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HAM vs BCM
03-27-2014, 11:20 AM, (This post was last modified: 03-28-2014, 02:04 PM by crabman.)
#1
Photo  HAM vs BCM
In the seemingly endless debate over whether Hot Asian Money (HAM) or Borrowed Canadian Money (BCM) is causing our high RE prices, most people agree that both are playing a role. In trying to quantify the effect of each, I decided to compare two similar cities - one with lots of HAM (Vancouver) and one with almost none (Victoria).

Any similarities in price movement between the two would indicate that BCM is the primary driving force. Any deviation in price movement is evidence of HAM.

After comparing the two, it appears that BCM was the primary driver of Vancouver price increases from ~2002 until mid-2009 -- since Vancouver and Victoria followed very similar price increases. However, since July 2009, the Teranet Index for Vancouver is up 31% while the Victoria index is unchanged. Thoughts?


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03-27-2014, 04:55 PM,
#2
RE: HAM vs BCM
Hey crabman,

Welcome to VanPeak. I have been following your posts and those of others in the great HAM debate over there at VCI. It will be interesting to see how the issue evolves here at VP should others care to jump in.

As for that linking issue, I went to postimage.org > about > Add image uploading to your forum and there it says:

Quote:The Simple Image Upload mod enables image uploading on your forum. All images are stored on our fast and secure network so it won't take up any of your bandwidth. Image uploading is very simple and your images will never be removed for inactivity. This mod is perfect solution for forums where visitors are not tech savvy and don't know how to upload image or don't know how to use [img] bbcode.

So, it would appear the VP forum would need to add this module for you to link to your images. This is something you will have to discuss with 'admin' if it is something you really need. You could send him a PM.

***************
Now, crabman, I am a little embarrassed to admit this but I am not very good a reading graphs especially when they’re not labelled. So, the numbers running up the left side of your graph - what do they represent? Are they related to the legend on the right?

I will assume that the columns are moving left to right and have a relationship to months and years. Is that a good guess? You say in your post:

Quote:...it appears that BCM was the primary driver of Vancouver price increases from ~2002 until mid-2009 -- since Vancouver and Victoria followed very similar price increases. However, since July 2009, the Teranet Index for Vancouver is up 31% while the Victoria index is unchanged.

Okay, but how can I verify this if the months and years or at least the years are not indicated along the bottom? Sorry, am I just being dense? This is so embarrassing. Wait a light bulb went off, the legend must be referring to the Teranet Index since you mention it in that quote. So, are those numbers going up the left the Teranet percentages? Is this a Teranet graph or is it yours? You don't indicate one way or the other.

It seems like you have a good argument here, but I really can’t be certain until you can fill in these blanks. Maybe I'm just tired, it's been a long day.
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03-27-2014, 05:39 PM,
#3
RE: HAM vs BCM
HAM vs BCM:

Any theory about the (still hypothetical) bubble must explain the rise in mortgage debt. Fact: Mortgage debt has risen hugely in Canada, more so in Vancouver. Someone is taking out those mortgages. It simply can't be HAM driving the market. It could easily be asian immigrants with huge mortgages, but it can't be cash buyers. The meme of HAM certainly, egged on eagerly by hungry realtors. Now mind you, greed to get in with the intention of eventually selling to HAM will drive a market.
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03-27-2014, 05:54 PM, (This post was last modified: 03-27-2014, 06:04 PM by Skook.)
#4
RE: HAM vs BCM
Say what Huh

Aw, Alexcanuck, all this talk of HAM and the great lengths individuals go to as a way to explain the Vancouver real estate market is too much for my little brain to comprehend and digest. I think I will sit back and watch the debate unfold.

That being said, I still would like to understand that graph. If it's here in the forum, I want to make sense of it.
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03-28-2014, 02:13 PM, (This post was last modified: 03-28-2014, 02:43 PM by crabman.)
#5
RE: HAM vs BCM
Hey Skook,

I finally noticed the "New Attachment" function at the bottom of the edit window...

