By Justin Spittler, editor, Casey Daily Dispatch
“Prices will fall at least 20%. I’ve never been so sure of anything in my career.”
Barry Magee told me this two weeks ago. We were talking about Vancouver’s housing market.
Barry is a real estate agent in Vancouver. He’s been in the business for the last 12 years.
During that time, he’s seen Vancouver turn into one of the hottest housing markets on the planet. But he doesn’t think the party will continue.
Instead, he thinks that the market will crash before the end of the year.
It could begin just a few weeks from now.
• This isn’t a popular opinion around Vancouver…
And that’s because Vancouver’s housing market has been booming for nearly two decades.
Housing prices have climbed 287% since 2000. They’re also 222% higher than they were at the peak of the last housing bubble.
The average detached home in Vancouver is now selling for $2.4 million. That’s a record high. And it’s more than double what the average person living in Vancouver can afford.
And yet, housing prices are still rising month after month. It’s complete insanity.
• At this point, Vancouver’s housing market is a bubble in every sense of the word…
And that’s one of the reasons I’ve spent the past month here.
I wanted to hear what locals thought about the real estate market. But most people I spoke with weren’t worried in the least bit.
They kept telling me, “People have been talking about a crash since 1999…and nothing’s happened.”
One big-time local broker even said he expects “condo prices will double again.” Another agent told me “the market’s doing great. Just look at the numbers.”
• I couldn’t believe what I was hearing…
But I shouldn’t be surprised.
You see, this is what happens during bubbles. People lose touch with reality.
We saw the same thing happen during the last U.S. housing bubble. Americans thought housing prices would keep rising forever. This led people to borrow huge sums of money to buy homes they couldn’t afford.
Now the same thing is happening in Vancouver.
This is obviously a problem for local real estate investors. But it’s also a threat to people across Canada.
I’ll explain why in today’s essay. I’ll even show you what you should be doing today to protect yourself from this crisis.
But you should first understand something important.
• I’m not the only one sounding the alarm on Vancouver’s real estate market…
Barry thinks Vancouver’s housing bubble is about to burst, too.
He explained why in a recent article that ran in the The Globe and Mail. You can read the entire thing here. But the gist of his argument is this: Barry thinks housing prices in Vancouver have climbed too quickly.
And he makes a good point.
You see, Vancouver’s population grew just 5% between 2011 and 2016. Local real estate prices soared 75% over the same period.
According to Barry, this rate of price appreciation is “unnatural and unsustainable.” It’s only possible because foreigners are buying up property in the city left and right.
• To be fair, this has been true about Vancouver’s housing market for years…
But the situation is getting out of control.
In fact, Barry told me that many everyday people can no longer afford to live in the city.
Local government officials are now scrambling to make housing more affordable. One year ago, they rolled out a 15% tax on foreign buyers.
This slowed Vancouver’s housing market…but it didn’t fix the problem.
Barry thinks British Columbia’s new government, which takes office in September, will likely do far more to make housing affordable. He explained why in his recent article:
They will introduce a property levy on owners who don’t file an income tax return in British Columbia. The pre-sale foreign-buyer tax loophole will be closed. Using a bare trust to avoid property transfer tax will be closed. The sub-prime mortgage scheme will be halted. The foreign-buyer tax could be doubled to 30 per cent and implemented province-wide.
In other words, the incoming government will try to make housing more affordable by making it harder or more expensive for foreigners to buy property in Vancouver. According to Barry, these measures will be the needle that finally pops Vancouver’s massive housing bubble.
That’s why Barry urged local investors to “seek shelter now” in his article.
• As soon as I read this piece, I sent Barry an email…
I had to learn more about the Vancouver housing market from him.
A few days later, Barry and I met for coffee. We spoke about the market for nearly an hour.
He told me that any sensible regulations aimed at improving housing affordability won’t just cause housing prices to top out. They will cause prices to crash at least 20%.
That’s a bold prediction. After all, Vancouver hasn’t had a crash like that since 2008.
But Barry’s betting his career on this. He’s even turning down clients left and right. He’s leaving money on the table.
And it looks like he made the right call, too.
• June sales in Vancouver fell 4%…
Housing sales are now more than 30% below their February 2016 high.
Now, prices haven’t fallen yet. But it’s only a matter of time before that happens.
After all, the number of active listings in Vancouver jumped 8% between June and July. The amount of new supply is also up 10% from a year ago.
That tells us homeowners are running for the exits.
If this continues, supply will soon outstrip demand. That will cause local housing prices to plunge.
• Most people in Vancouver don’t realize this…
In their eyes, Vancouver’s housing market hasn’t crashed in decades. Therefore, it will never crash.
This isn’t just foolish. It’s reckless.
After all, Vancouver’s real estate market appears to be on the verge of collapse.
To protect yourself, I recommend getting out of Canadian housing stocks. You should also lighten up on Canadian banking stocks if you haven’t already. They could take a big hit when the Vancouver real estate bubble pops.
August 3, 2017
P.S. I also encourage you to keep an eye on the Dispatch this next week. As you’ll see, Vancouver isn’t the only real estate market in Canada that’s about to collapse…