Wednesday 6 February 2013

My 2013 Vancouver RE Prediction (in English)

Just did a big piece on 2013 RE predictions on a couple Chinese forums and for my RE column. Also submitted to local newspaper where printing date is being arranged. Below is the English translation:
Bullish Factors for Vancouver RE:
1. Chinese economy/stock market showing some sign of ‘recovery’ in early 2013. Some ‘HAM’ may end up in Vancouver RE.
2. HST expires in April, good for new home market.
3. Interest rates remain at historical lows. (But also means can’t drop like 2008-09 again)
4. QE4 and coordinated monetary easing may offer short-term boost to stocks/economy. But its sustainability and how much flows into Vancouver RE is questionable.
Bearish Factors for Vancouver RE:
1. BC population growth continues to slow, worst in 8 years. Inter-provincial outflow accelerates.

2. Immigration policy continues to tighten in 2012-13. Immigrant investors decline; language proficiency more strict; crack-downs on Quebec/Maritimes provincial-nominees who move to GTA/GVA against agreement.

3. Household debt making new highs exceeding US peak levels.

4. BC household income increase sluggish. Poor job market outlook. Poor RE sales will drive down income of related fields (RE agents/mortgage brokers/lawyers/builders/hardware stores/banking etc). Because Vancouver economy is heavy on RE-related fields, the impact will be worse.

5. Baby boomers(1946-1964) 1st wave already reaching 67, becoming net-sellers of RE.

6. Canada’s “Population dependency index” (>65+<15)/(15-65) will rise rapidly in 2013-2015 and continue to rise for 15 years until stable. Taxes will rise, demand for RE will fall.

7. CMHC rules tightened in Jul 2012, effect will continue to be felt.

8. OSFI rules tightened in Nov 2012, more effect will be seen in 2013.

9. OSFI rules for mortgage insurers to be released in early 2013, will negatively impact RE (according to OSFI execs).

10. MSMs already widely reporting RE bubble and risk, negatively influencing market psychology.

11. Worldwide economy yet to exit from crisis. Euro/China/Japan/US all potential risks.

12. BC condo's depreciation report due by end of 2013, maintenance fees set to rise (need more contingency fund), bearish for condo strata.

13. GVA condo starts/completions continue to rise in 2012-13, worsening supply/demand imbalance.

14. Finance Minister Flaherty publicly states "pleased to see RE declining" and sees household debts as "greatest internal threat to Canadian economy". However, newest report in Feb/13 still shows increasing consumer debt (+6% YoY). Putting more pressure on government to further tighten lending.

15. BC general elections occurs in May, with NDP currently leading in polls. A NDP government is often viewed as negative for RE.

2013 Greater Vancouver RE predictions:

1. MLS HPI Benchmark Price (vs Dec 2012)
- Composite: Jun-end: -3.4%, Year-end -8%
- SFH: Jun-end: -3.6%Year-end -8.5%
- Condo: Jun-end: -3.1%Year-end -7.5%

2. Grater Vancouver SFH Avg Price (vs Dec 2012)
Jun-end: -2%Year-end -10%

3. SFH by Region: MLS HPI Benchmark Price (vs Dec 2012)
- 温西 Vancouver W:Jun-end: -3.3%,Year-end -10%
- 列治文 Richmond:Jun-end: -3.5%,Year-end -9%
- 温东 Vancouver E:Jun-end: -3.3%,Year-end -8.0%
- 南本拿比 Burnaby:Jun-end: -3.5%,Year-end -8.5%
- 高贵林 Coquitlam:Jun-end: -3.3%,Year-end -8.0%

Last few paragraphs were about why 2013 Won't be a repeat of 2009.
Basically talking about interest rates can't get much lower. The situation in 2008-09 where prime rate saw a decrease of 2.5% in half a year will not be repeated.
Also, CMHC now reaching 600B cap.  Can't repeat 2008 'bail-out' unless cap lifted again.

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