If I wasn't so lazy, I would make a proper graph with labels! Wink But it's the combined Teranet Index for Vancouver and Victoria from Jan 1990 to Feb 2014. The left scale is the index value, all cities are set to 100 in June 2005.

If you want to see the individual graphs (with years included) go to:

http://housepriceindex.ca/

I agree, Alex. Mortgage debt has been rising dramatically all across Canada, and is now at record highs as a percent of income.

But check out the graph below, it shows a much steeper slope in the 2002-2009 time frame. Since then, mortgage debt has been growing much slower. This would seem to agree with my original theory.

It's also possible that rising prices themselves are leading to higher debt in some areas. The more a property costs, the more the typical person will have to borrow. No need to borrow a million in Omaha, you can buy a mansion there for $400k.


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02-06-2015, 08:18 AM,
#6
RE: HAM vs BCM
I've found some more pretty compelling evidence that the last 5 years have been driven by foreign money. I've recently noticed that high-end condos in my neighbourhood (Yaletown) have appreciated much more than low-end condos. This is not what usually happens in a debt-fueled bubble. Entry-level homes rely on debt much more than high-end homes do.

It's also true that the $1M+ SFH market has been much stronger than the sub-$1M condo market in recent years. However, CMHC hasn't insured mortgages on $1M+ properties since 2012. This strongly suggests foreign money is the primary driver of the market right now.

If you look at the long-term price graph for Vancouver detached versus apartment, you also see strong evidence of foreign money. Since 1977, detached and apartment prices have generally appreciated/depreciated at the same rate. However, there are two periods where this has not been the case.

The first period was the 1990s. In the first half of the decade, immigration from wealthy Hong Kong residents concerned about the Chinese handover was very strong. During that period, detached prices increased significantly more than apartment prices. In the second half of the decade, when immigration from Hong Kong slowed, detached prices actually fell, while apartment prices were flat.

The second period is late-2009 to present. (The same period I mentioned in my earlier post which compared Vancouver to Victoria). Over this period, apartment prices have been flat, while attached prices have increased about 50%!


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02-08-2015, 04:42 AM,
#7
RE: HAM vs BCM
Good post crabman. Whether foreign investment in and of itself constitutes a bubble - for instance, the Swiss property market is almost all foreign investment, but it's been just plain high for decades simply because of Swiss tax laws, privacy/secrecy, etc... - what you say is I'm sure correct. If we look at the UK, and specifically Edinburgh where my wife and I used to live, the same phenomenon is evident: my wife owns a small condo in a working -class area and values are actually down 10% since 2007 in non-adjusted terms; by contrast, my 3-bed attached in a quiet neighbourhood near the city centre has gone up in value by 50%. There's no doubt whatsoever in the UK that this is foreign investors. Two small follow-on points: 1 - in the UK, no-one tries to deny the role foreign investors play in the market. Instead, people look at the issue of access to affordable housing. 2. - I actually managed to get Garth Turner to agree with me on his blog that HAM has played a significant role in Vancouver, a topic he otherwise seems to consistently refer to as racist. I got him to agree by asking him to consider what happens when a rich Russian buys a top-end house in London... put simply, the previous owner takes their massive gains, buys a bigger place in a slightly less ritzy area and then buys a couple of investment properties. Two effects: 1. prices go up further down the chain but 2. and more dangerously in my view access to ownership becomes increasingly limited to a small cadre of those who can afford it. Effect 2. is definitely happening in Vancouver from my direct personal experience; I know of a number of people who have cashed out from North Van and bought in the gulfs/sunshine coast, though less so in the last few years as these areas are perceived to be "lacking in value growth potential" - something which recommends them in my book. And don't even get me started on the North Van Realtor™ who approached me in a Starbucks in Surrey two weeks ago and said, "Come to North Van and buy - lots of white people are moving there..." racist much? :-) Cheers, good post - Jimmy
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