The chart mashup above was prompted by an observation from a reader (S.B.) that the technical structure of the Vancouver housing market is now within momentum levels for a trend change to the downside as soon as the next retest and failure of the recent highs completes; the setup being the "anti-trade". S.B. made earlier observations here "3 Vancouver Views" Sept 2016 and "Simple as ABCD" May 2016; thanks SB.
The evidence of serious downward repricing has this provincial government attempting to goose the demand side of the market with free ZIRP money provided by you and me dear tax payer. Not only will we tax payers supply the down payments to people who don't qualify under the already sub prime CHMC lending standards, but we are additionally collectively subsidizing the banking and mortgage industry that has little or no lending risk and we are continuing to feed the provincial government tax collector via the property transfer tax. "In total the property transfer tax brought in $1.53 billion for the government, $605 million more than budgeted" said BC Finance Minister Mike de Jong CBC NEWS July 2016.
Ontario and Toronto are also implelled to goose the fence sitters into buying into the market:
Ontario land transfer tax rebate doubled to $4K for first-time homebuyers. City News November 2016.
Taxation and picking electoral sectors to reward or punish has created overly complex bureaucracies that exist in their own bubbles far removed from those they claim to serve. Every election brings new promises of reform (kiss that recent electoral reform goodbye) and at some point in the election cycle we hear that tax reform is on the agenda but reform never seems to make the cut. We may have to wait for a new generation of engineers armed with big data and new algorithms to simplify the tax structure. My favoutite is The Automated Payment Transaction Tax. It would do away with the tax department and with having to pay for the accounting and filing of overly complicated annual tax filings. The problem in this country is not the absence or lack of money creation.
Political ideology at all levels of government since the post war "invention" of CMHC has destroyed any possibility of a social contract that includes affordable housing as a basic right of tax payers. It appears to me that governments at all levels in Canada will continue to promote and urge Canadians to add even more household debt to their balance sheets that are already at historic levels nationally and globally. Although the Federal Government appears on the surface to be more rational than the provincial governments by warning Canadians who already have high levels of debt, they are not concerned with Canadian Banks who continue to be sheltered by tax revenue from the private sector. What they are concerned with is a RECESSION and THEIR OWN FEDERAL CASH FLOW. Is it irony or finger wagging and buck passing? The government is hooked on the commodification of real estate; it's a cash cow with a golden udder of debt that we are all attached to.
Here is the Federal Government at work:
CHMC Promotions Oct 2016 by the Globe and Mail
Warning from the Bank of Canada:
Zombie real estate in Vancouver BC is a problem. The owners have placed a high value on keeping them empty when vacancy rates are at historical lows. See the Beautiful Empty Homes Vancouver archive. In March 2016, theGeorgia Straight reported some 10,000 condos were vacant. The city now wants to tax the owners between a ½% and 2% of the assessed value; CBC News Sept 14, 2016.
As it is now with the state playing monkey business with interest rates (ZIRP and NIRP) and removing credit risk from a lender's balance sheet (CMHC) and reacting with "supra" taxes layered upon individuals deemed to be distorting the market, we end up with more complexity, uncertainty and unproductive investment.
Land management should not be in the hands of short term profiteers. There are alternatives. Land in the Fiji Islands is managed through three complementary systems. Leased land covers 90% of their territory (83% "Native Land", 7% "Crown Land") and 10% of the land is "Freehold". Source
If land costs were built on productivity incentives and protected from the boom and bust of demographic pressure, urban planning departments could create longer term strategies and developers could be more productive on the improvement side of land development. But with very high land costs, the market forces us to build to the minimum of efficiency standards and the maximum of financial rewards.
The crappy little toaster that you call an electric baseboard heater inside an inefficient envelope is indeed just a heat transferring conduit. The condo boom is a commodity arbitrage not an affordable housing plan. (The Condo Game, CBC Doc Zone, January 2015)
The Democratization of Production
Be lazy like a fox. WikiHouse
Tesla's Powerwall 2 and Solar Roof Launch
The sun provides more than enough energy in just one hour to supply our planet’s energy needs for an entire year. Your home can capture this free, abundant energy source through rooftop solar tiles, turning sunlight into electricity for immediate use or storage in a Powerwall battery. Tesla, October 28, 2016
3 Charts of Vancouver Housing Prices to August 31, 2016
Monthly HPI & Average vs Inflation Adjusted Projection
See also this reader supplied prescient
Elliot Wave Chart from May 13, 2016
I think the source author is YVR Housing
If you can confirm, please do.
