Vancouver Real Estate: Did You Hear That Popping Sound?

 

August, 2, 2016 was the cut off date to get in all the real estate deals before the sales tax was due to be implemented. 

Many did not make it, and news about deals collapsing shortly after have started to come out. This tax was created by the government, and now we have to see what other dominoes will be falling. 

With over 4000 deals failing and others just walking away, because they are not willing to pay the extra.  They are walking away because they are not as rich as the public media makes them out to be. 

Rich foreign investors not being able to afford an extra 15% tells me it is not smart money that has been doing all the buying, but, dumb money that thinks the trend will always be up.

  August, 2016 may go down in history as the month when the Great BC Housing Bubble Burst. 

 

jul16-vancouver

  Source  Canadian Housing Price Charts 

This chart shows us what has happened until the end of  July 2016. This trend cannot continue, and to help confirm that we eventually should see this chart turn down. No wonder why prices have shot up if the listings have imploded like the green trend line shows.  These are some major imbalances and the listings trend may explode if the entire real estate complex takes a hit. Everybody will try and sell at once, as fear takes over while at the same time, buyers dry up and refuse to show up in ever declining numbers. 

The fires in Alberta have already devastated the real estate market there, so now it’s BC’s turn to do some more damage.  Some say that buyers are running to Toronto, because the Foreign Buyers Tax has not kicked in. This is more evidence that it is hot money moving and not smart money. Running into, or out of something because of fear will never work for very long. Only dumb money moves under pressure of fear as they are the least disciplined.  

In my area landlords have been on a rent raising spree, because their costs have all escalated as well. I’m sure prices will get hit all the way up and down the Frazer Valley as real estate, is worth only what another is willing to pay for it.   

Some figure that at least a 60% price correction is coming, but the herd will always be too late to react on time. They say real estate is a safe investment, but in fact the leverage is far more that any futures contract. 

If we look at the 30 year cycle, 2016 would be the anniversary of Expo 86 in Vancouver. The mood in 1986 was about the same as the mood in early 2016, so this would make for a very good fit.  We are still 15 months away from the 30 year anniversary date of the 1987 crash, so the fundamentals of Canada should continue to deteriorate in the next few years.