuter’s Lament/A Close Shave by Norman Colp as public art in the tunnel connecting the NY Port Authority to the Times Square subway station.
Doctor Who "Gridlock" Scene 6
Left, Right or Down
Canada’s poorest 10% of the population saw their net worth drop some 150% since 2005. They have an average net worth of -$5,100, meaning on average the lowest earners have $5,100 more debt than assets, down from -$2,000 in 2005.
In the U.S. those in the lowest 20% quintile had a negative median net worth of -$6,029 in 2011, compared with -$905 in 2000. Those in the 2nd lowest quintile saw their assets drop by nearly half to a median of $7,263 in 2011 from $14,319 in 2000. (CNBC.com)
Deep and Persistent Wealth Inequality in Canada
Broadbent Institute September 2014
The Fading Redistributive Impact: Inequality and Poverty After four decades of relative stability, income inequality in Canada surged upward in the latter half of the 1990s. Between the mid-1990s and the mid-2000s, inequality increased more in Canada than in other OECD countries, and the redistributive impact of the tax-transfer system in Canada declined (OECD 2008, fig. 4.7). As we saw at the outset, by the mid-2000s, the redistributive impact of Canadian taxes and transfers was among the smallest among OECD countries (OECD 2011, 271).
The big surge in market income inequality began during the recession of the early 1980s and continued until the end of the 1990s. Rising market inequality reflects several distinct but powerful trends. Most attention has focused on the stunning rise in the proportion of income captured by the top 1 percent of income-earners, reflecting changing norms about compensation for the highly paid (Saez and Veal 2005; Fortin et al. 2012). The share of income captured by the top 1 percent is now approaching the levels reached in the “Gilded Age” of the 1920s and the Great Depression of the 1930s, generating an intense debate about the division between the rich and the rest, which was highlighted by the Occupy Movement in 2011.
However, other trends have also mattered. One is the loss of solid middle-income jobs as a result of a combination of technological change, outsourcing, and declining unionization. According to one analysis, “the young and the poorly educated have borne the brunt of these forces, but significant numbers of those previously in the middle and lower middle of the occupational skill and wage distribution have also been adversely affected” (Fortin at al. 2012, 133).
Finally, social changes have been important. Women and men increasingly choose spouses with similar educational levels, a process known as marital homogamy, or educational assortative mating. This trend tends to increase family income inequality as high-income earners increasingly marry each other and lower-income earners do likewise. Figure 1.1 captures the impact of these wider trends, demonstrating the strong rise in the real income of families at the 80th and 90th percentile, compared to the stagnation in the incomes of families in the middle and lower levels of the income distribution.
Read the whole Broadbent Institute study with charts here.
Bill Maher - Wealth Inequality in America
A ranking like this is important, said WealthInsight Analyst Oliver Williams, "...because wealthy individuals, more than any other group, will change their home and even their domicile based on factors of ready access to wealth managers and private banks as well as political stability and heritage. Owning a piece of history in a city such as London is an aspiration for many, particularly wealthy individuals from overseas..."
- Monaco (29.21%)
- Zurich (27.34%)
- Geneva (17.92%)
- New York (4.63%)
- Frankfurt (3.88%)
- London (3.39%)
- Oslo (2.90%)
- Singapore (2.80%)
- Amsterdam (2.63%)
- Florence (2.59%)
- Hong Kong (2.58%)
- Rome (2.54%)
- Dublin (2.40%)
- Doha (2.31%)
- Toronto (2.29%)
- Venice (2.25%)
- Brussels (2.11%)
- Houston (2.09%)
- San Francisco (2.07%)
- Paris (2.04%)
Grace Kelly & Prince Rainier Attend A Gala Show 1955?
"The high end has been bought by Europeans and Chinese trying to get off the grid."
Edited & bulleted from July 12, 2014 armstrongeconomics.com
- U.S. real estate market remains very diverse.
- U.S. high end bought by Europeans and Chinese trying to get off the grid.
- Chinese biggest buyers on price of U.S. real estate.
- Canadian biggest buyers on quantity of U.S. real estate.
- Prospects of bail-ins coming in Canada.
- Texas & Florida property cannot be seized even in a court judgment.
- Hawaii topping the list of U.S. price advances.
- Europe's real boom was clearly in London real estate.
- Germany’s house price rises slowing, yet are still positive.
- South German house prices are extremely cheap.
- Germany’s overall house price index slowed for 7th consecutive month at April 2014 after the September 2013 high.
- Lithuania’s demand for, and new construction of, property is recovering gradually as its economy has produced growth.
- Copenhagen and Denmark experiencing a real estate boom as prices rise and may soon surpass pre-financial crisis levels.
- Armenia’s property market recovering gradually following several years of falling house prices and now being driven by the inflow of wealthy Armenians from Russia and ethnic Armenians from Syria trying to escape political turmoil.
- Chinese average prices of new homes in 100 major cities fell 0.3% M/M (April-May 2014); the first decline since June 2012.
- China’s share markets peaked in 2007 and the bulk of domestic capital moved into real estate causing a great worry that banks would soon be overstretched with bad loans to developers as many projects were left vacant.
- Shanghai has a (low) supply problem. Demand keeps rising sustaining prices at high levels.
- China-style housing bubble is concerning.
- China's weaker real estate market means less cement being poured and less copper being purchased and that impacts the commodity prices in the West, which have declined.
- China's real estate market is similar to the land boom in the 1830's USA more than the 2007 bubble created entirely by bankers.
- Macau’s property prices continued to dramatically surge even after double-digit annual prices rises in recent years.
- Macau residential property prices skyrocketed about 50% Y/Y in 2013.
- Myanmar’s property prices and rents have surged with new government allowances since 2011 and from a sharp increase in overseas investors and persistent land and building shortages.
- South Korea’s house prices are rising after more than a year of falling house prices and a 2014 recovery of robust economic growth.
- Singapore’s house prices now starting to fall from the problem of hunting expats by Europe and American governments despite a reasonable rate of economic growth.
- Malaysian house prices continue to rise even following anti-speculation measures.
History, Charts & Curated Readings
"Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement; and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it." George Santayana Vol. I, Reason in Common Sense
Balance Of Trade
Rent Or Buy