The Forces that Cause the Bubble to Burst
The bubble bursts when excessive risk-taking becomes pervasive throughout the housing system. This happens while the supply of housing is still increasing. In other words, demand decreases while supply increases, resulting in a fall in prices.
This pervasiveness of risk throughout the system is triggered by losses suffered by homeowners, mortgage lenders, mortgage investors and property investors. Those losses could be triggered by a number of things, including:
1. An increase in interest rates that puts homeownership out of reach for some buyers and, in some instances, makes the home a person currently owns unaffordable, leading to default and foreclosure, which eventually adds to supply.
2. A downturn in general economic activity that leads to less disposable income, job loss and/or fewer available jobs, which decreases the demand for housing.
3. Demand is exhausted, bringing supply and demand into equilibrium and slowing the rapid pace of home price appreciation that some homeowners, particularly speculators, count on to make their purchases affordable or profitable. When rapid price appreciation stagnates, those who count on it to afford their homes long term might lose their homes, bringing more supply to the market.
The bottom line is that when loses mount, credit standards are tightened, easy mortgage borrowing is no longer available, demand decreases, supply increases, speculators leave the market and prices fall.
A simple and important principle of finance is mean reversion. While housing markets are not as subject to bubbles as some markets, housing bubbles do exist. Long-term averages provide a good indication of where housing prices will eventually end up during periods of rapid appreciation followed by stagnant or falling prices. The same is true for periods of below average price appreciation.
SOURCE Investopedia by Barry Nielsen, September 13, 2014
"OSFI tells some banks to test for sharp drops in Vancouver, Toronto housing markets" July 26, 2016 CBC News
“B.C.’s 15% tax on foreign homebuyers could drive money to other parts of Canada” July 26, 2016 Financial Post
"Tory won't rule out a tax on foreign real estate buyers in Toronto" July 28, 2016 Toronto Sun
"Chinese-language media up in arms over B.C. foreign buyer tax" July 28, 2016 Globe & Mail
“Does this set a dangerous precedent in the minds of foreign investors across Canada?" July 29, 2016 Mortgage Broker News
It must be my age, but when I see politicians trying to solve problems via blunt taxation, I move even closer towards being a grumpy old man - death and taxes - they suck, literally. Here are a few ideas while we wait for the July housing numbers to come out next month.
In November 2011, I came across the idea of the APT, the ‘Automated Payment Transaction Tax’ which eliminates the need to file tax or information returns. A year later I posted links to the APT and since then I have continued to encourage media, politicians and potential influencers to at least look at the thesis.
To my dismay I have had insignificant response. I think this is because we have too much tax and are immersed in its complexity and we have not enough death of tired old ideas that should be retired with every generation.
The Automated Payment Transaction Tax
In its simplest form, the APT tax consists of a flat tax levied on all transactions. The tax is automatically assessed and collected when transactions are settled through the electronic technology of the banking/payments system.
The APT tax introduces progressivity through the tax base since the volume of final payments includes exchanges of titles to property and is therefore more highly skewed than the conventional income or consumption tax base.
The wealthy carry out a disproportionate share of total transactions and therefore bear a disproportionate burden of the tax despite its flat rate structure.
The automated recording of all APT tax payments by firms and individuals creates a degree of transparency and perceived fairness that induces greater tax compliance. Also, the tax has lower administrative and compliance cost.
Think about the desirability and feasibility of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction tax.
Implementation of this elegant and simple idea in Canada would allow Canadians to create an original, authentic social organization that would eventually be copied by other nations. Let's apply the power of the internet to get this Automated Payments Transaction Tax idea into the public square of discussion and then into application.
Canadians, write your Member of Parliament." Foreign readers take this idea back to your jurisdiction and spark the conversation there. Some country will be first in the implementation of the APT thesis.
In my opinion the APT or a variant of it will happen one day as sure as Uber, Airbnb and Torrents have arrived and driverless freeways will eventually emerge. It’s a peer to peer thing; it’s the internet, it’s inevitable. “Software is eating the world.” Marc Andreessen.
A micro tax on all financial transactions reduces the burden on all individuals and allows our governors to manage our spending requirements in a transparent progressive way. The APT thesis calculations were based on U.S. taxation revenues and expenditures from the late 1990’s. The potential tax base has increased significantly since then; think of the machine initiated equity, fixed income and commodity exchange transactions that go on day and night. Here is a snippet from the 41 Page PDF authored by Edgar L. Feige, Professor of Economic Emeritus, University of Wisconsin-Madison:
The APT tax rate from the original study publication in 2000 achieved the goals of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction tax of only 0.15% on each side of the transaction for a total of 0.3% on any financial transaction.
