Vancouver real estate and 2013: proceed with caution
Posted: Jan 19th, 2013
Recently @DouglasCoupland quipped on Twitter that 2013 was a very bad name for a year, so he was going to rename it Tammy. "Tammy" sounds like a hurricane name, if you ask me.
But then again, perhaps that's what we can expect. We have entered uncharted waters, and there are as many reasons why this state of things can go on much longer as why it can end tomorrow.
China has taken more people out of poverty in the last few years than anyone could ever fathom, and has produced a lot of millionaires lately. Much of this has been on the backs of some large corporate brands.
It is a vicious cycle. Our companies are tightening spending so people are working more and (maybe) getting paid less, so as a result, they have as a whole started buying cheaper stuff. That 'stuff' is now predominantly made in places like China. If we buy Chinese-made goods, we raise their wealth, which they in turn invest here, driving up our home prices and forcing us to buy more inexpensive goods: it's a circular wind, like a hurricane.
Here is an interesting graph showing the psychology of investing. This was done by Dr Rodrigues of Hofstra University.
Let me follow that with a graph of Real Estate trends since 1977.
If you scroll to the right, you see the similar double peaks. Scary, isn't it? Coincidence?
I don't predict the massive drop with rates still so low. If I can borrow at 3 per cent interest, eventually a significant drop in prices will mean I can rent cash positive, and I would do that over paper stocks any day. I prefer to be able to walk through and touch my investments, since I feel like I have more control -- naive as that might prove to be.
In some less desirable areas, yes, I think prices will go down.
But if we treat real estate investing as an emotional, confidence-based type of investing (and isn't all investing that way?), then I would proceed with caution in 2013. As always, get very good advice before any major purchase. Don't get involved in the hype, buy what you need and can afford.
After all, we are talking about buying 'shelter', right?