Housing bubble ready to pop in Vancouver: Turner

Yet that’s exactly what’s happening in Vancouver. Consider that even as the Real Estate Board of Greater Vancouver (REBGV) reported that year-over-year sales dropped 8.2% and month-over-month sales plummeted 21% in April, the benchmark price for a home in Greater Vancouver kept climbing to reach $622,991 in April 2011, up 5% from April 2010 when the benchmark was 593,419.

The Bank of Canada is going to have no choice but to raise its key lending rate on July 19 to stem rising inflation, Turner said, and once that happens, sales and prices will plummet in Vancouver.

“The whole thing will implode in Vancouver. It is reaching the point of tottering. Month-over-month sales have just plunged in April, so this may be the start of a decline,” he told CRE Online.

“And when the real estate market collapses in Vancouver, it’s really going to hit the B.C. economy, and it’s going to last for a number of years because British Columbians have just put way too much emphasis on the value of real estate,” said Turner, the author of Money Road: Tools for the Wild Ride Ahead.

B.C. politicians betting on real estate

Turner said B.C. politicians are also to blame for the impending real estate downturn. The City of Vancouver and the province invested nearly $1 billion into the Olympic Village based on the assumption real estate appreciation would just continue forever.

The Globe and Mail reported in March that the city’s claims that its total losses for the Village were $50 million did not include the $180 million the city was already losing on the land. So the actual total loss is $230 million, which B.C. taxpayers are on the hook for.

Asian investment ‘myth’

What really bothers Turner more than anything is what he calls the “myth of hot Asian money” propping up the Vancouver market. He said the assertion that Chinese investment dollars are inflating prices while demand continues to slide is not backed up by sound statistics. “There are no statistics quantifying foreign investment in Vancouver,” he added.

While there is Asian investment concentrated in certain areas, such as Richmond, he says the amount of that investment has been blown out of proportion by the real estate community to keep the mania going.

He said the fear of Chinese investment bidding up prices even higher has been forcing more  under the belief that they may be eventually priced out of the market.

“This is a myth that is used by the real estate community to make everyone think they have to buy now or they’re never going to be able to afford to get in. I think it’s one of the most disingenuous marketing techniques I’ve ever seen.”

National stats ‘meaningless’

The Canadian Real Estate Association, in its latest press release, said the results for national sales activity and price appreciation have been skewed by a surge in high-end home buying in Vancouver.

As the Vancouver market becomes increasingly separated from the rest of Canada, Turner said it calls into question having national sales and price data.

“This data is becoming increasingly irrelevant,” he said. “I think that forecasting an increase in national prices based on the insanity of one market is meaningless to the rest of the country. It may look good for those who want to encourage buyers to continue buying, but I think that’s quite disingenuous,” he said.

“The Vancouver market is ready to correct and everyone should be aware of that. And I think taking into account national numbers and extrapolating that across the country is a very dangerous trend.”

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