The APT tax proposed is designed as a revenue neutral replacement for the present tax system. It is emphatically not intended as an additional source of revenue. It proposes to broaden the tax base by eliminating all implicit tax expenditures, all exemptions, deductions and credits while adding to the tax base the enormous volume of transactions representing exchanges of property rights to real and financial assets and liabilities. The flat rate tax required to maintain revenue neutrality is estimated to be in the neighborhood of 0.6 percent if total transactions volumes fall to half of their current levels.
PART II - The Need for Policy Reform
Clearly, a 15% provincial tax on Vancouver housing purchases by foreign buyers will simply move what little demand there is from this sector to other jurisdictions. Hot speculative money whether clean or dirty is transnational.
Look at Canada’s record of Federal Direct Investment; in full year 2015 there was a huge spike in FDI OUT such that for every $1 of FDI coming into Canada there is $1.31 going out to get a better return on Capital and Labour. In short, our Canadian investor class, like most other global players, looks for leverage and arbitrage opportunities outside of Canada. This is a trend that has been widening and unbroken since 1997 throughout the last five federal governments (4 Liberal, 1 Conservative).
Meanwhile after seven years of nitro-fueled Zero Interest Rate Policy, we have only increased our consumption habits and widened our debt load across both private and public sectors. While the private sector binges on low cost credit, our multi-level governance is shifting more to fiscal policy since monetary policy has not worked as promoted. Yes - CPI remains muted, No - we have no control over what consumers will do with easy credit especially since competing governmental departments encourage minimum equity positions when borrowing. After seven years, the Bank of Canada is still trying to figure it out:
With the next renewal (of the “Inflation Control Target”) approaching in 2016, the Bank is focusing its review and research in the following three areas:
1) The Level of the Inflation Target
2) Financial Stability Considerations in the Formulation of Monetary Policy
3) Measuring Core Inflation
We have a failed Canadian central bank policy of ZIRP and NIRP threats that ape the U.S. Fed policy as well mirroring many other central banks since the pit of gloom in March 2009. It’s been a race to the bottom, and here we are.
We have the outdated 20th Century wild west mortgage insurance liability of CMHC which was created in 1946 as an elaboration of previous housing incentives beginning in 1919 (Wikipedia).
We have an irresponsible overpriced exclusionary and predatory real estate industry that obfuscates, monopolizes and fails at basic fiduciary behaviour.
This combination of patchwork policy has failed to get capital investment into productive employment. Instead we have asset valuations that exceed the worst possible, measured globally, and we have settled for consumption and waste. Asset values may look good on a balance sheet in terms of credit worthiness, but the social contract does not serve our collective needs.
Nowhere is there public debate or care about tomorrow except in the tedium of blogs and anonymity. Governance has clearly failed and the media is busy chasing sirens and shootouts. It’s shameful. It’s time for reform and modernization using the tools we already have.
PART III - The Need for Land Entitlement Reform
“The social state is advantageous only when all have something and none too much.” A paraphrase of Jean-Jacques Rousseau from his Du Contrat Social ou Principes du Droit Politique of 1762.
The APT does not solve the problem of the current historic asset valuations in Canadian housing prices which are at crisis proportions and which cannot now be easily solved with ZIRP, NIRP or a revolving door of political ambitions.
Let’s consider the end to private fee simple land ownership and move all our land and territorial limits into the hands of all of us.
Here’s how I see it:
- All land and territorial space inside the jurisdiction of Canada (the Land) would be owned by the Canadian Government (the State) on behalf of Canadian taxpayers (the Tenants).
- The land would be leased to the tenants.
- The state would set the value of the land lease and term according to use.
- Only the improvements allowed on the land are owned by the tenant or transferable to another tenant in an open and free market place.
This simple idea would put an end to the endless inflation of the cost of land since the value of the land would be set by the central organizing body of the state which would assess the needs of the community of tenants and the responsibilities of all of us towards the wellbeing of our health and environment.
The improvements on the land would by definition be valued by their utility and composition of materials all of which are readily assigned value by an open marketplace and would be more prone to deflation than inflation because improvements have to be maintained to retain value.
Valuations would be rational, transparent and immediate. Affordability would be easily controlled. Tenancy agreements on the land would be available to both domestic and foreign users and when combined with the ‘Automated Payment Transaction Tax’ outlined in PART I above, all land lease revenue and all improvement transactions would trigger APT revenue to the state for reinvestment.
