acer rose

I would not be surprised to see significant drops in Vancouver property prices.

From the 2006 census the median family income was a smidge over $64,000 while the average value of an owned dwelling was £628,682 (www.bcstats.gov.bc.ca/data/dd/facsheet/cf189.pdf from http://www.bcstats.gov.bc.ca/census.asp)
The economy was considered hot then but is probably considered less so now.
http://www.vancouversun.com/Business...504/story.html

Even if "Canada/Vancouver is different", I can't see all that off-shore money blamed for pushing up prices in Vancouver being sustained unless every country other than the UK and the US is "different". That does not appear to be the case so far in the global credit crunch story.

TheBear

It makes me laugh when they talk of the decoupling of the global economy and how countries like China and India will see us through this mess. China and India make their money by selling their cheap tat to the US and Europe. I have a friend who goes to China all the time on business and he said that something like 26,000 factories are shutting down a week out there. The US unemployment might be going up by 500,000 a month but I suspect China's is going up by well over a 1m...don't think there's going to be too many of them buying apartments over in Vancouver.

JonboyE

I don't think that currently employed, or recently unemployed, factory workers from mainland China have ever been a driver of the Vancouver real estate market.

JonboyE

Vancouver is different, at least to the extent that real estate prices have been driven ever upwards by overseas investment, and the money in the resource sector, for much of the naughties. (2000-2008).

I don't disagree with what you are saying. Average dwelling prices of 10 times average income are certainly scary. However, average figures need to be interpreted with a bit of caution.

There are some really, and I mean really, expensive properties in Vancouver. They may be out of the reach of any normal family but they still appear in the averages and skew the figures upwards. Where these are owned by overseasas investors the owner's incomes do not have the same effect on average earnings, nor do the big earners in Vancouver who live in West Vancouver.

Also, these averages are only for the City of Vancouver, not the metropolitan area. There is a pattern of people living in rented accommodation in Vancouver when they are young, moving out to the suburbs to have a family and returning to Vancouver as retirees. I don't know what effect this has on the average earnings figures, just that having a relatively higher number of young people and retirees must have some effect that needs to be considered.

Having said that, it is obvious that real estate prices are falling and haven't reached the bottom yet. There are dozens of single family homes and hundreds of townhouses for sale in the City of Vancouver below $500,000. As mortgage rates are falling maybe 2009 will be a year when ordinary people in Vancouver will be able to get back on the property ladder.

MarkG

But the Chinese economy has, and right now it's going down the toilet with the prospects of serious political unrest that would certainly make any rational Western company think twice about shipping work over there in future; if the economic decline continues, a few million starving, rioting factory workers won't be good for business stability.

Of course if manufacturing jobs start coming back to Western nations, then there'll be more money here instead .

TheBear

Of course they are if oversees investment is a driver. If they can't spend money in China, there will be less chinese millionaires and billionaires to buy property oversees...same goes for India etc.

JonboyE

Possibly, though the super wealthy seem to be less concerned with the ups and downs of the economic cycle than the rest of us.

If the Chinese economy is going into the pits then all the more reason for the wealthy Chinese to make overseas investments.

Mikey B

If only that could happen!! Could beind the operative word - is that spelt right Novo?

Steve_P

Actually "spelt" is not accepted in Canada it would be spelled.

Alan2005

Vancouver isn't different - why do people think places are different? Booms+busts are the same everywhere.

I kind of agree - but this is so far skewed the wrong way that the only interpretation is that prices are too high and must come down.

No it won't - another 10-20% (and maybe more for some) to go in 2009. Places that were $500k in 2007 will be nearer $300k by 2010 - even that is only just affordable for the average family earning around $100k.

Bellanova

If that wasn't sarcasm I don't know what is, did someone get out of bed on the wrong side this morning!!

RN1

Well as we'll be looking to buy in the New Year I hope house prices drop further! :-D

Don't seem to have slipped so low yet in Calgary though :-( Still there's always hope! ;-)

JonboyE

It is a home first, and an investment second. If you are happy living in a home then the ups and downs of the real estate market not so very important. It might lose money in the next year or so, but over the medium-term real estate will continue to be a sound investment.

JonboyE

What is it with all these Bs? Brighton or Bangkok, what is it that enables you to speak about the Vancouver real estate market with such certainty?

"Boom and bust" is a pejorative description but no one is suggesting that Vancouver is not subject to market cycles. However, real estate prices in Vancouver are driven by overseas investors to a much greater extent than in many other Canadian cities. To that extent at least it is different.

I don't pretend to fully understand how this difference will influence prices in a falling market. However, to ignore this will make any further analysis meaningless.


We will have to wait and see.

Whether or not your forecasts of prices prove to be realistic you are completely missing the point I was making about interest rates. In Canada, the amount you can borrow for a mortgage is a function of both your income and your debt repayment load. At a 6% mortgage rate the family earning $100,000 pa, with $50,000 down payment, can afford a home up to $425,000, at 4.5% (now available from ING) they can pay $500,000, at 2.5% (not unimaginable) the price they can pay increases to $640,000.

All these are above the $300,000 you quote. It is very likely that mortgage interest rates will fall in 2009 so increasing the amount people can borrow and so increasing the price they can pay. Again, I can't say with certainty this will cause a slowdown in the rate of decline and raise the level of the bottom of the market, though I suspect it will.

FWIW my gut feeling is that for pure investment potential the summer of 2010 is the time to get back into the real estate market here. It is just my interpretation of the economy and what I see going on around me. However, it is a market I have been following for a decade and in which I back my judgment with my own money.

Auld Yin

Whether or not your forecasts of prices prove to be realistic you are completely missing the point I was making about interest rates. In Canada, the amount you can borrow for a mortgage is a function of both your income and your debt repayment load. At a 6% mortgage rate the family earning $100,000 pa, with $50,000 down payment, can afford a home up to $425,000, at 4.5% (now available from ING) they can pay $500,000, at 2.5% (not unimaginable) the price they can pay increases to $640,000.


One of the downsides of the mortgage system here is that in times of low interest rates home buyers tend/are encouraged to buy too much house for their present and potential earning capacity. Back in the early 1980's, I think it was, interest rates here soared as high as 22% for mortgages. Many whose mortgages matured/came up for renewal during this period experienced mortgage repayments doubling and tripling. Needless to say the sale market was virtually non-existent and many of those renewing lost their homes. I think the lenders and the purchasers are both at fault for being loose lenders and over-buying public.