Vancouver Housing Bubble Burst Sends Local Consumer Sentiment Crashing Most In Three Years

Tyler Durden's picture

As was largely expected, the first official data since the bursting of the Vancouver housing bubble following the 15% luxury real estate tax, was ugly: on one hand, the number of Vancouver home sales fell 26% from a year earlier, and tumbled by 23% comparted to July, to
2,489 transactions. Detached properties were hit hardest as sales
dropped 45% from a year earlier. Transactions of attached homes such as town-houses dipped 25% and apartment sales were down 10%. On the other, prices likewise slumped, with the average price of detached Vancouver properties crashing 17% in just one month, and already down 0.6% on the year, to C$1.47 million ($1.13 million) in August, the lowest price since September 2015.

 

What is worse, is that what was until now a mostly regional housing bubble, is starting to spread in the form of a hit to Canadian consumer confidence. As Bloomberg reports, "a shifting real estate market in Vancouver led Canada’s consumer confidence index lower for a second week." According to the BBG Nanos telephone poll shows, the share of respondents who see local real estate prices falling has almost doubled in the last two weeks, rising to 22.5% in the latest survey, up from previous readings of 20.5% and 12%. Conversely, the share of those who see higher prices fell to below 40 percent for the first time since April.

Housing jitters dragged the broader Bloomberg Nanos Canadian Confidence Index down to 58.4, from 59.3 previously, the second straight drop from the 2016 high of 59.9. Readings on the economy also deteriorated, while perceptions of job security and personal finances showed slight improvements.

The drop may not appear too dramatic on the chart below, however once the inlfection point in public mood hits, the acceleration phase kicks in shortly after, especially if the Vancouver housing woes accelerate or, worse, spread to cities such as Toronto.

However, while the broader national index has only just started inflecting, the British Columbia expectations sub-index, which measures the outlook for housing and the economy, plunged by the most since July 2013 to 60.9. 


“Negative pressure on the perceptions of real estate value continues, particularly in the province of British Columbia,” said Nanos Research Group Chairman Nik Nanos.

Unless another wave of price-indescriminate Chinese buyers emerges over the next few months, what is for now just a trickle to national Canadian consumer sentiment, will promptly become a flood.

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booboo's picture

Oil, houses, beaver pelts,...it's pandemonium!!!!!!!!!!!!

Laowei Gweilo's picture

Averaging housing prices in Vancouver actually increase June-August...

http://www.cbc.ca/news/canada/british-columbia/26-slump-in-vancouver-rea...

And in August, for the first time in Canada's history, the average assets of home owners in any city is over $1 million...

http://www.cbc.ca/news/canada/british-columbia/vancouver-millionaires-1....

funny how those stats are nowhere to be found in the post....

 

pitz's picture

Nearly all of that (and the alleged 'increases' over the past few years) have been sales mix, not appreciation-based. 

Laowei Gweilo's picture

so is the chart in this post.... it's the exact same source even

the source itself are just real estate agents, why would it even be based on valuation... of course it's based on sales price. since when do real estate agents even serve that function? they're not bc assessment... real estate board has no valuation or otherwise appreciated based function. 

it's an odd thing to single out because the chart in this post is actually even less valuation based... it's based on barely a couple weeks of data based on record low volume where the data is mostly skewed by the sale of a half dozen $20m homes that sold for few million less than expected, which when combined with very low volume, massively skews the average (not median) of the very few other homes that sold .... you really think record low volume of $20m houses selling below $23-24m is a MORE valuation based representation of the average housing VALUE of ALL houses in Van?

Lore's picture

From Laowei Gweilo's CBC article: "The study was based on real estate values from 2015 and does not include the latest monthly changes in the market, Miron noted."

So in other words, the "millionaire" numbers are entirely backward-looking and do not reflect the curret situation at all.

I rely principally on direct personal anecdotes.  I have a cousin who JUST listed a house close to downtown.  It's a 35-year-old two-storey box that needs a LOT of work (rotting roof, siding needs pressure-spraying and fresh paint, rotting back steps, etc.).  Last weekend, he held his first open house, and not a soul showed up. 

Laowei Gweilo's picture

yeah but the first article is based on current numbers, and it shows an increase even through june-august. (just as the one in the OP shows an increase all the way through to the year to the summer). 

and i fully agree with your anecodte, in fact i think it's probably worse even than the real estate board will let on. basically everyone i know in the market is on the side lines now ... only people even remotely looking are students because the whole on-campus housing fuck up at UBC. this notion that just because i want to try include all the data that i'm somehow pro-housing boom is crazy.

Laowei Gweilo's picture

it's sales based... his entire point before was that it should somehow be based on the exclusive 'real' valuation of housing as assets, as if that was the standard set in the original chart or by the source when it's always a sales mix.