How economic inequality harms societies - Richard Wilkinson
"If you want to live the American dream, go to Denmark.”
We humans have accomplished a lot of ambitious and technically challenging projects and have expanded our knowledge base to a degree that suggests we should be able to transform our puny little financial problems in a politically impartial way free of ideology to the benefit of the greater good.
I don’t expect that this post will trigger any change during my remaining lifetime to the status quo of 20th century and older ideas that we remain wedded to, but I publish this because ideas precede action and I am not the only one thinking about this.
According to this December 2015 study by Azoulay, Fons-Rosen & Zivin “Does Science Advance One Funeral at a Time?”, Max Planck’s observation is indeed the way our knowledge base and idea implementation grows.
“A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it."
Real Time with Bill Maher
Michael Moore – Where to Invade Next
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
- In the U.S. for the past 55+ years the average NRoI has been +/- 2.5% and in the Eurozone has been +/- 1.7% (MonetaryRealism.com). In Canada, the "real" Bank of Canada bank rate (rate less CPI) was approaching 5% in 2007 before the 2008 crash and as well after the dot.com bust in 2001. It's flirting with zero now.
At street level in Canada earnings have been topping with the commodity crash but in many cases, earnings reliability are not even necessary to use in the calculus of risk analysis when granting a mortgage or consumer loan. We should be ashamed of ourselves, but instead we blame others.
As CIBC economist Benjamin Tal said, he is concerned that subprime lending is “driving the bus.”
Subprime borrowers’ debt loads will continue to grow as long as interest rates are low. Benjamin Tal
- Average debt levels up nearly 3% in the first quarter of 2016.
- Non-mortgage debt rose to $21,348 in 1Q 2016, up 2.7% Y/Y.
- Subprime average credit card balance grew by 5.7% Y/Y to $6,601.
- High interest installment loans grew 4.8% Y/Y to an average $23,591.
- Serious delinquency rates (90+ days late) increased 3% in 1Q 2016.
At the national level it's worse; net Federal Direct Investment widened dramatically in 2015 Y/Y meaning that Canadian investment capital would rather look for yield offshore than on. We can't even invest in ourselves (Net FDI has been negative for the last nearly 20 years); we continue to increase our borrowing so that we can consume to 'maintain' our lifestyle.
Even people without money via savings and low employment earnings are buying property - how would they know the value of money? Well they will find out along with their extended families the difference between equity and debt in an aging speculative triumph.
BMO Millennial Home Buyer Survey (March 2016)
According to the survey, millennials expect they will have to spend $350,000, on average, to buy their first home. These amounts range from about $235,000 in Quebec to more than $478,000 in British Columbia... To make such a purchase, respondents indicated that they expected to raise about 15 per cent of the purchase price for their down payment - or, roughly, an average of $53,000. Most (65%) indicated that they would rely, to some extent, on parents or other family members for financial assistance for as much as 10% of the purchase price, although most don't know.
A probability sample of this size would yield results accurate to ± 2.2 percent, 19 times out of 20.
Ipsos Reid - BDO Poll (May 2016)
55% of Canadian would have trouble paying bills if interest rates rise.
46% say rising cost of living is limiting the money they put toward paying off debts.
37% say the rising cost of living hasn’t impacted their debt payments at all, suggesting its having some impact on most people.
58% think the value of their home will increase.
The poll is accurate to within +/ - 3.5 percentage points, 19 times out of 20, had all Canadian adults been polled.
Condo Construction Subject To Red Alert From Royal Bank
HuffingtonPost.ca (May 30, 2016)
RBC isn't the only organization that has presented concerning statistics regarding the housing market recently.
Sales activity in Toronto and Vancouver may have "topped out," Canadian Real Estate Association (CREA) president Cliff Iverson said earlier this month.
Sales didn't grow in Toronto at all in April after dropping 1.8 per cent in March.
They were also down one per cent in Vancouver, after a drop of 0.3 per cent the previous month.
Gregor Robertson Mayor of Vancouver, May 30, 2016
Yes, housing prices are high in Vancouver, and global capital plays a part in that. If prices keep increasing, many of the things we love about Vancouver are at risk, and many will not be able to put down roots in a city bound together by a rich, multicultural history that has a lot to offer geographically and culturally.
Magic Bus - The Who 1968
I don't care how much I pay
I wanna drive my bus
to my baby each day
I want it
I want it
I want it
I want it
Simple as ABCD
A reader (S.B.) sent me this chart of Vancouver Single Family detached house prices with his notations from a Elliot Wave perspective.
