February 18, 2013

A Market Held Aloft By Speculative Psychology

The Montreal Gazette reports from Canada. “Friday’s report from the Canadian Real Estate Association demonstrates that national home sales continue to be significantly lower than those of a year ago, but that virtually all of this decline happened abruptly last August, reflecting a tough squeeze on mortgage-lending conditions in July by Finance Minister Jim Flaherty. Since then, however, there’s been no further month-to-month downtrend, notes CREA chief economist Gregory Klump. The latest squeeze on mortgage lending, the fourth in five years, is also the toughest, points out economist Robert Kavcic of BMO Capital Markets.”

“In a market held aloft by speculative psychology, it seems very likely that such a hammer blow would bring about the very crash that pessimists have been predicting. Instead, though, the market reacted pretty much as it had during previous rounds of Flaherty’s campaign to rein in the housing market, notes Derek Burleton, deputy chief economist at the TD Bank.”

“What’s the bottom line? In my opinion, it’s that the catastrophist scenario detailed not just by eccentric bloggers but also in national newspapers and magazines, looks increasingly unlikely.”

The Globe & Mail. “A Vancouver real estate marketing company is apologizing for having two employees pose as prospective home buyers in televised newscasts on a supposed spike in sales around the Lunar New Year. The misrepresentation was first spotted by the local online community and then dissected on local blogs and message boards. Some noticed a Google search of one of the women’s names turned up her Facebook and LinkedIn pages – both since deleted – which stated she worked at MAC Marketing Solutions.”

“The two young women – presented as house-hunting sisters whose parents would be in town from China for the New Year to help them purchase a condo – are in fact an administrative assistant and a sales assistant with MAC Marketing Solutions, president Cameron McNeill confirmed to The Globe and Mail.”

“This is the latest in a number of questionable marketing tactics to be exposed within Metro Vancouver’s real estate community. During a media blitz announcing the Groupon-style sale of units at a Surrey condo development last year, one woman identified to a television news crew as an eager local investor was in fact a sales manager for Key Marketing, the company behind the scheme.”

“That same company has also taken groups of Chinese buyers on helicopter tours of Metro Vancouver properties, and at least one of those trips was believed to be misleading. Garth Turner, a business journalist and former politician, reported the Chinese buyers on a Feburary, 2011, trip – on which several media outlets were invited – were in fact local real-estate agents and brokers and the trip was meant to promote a new condo development.”

“According to 2011 data by the Landcor Data Corporation, 75 per cent of those who purchased Metro Vancouver condos as investment properties are from Metro Vancouver. About 3 per cent are from the U.S. and 2 per cent are from other countries.”

From Post Media News. “In a prepared statement, Ethan Faber, managing editor at CTV British Columbia News, said ‘we were certainly surprised to learn that two people our reporter approached who told us they were shopping for a condo, were in fact employees of the company. We are doing a followup story.’ A call to the CBC Vancouver newsroom — which also ran a story that turned out to include fake Chinese investors — was not returned.”

“Company president Cameron McNeill was asked if the apparent misrepresentation being alleged throughout Vancouver’s blogosphere — that the company seemed to be seeking to drum up condo sales using employees as Chinese investor actors — could constitute a fraud. ‘I don’t believe that it was an absolute contrived situation, and I understand that some people would be angry about it,’ he said.”

“Reporters often field real-estate story pitches and, in recent themes, marketers have focused on the voracious Chinese investor who comes to Vancouver on holiday during Chinese New Year ready to throw down cash. On Thursday, the Mac Marketing Solutions Facebook page took quite a backlash against that narrative, seemingly from young Vancouverites who are fed up with exorbitant home prices.”

“Not long ago I was talking to a young doctor who’d just started working at a new clinic on the west side. When I mentioned I write a column on real estate, she actually sneered. ‘Why on earth would you want to write about Vancouver real estate? I think it sucks.’”

“The young doctor and her husband had relocated to the city from the ’burbs and couldn’t afford to purchase a home. Her resentment was palpable. A friend told me about an established lawyer with two kids who couldn’t afford to buy property here either. The lawyer declined to comment for this story, however, because ‘he doesn’t want to be the poster boy for ‘good job, but can’t afford a house.’”