Winston1984's picture

 

Trying to understand your post.  Is the real estate value based on sales price or not?

I think real estate agents would know the sales price.  

"Detached properties were hit hardest as sales dropped 45% from a year earlier."

So 'half a dozen' detached properties - so, 13 last year and just 6 this year?  Are all detached properties $20m?

Maybe my problem is I don't know what you mean when you say 'valuation.'  I'll hang up and listen to your response.

thx

 

Quantum Bunk's picture

haha a city with an average income of $43,000 Canadian dollars and Laowei gweiwuefwo is telling us that its a good thing that house prices are north of 1 million.

 

You pathetic fool

Laowei Gweilo's picture

i share additional stats from the exact same source and you think that means i think it's positive?

you rather pretend those numbers don't exist and just cherry pick the things that fit your opinion?

espirit's picture

Next greater fool is out to lunch.

Try the place over there --->.

PrometeyBezkrilov's picture

You are right about the income and people being in debt up to their eyeballs, but most idiotic thing is that developers keep thinking that this is a sustainable formula, so they keep jacking up rpices and organize bidding wars. I just wish all these idiots went bankrupt.

TradingTroll's picture

That article only quotes a benchmark price which is just a fantasy price created by the real estate board to pretend prices are still rising.

Fact is that single detached AVERAGE prices peaked in January 2016 and dropped ever since. It's all there on the REBGV website in the monthly statistics packages. The average prices are on the last page behind all the benchmark bullshit that some people gobble up. :))

Event Horizon's picture

Don't worry, ZH is the goto for "short and distort" conmen planting articles to manipulate public opnion. All the brain dead pinheads here just lap it up.. confirmation envy..

Blogs are loaded with this type of distorted propaganda from anonymous or hedge fund ghost writers. They have been calling for the Van RE bubble to pop for 6-8 years. Van has had 15-20% corrections many times and kept on going up. 

Volume is just back to normal from being scorching hot, the tax pulled high end sales to July distorting the vol change and lowering the average Aug sale price, the price variability is due to sales mix changes not comps..  The new tax was a bomb in the market, everyone is waiting to see how it shakes out.  but we still need more time to determine the market, for ZH to run these shit articles is pure short and distort propaganda. 

Do you pinheads really think that in the face of massive global CB balance sheet expansion ZIRP/NIRP and the FED likely going to an easing cycle that RE is going to collapse.. IT IS THE MONEY SUPPLY STUPID.. the value of money is being destroyed.

Hey "Tyler", who writes this shit and how much do you get paid for its placement.. clearly it is uninformed propaganda.

 

Bay of Pigs's picture

Vancouver had a brief correction in 2007-2008 when the US market imploded. Been going straight up ever since. You are full of shit.

pitz's picture

Vancouver/Toronto appreciation stopped in 2013. 

Bay of Pigs's picture

Why is you never provide any links or facts for your assertions?

Event Horizon's picture

Are you a liar or just ignorant, 2012 had a good correction

Iconoclast421's picture

15-20% corrections? When? There is a chart right at the top of this post. I see nothing even remotely close to a 20% correction followed by a recovery.

Event Horizon's picture

I guess you are fuckin blind,, try expanding it

Déjà view's picture

Pitz...

Have you listed Lions Gate Bridge?

Btw...Brooklyn Bridge sold last week...

Quantum Bunk's picture

Nothing has proven Pitz wrong. The sell side is blaming the tax when in reality, this fucking house of cards was destined to come down by shear wheight of itself.

 

The tax had NOTHING to do with it. The tax was a symtom. The tax was an indicator for anyone with brains.

pitz's picture

If anything, the tax was to prevent BC's reputation from being permanently sullied amongst International investors (who mostly are non-existent in BC anyways) as the house of cards (no pun intended) came tumbling down. 

Its hard to believe, but there may actually have been a few foreigners investing in Vancouver stupidly thinking it was still going to go up further.

Déjà view's picture

Chinese are very much into COLD WEATHER & WINTER SPORTS!

tropicthunder's picture

the implosion of chongcouver's stucco box market confirmed..

Escrava Isaura's picture

"Stock prices have reached what looks like a permanently high plateau." — Irving Fisher, three days before 1929 stock market crash.

 

bleu's picture

The world is paying dearly for the Greatest Injustice of the 20th Century.
http://wp.me/p4OZ4v-19

Laowei Gweilo's picture

how is that even relevant lol

Kirk2NCC1701's picture

I object to the Chicoms increasing the home values in Vancouver.

If they'd leave it to the US, it could have collapsed.

All we know abroad, is to wreck and bomb the shit out of places. To make the US the "Safe Haven", presumably.