"Watch for volume climaxes, especially after long moves." Richard Donchian 1934
The Vancouver housing prices are following a price channel, and look to be forming an ABCD pattern.
The thing about ABCD patterns is that prices return to the mid-point. This means that prices should return to 2008 levels.
Furthermore - if prices return to the midpoint consolidation, this would be a 62.8 Fibonacci retracement.
Timing looks to be an approximate cycle of 8 years which means there would soon be a peak, and then another bottom in 2025.
If you view housing as a commodity, in Elliott Wave Theory (psychology) then Wave 5 has large percentage gains as people get spurred by scarcity.
How Stupid is Vancouver’s Real Estate Market?
Interview with Thomas Davidoff, Sauder School of Business
“The cross currents are beyond crazy in Vancouver — it’s a mix of money laundering, speculation, low interest rates,” says Cohodes, who was once profiled as Wall Street’s highest-profile short-seller by the New York Times. “A house is something you live in, but in Vancouver you guys are trading them like the penny stocks on Howe Street.”
Quote from Marc Cohodes, who advises hedge funds on Wall Street that want to bet against the Canadian housing market. Source: Visual Capitalist
March 18, 2016
Last week I looked at a few more open houses and it occurred to me that Vancouver asking prices, although laugh out loud ridiculous, are in some sense rational. Sellers see that buyers will pay an amount above last year, but they don't know by how much until they test the market and so list prices are offered by grinning agents to potential buyers who also want to act rationally because prices have been going up. It's peer pressure, everyone is involved. As the info-graphic below notes, actors also behave rationally when prices are dropping.
CLICK GRAPHIC BELOW TO ENLARGE
In Vancouver, talk of growth intersects with the investment of outside money—and although there’s no firm data, it’s clear that developers are courting foreign money, especially when marketing luxury condos.
I was looking at open houses this weekend in East Vancouver where droves of anxious buyers are trolling for accommodation under $1,000,000; good luck with that people. (91% of single-family homes in Vancouver now valued at over $1 million, study shows. VanCityBuzz.com)
Apart from the housing mania in Vancouver, there is an automobile mania that has been fueled by low interest rates as well. Vancouver is making the same mistakes as most other polluted and vehicle congested cites by funneling single passenger cars out of the suburbs into dense urban areas and allowing gas and diesel exhaust to be spewed into our high density residential areas. (BCAirQuality.ca)
Some experts go so far as to predict that replacing the all-glass outer layers of buildings may become necessary as early as 15 to 20 years from the day that the condo is built, and cost as much as $80,000 per unit.
However, for buildings in which major problems have been discovered... the financial strain posed by construction estimates makes it difficult for strata corporations with problems to obtain the approval of 75 per cent of owners they need to go ahead with special assessments to cover the costs of repairs.
Condo owners have options. If individual owners can’t afford the full amount of special assessments, or can’t finance repairs on their credit, strata corporations can take out loans on behalf of the building. “In the last two or three years, there has been an increase in the number of lenders that fund these (strata loans),” said Brian Chatfield, president of North-Vancouver-based 1 City Financial Ltd. (VancouverSun.com)
The Secrets of the World's Happiest Cities
There is a clear connection between social deficit and the shape of cities. A Swedish study found that people who endure more than a 45-minute commute were 40% more likely to divorce. People who live in monofunctional, car‑dependent neighbourhoods outside urban centres are much less trusting of other people than people who live in walkable neighbourhoods where housing is mixed with shops, services and places to work.
Driving in traffic is harrowing for both brain and body. The blood of people who drive in cities is a stew of stress hormones. The worse the traffic, the more your system is flooded with adrenaline and cortisol, the fight-or-flight juices that, in the short-term, get your heart pumping faster, dilate your air passages and help sharpen your alertness, but in the long-term can make you ill. Researchers for Hewlett-Packard convinced volunteers in England to wear electrode caps during their commutes and found that whether they were driving or taking the train, peak-hour travellers suffered worse stress than fighter pilots or riot police facing mobs of angry protesters.
But one group of commuters report enjoying themselves. These are people who travel under their own steam, like Robert Judge. They walk. They run. They ride bicycles. By spending resources and designing cities in a way that values everyone's experience, we can make cities that help us all get stronger, more resilient, more connected, more active and more free. We just have to decide who our cities are for. And we have to believe that they can change. (TheGuardian.com)
History, Charts & Curated Readings
Balance Of Trade
Rent Or Buy