“Instead of obsessing, the more rebellious and unconventional among us simply opt out. People who own often pressure their title-free friends to do the same. ‘For years, my friend who had a house on the north shore said, ‘Buy, buy, buy,’ says former Vancouver Sun theatre critic Peter Birnie, 56, who was never interested. Instead of real estate, Mr. Birnie has his money in conservative blue-chip stock investments. And he’s not regretting his decision, either. ‘When condos came along, my thought was, ‘you are buying a slice of air up in the sky, this non-existent thing,’ adds Mr. Birnie. ‘And I’ve never felt there’s any reason to be spending money on those things, and these days I think I’m proved right.’”

“He’s not alone. An estimated 55 per cent of the city is renting, according to the Vancouver Renters Union.”

The Vancouver Sun. “While the Montgomery townhouses in Vancouver may not be affordable for most people, they do provide an interesting alternative to single-family homes on the west side. The 27 Montgomery townhouses are on four levels - including a basement space, main floor living space, two bedrooms up and then a master suite on the top floor.”

“The UDI/FortisBC Housing Affordability Index for B.C. found that less than 32 per cent of working households in Vancouver earn the requisite $91,199 necessary to qualify for the $2,432-a-month mortgage payment required for the average new 1,463-square-foot townhouse in the area, with a median price of about $765,752. Prices at Montgomery are a bit higher than the median, at about $1 million. The townhouses are also bigger, however, averaging about 1,700 square feet. And they’re in the heart of the city’s coveted west side.”

“The same $1 million could buy a single-family home on the east side of the city, but that home is likely to be small, old and in need of a lot of work, said Chris Rowland, vice-president of the project’s developer, the Listraor Group. The project has attracted both offshore buyers from Asia and families moving up from condos in Vancouver or the suburbs, Rowland said.”

“He said the development is out of the reach of most first-time buyers, and they don’t get many downsizers because of all the stairs.”

“Being right on Oak Street does mean there is some traffic noise, but the builders have installed special glazing on the windows and have added plants to soften the noise and the visual impact of the traffic, Rowland said.”

The Tyee. “Even though the City of Vancouver’s Urban Design Panel rejected a rezoning and development application for a co-housing development in Kensington-Cedar Cottage last month, Dane Jansen, principal of Vancouver’s dys architecture, remains optimistic about the potential for this European housing type to successfully establish itself in Vancouver.”

“‘[Co-housing is] one of the ways we can improve affordability that’s self-initiated,’ he continues. ‘Part of being in co-housing is to reduce some of the lifestyle and budget issues. You’re not always having to go looking for a babysitter because there’s somebody there to deal with your kids if you’re running late coming home one night. People are coming together to be mutually supportive, which should suggest you can reduce some of your other costs in your life and draw that down.’”

“Jansen’s other work in designing social housing units has, like co-housing, drawn on European inspiration. He has designed 220- to 325-square foot apartments several supportive housing facilities in Vancouver, and was one of the first architects to pioneer small suites for such purposes in the late 1990s.”

“‘There was quite an outcry. ‘How dare people live in something that’s the size of a parking space?’ he remembers. ‘For me, I knew that other people living in the rest of the world had been living that way.’”

From CBC News. “A high-rise hotel and condo project on Vancouver’s West Georgia Street is being rebranded as the city’s first Trump tower, CBC News has learned. Developer Holborn Group is relaunching its Arthur Erickson inspired twisting tower under the Trump brand with condos priced around $1,600 a square foot.”

“When the project was originally launched before the global economic meltdown, the 60-storey tower, which will twist 45 degrees as it rises, was to feature a high-end Ritz-Carlton hotel on the lower floors. Another 123 luxury condos were planned for the upper floors, priced between $2.5 million and $10 million, with the penthouse priced at $28 million. But when the recession hit in 2008 the luxury market collapsed. The project was halted and early buyers were refunded their money. The project was restarted in April 2012, with 290 condo units aimed at a lower price point.”

“Trump has a similar project in Toronto. At 65 storeys, Trump International Hotel and Tower has put its stamp on that city, and the Vancouver project might do the same here. But also like the Toronto project, Donald Trump and his daughter are not investing in the Vancouver tower, merely selling the Trump brand to the developer. ‘We are naturally excited about Vancouver. It is a great city with tremendous access to the Asian market and we look forward to continuing to explore the potential of bringing the Trump flag to this location,’ said a statement released by the pair.”

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