CheapBastard's picture

Watch that show "List it or Love it" and you'll see how ridiculous house prices up there. I mean $1.7 million for an old house, 2,300 sf?! They're nuts!

The history of this type of bust is sales numbers drop slowly then gain momentum and start to plunge as people realize what's happening.

Then prices start to drop then plunge fast.

We are in stage 2 of plunging sales gaining momo at this point. Prob in 3-6 months we'll see prices star to "be reduced" by 10% then 20% and then rapidly down 50-60% depending on how much the Canadian gubmint wants to bail out their bankers for all their bad loans and both screw their tapxpayers and/or triple their national deficits.

zen0's picture

My sister bought a shack in Vancouver a while back for $900,000. Now the bubble has burst , it is probably only worth 1.5 mil.

 

Its still a damn shack, though.

Antifaschistische's picture

allow me....it's probably worth $400,000, but some fool may still be willing to pay $1.5....today.  don't worry, they won't tomorrow.

also...how screwed up are we, when consumer sentiment crashes because homes are becoming MORE affordable (relatively speaking).

want to make my sentiment good...let me pick up a second place in 77024 for $250,000.  How does unaffordable housing make my sentiment go up.  (yes, it's rhetorical).  So...their home goes up $300k, so why not go out and buy a Mercedes G Wagon.  Then, when it drops $300k...they're all depressed.

Quantum Bunk's picture

The crash is just getting started guys. Its barely begun.

Bay of Pigs's picture

Funny how Canadians never want to bring up consumer debt levels either.

2500saturdays's picture

HELOC I suspect.

i know a few here in ontario that keep borrowing more and more to keep them in the lifestyle using the house as the collateral

 

Escrava Isaura's picture

Wonder at which rate she borrowed because she might end up paying $1.5 million dollars in interest.

 

WTFUD's picture

As long as the knocking-shop-drug den she set it up for doesn't get busted she can claw her money back when 3 moons meet the polar triangle of Heranus.

mpnut's picture

Nothing new under the SUN, as anyone knows full well.  Stay in it long enough and you get burned.

zen0's picture
Bulls Make Money, Bears Make Money, Pigs Get Slaughtered
kiwigal's picture

The first rule of real estate, a property is only worth what someone is prepared to pay for it. 

WTFUD's picture

Is this good news for renters then? Probably not in this bad is good FUBAR world.

PersonalResponsibility's picture

Wait a second. Prices have fallen 22% on a 15% tax. Am I missing something? What's the problem? They get the properties cheaper now.

Pomkiwi's picture

Good point. Other way of looking at it is that the vendors are paying the tax

PersonalResponsibility's picture

Yeah, the government just wants peice of the action. Buyers will still flock to there as long as property taxes are low. The carrot has not left the end of the string.

TradingTroll's picture

Previously a house often traded hands several times between contract and final closing tax free. Now each of those assignments is subject to the tax. 6*15%=90%

buzzkillb's picture

What's the purpose of doing that? Does the price change during each of the 6 hands?

When I saw first hand what people were doing in SoCal during the last go around, I couldn't believe it.

Quantum Bunk's picture

Tax had nothing to do with it

 

It was a bubble

 

that flopped under its own weight.

 

The tax was indicitive of a top. It was a symtom

Killdo's picture

Vancouver was a shithole when I lived there about 10 years ago - I coudl not wait to get out of there - small town mentality, lotsof drug addicts, unemployed. I remember reading in the Business in Vancouver that the average person there was a foreign born, visible majority, unemployed renter. Weather was shit too - I remember it once rained for about 20 days non-stop. It never felt like a cohesinve city - more like a refugee camp with lots of un-integrated foreign peopel from all around the world (who regretted moving there - as most of my Brazilian and Argentinian friends there  did). I rememeber bumping into European tourists and the first thing they woudl ask me was why was Vancouver voted the 'most livable city' (by some UN geeks I think) - I coudl never answer. The only explanation I can think of is that the Canadian governemt bribed someone in the UN to give them that title.

The air was also polluted - I rememebr looking from that Lion Gate Bridge inland - pollution was thick you coudl not see far. I have a friend in LA who is from Vancouver and his family stilllives there - he told me he hates going there because people are jealous and depressed. I had the same impression when I lived there. Locals there reminded me of English people (but with all the good attributes the English have like humor, taste etc removed)

Just 1 Pick's picture

All true. Everyone in Vancouver is insecure. Makes for very lousy parties.

the.ghost.of.22wmr's picture
the.ghost.of.22wmr (not verified) Sep 6, 2016 9:42 PM

If a Black Swan fell in the Canadian housing market forest and nobody was around to hear it, would the Black Swan's popcorn taste any sweeter?