In Canada, an interesting paradox is visible.
On the one hand, the country’s oil patch is dying a slow death in Alberta, where the worst 12 months for job losses in 34 years is contributing to rising property crime, higher food bank usage, and a rash of unsold condos and empty office space in Calgary.
On the other hand, if you were to take a look at real estate in Vancouver and Ontario you’d think you were looking at home prices for an economy that’s thriving.
In fact, prices in Vancouver have reached nosebleed levels. In January for instance, the average selling price of detached homes was an astronomical $1.82 million.
Here’s what that look likes like in chart form:
The madness has caused all sorts of abberations including the following listing which, outside of Silicon Valley anyway, represents what is perhaps the most absurd example of “greater fool” speculation since the Tulip Bubble:
That listing eventually sold for more than $100,000 above the asking price despite the fact that it’s clearly a rundown shack but as is always the case when dealing with speculative bubbles, things will invariably get frothier-er as evidenced by the fact that the home shown below just sold for a whopping $735,000 above the asking price, setting a new record.
“The house at 3555 West 1st Avenue was built in 1912, is 3,400 square feet and sits on a standard 33 x 120 foot lot without a view,” Vancity Buzz notes. “The selling price of $4.23 million is about $1.6 million above the lot’s assessed property value.”
For his part, real estate agent Brandan Price is incredulous. “For it to go over $4 million is remarkable. I had five offers,” he said. “These were local buyers just looking to make a shift who wanted to move into this area.”
“They were willing to sacrifice lot size to move into this area.”
Maybe, but things seem to be getting out of hand and part of the “problem” may indeed be demand from investors attempting to find a home for capital they’ve moved out of China. As Thomas Davidoff with UBC’s Sauder School of Business told Vancity Buzz: “These prices are getting pretty freaking nuts in my opinion.”
“As a proposition for someone who’s going to live in that house and what you’re getting for four million plus – that is a ridiculous joke and that is not something that’s going to work for people who just make a living in Vancouver,” Davidoff says.
Sorry Thomas, but you’re going to have to get used to it, because as long as the market expects a 30% yuan deval, Vancouver real estate is going to keep getting more “attractive”. Or, in other words, the Canadian real estate market is going to continue to be one of the world’s most attractive money laundering vehicles.
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