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"SF on the other hand is just seeing their ceiling come into play. Only so many people can justify raising a family and purchasing a home in The Bay. Why not ch

"SF on the other hand is just seeing their ceiling come into play. Only so many people can justify raising a family and purchasing a home in The Bay. Why not change jobs to Seattle or Portland and make around the same money, but spend half on a house? I think that's what we're seeing." It's more than just tech workers. SF real estate prices have been influenced significantly by foreign speculation (especially from China). As the Chinese market slows down, so too does speculative offshore real estate investment. And these were buyers with virtually unlimited purses, ready to drop all-cash well north of asking prices. (Full disclosure: I own a modest condo in SF, and when Chinese speculation was at its frothiest, I would get hand-delivered letters from real estate agents on more or less a quarterly basis. They would state that XYZ buyer in China is willing to purchase my property, sight unseen, and they would ask me to get in touch if interested.)

soperj 11y ago
Why isn't this drying up in Canada then?
- jonnathanson 11y ago
  I know basically nothing about the Canadian market, or the various factors (regulatory, tax-related, currency-driven, or otherwise) that might make it more or less attractive to foreign investment than the market in SF. I also know very little about which types of foreign buyers consider Canadian real estate attractive. Since I'm admittedly pretty ignorant of that market, I honestly can't say. The best I can tell you is that, while foreign demand in the aggregate might be global, there are many local factors that determine whether a particular market is or is not the recipient of significant investment at any given time. We can't assume a global/universal phenomenon applies itself evenly across all localities. Indeed, many of these locales might be substitutes for one another at different points in time and under various macroeconomic circumstances.
  - turnip1979 11y ago
    My hypothesis is that the China/hk dollar peg is to blame. Edit: to clarify, the Chinese yuan and hkd are pegged to the USD. The recent strength of the USD has caused problems for China ...some people thing the peg will fail. If you are one of these people and you have lots of cash in China, you want to move the money out of the country and into a different asset class. The recent weakness of the Canadian dollar has made parking money in Canada very reasonable via buying of property. As a poor Canadian who owns no property, I'm pretty much outpriced of the real estate market in the city where I was raised .. with the exception of a condo ...those are being unconstru ted at an unbelievable pace. People I meet seem to own 2-3 condos a piece. Everyone thinks they'll just rent them out. I think we are almost guaranteed to have a condo collapse in the near future.
    - aianus 11y ago
      > People I meet seem to own 2-3 condos a piece. Everyone thinks they'll just rent them out. I think we are almost guaranteed to have a condo collapse in the near future. If you're not hung up on owning, this is a great spot to be in. I can already rent a luxury condo here in Toronto for less than (mortgage interest + property tax + maintenance) would cost me if I had purchased it. Rich landlords are effectively subsidizing our rents (which are very, very cheap compared to SF or NYC).
      - turnip1979 11y ago
        My worry is that a day will come when rents start to increase. My great fear is that this will happen precisely when interest rates are high. What will we renters do then? We will truly have no choice then. The housing market in the UK is going through something like this now.
        laurencerowe 11y ago
        Interest rates in the UK are 0.5% and have been for 7 years now. These low interest rates, while necessary for the real economy with inflation near zero, support extremely high house prices. Mortgage interest payments substitute for rent so low rates imply high prices. As a renter without much in the way of assets a high inflation high interest rate regime is really beneficial. Higher rates would mean lower prices (thus lower required deposits) and high inflation would mean quickly building equity.
- bodyfour 11y ago
  Some of the difference in nominal price appreciation is currency driven -- the US dollar has been strong and the loonie has been (relatively) weak.
  - soperj 11y ago
    Loonie has gone up over 10% in the last couple months, Vancouver has continued to go crazier.
- cbhl 11y ago
  It's easier to become a naturalized Canadian for Chinese nationals, isn't it? Maybe the Chinese buying homes in the Canadian market are actually planning to move there and raise kids (as opposed to pure speculation in the US market).
  - heynk 11y ago
    Interesting thought - this NYT article suggests that many wealthy Chinese children are moving to and living in Vancouver. http://www.nytimes.com/2016/04/13/world/americas/canada-vancouver-chinese-immigrant-wealth.html?_r=0 http://www.nytimes.com/2016/04/13/world/americas/canada-vanc...
    - Mikeb85 11y ago
      The University of BC has an alternate name: University of Beautiful Cars. http://universityofbeautifulcars.tumblr.com http://universityofbeautifulcars.tumblr.com You probably don't need me to tell you who owns them...
      - nibs 11y ago
        University of Toronto Mississauga is the same, with respect to overly nice student vehicles.
- Mikeb85 11y ago
  Because you can buy citizenship here (Canada).
- Apocryphon 11y ago
  Isn't Vancouver and Toronto also easing towards correction? http://www.bloomberg.com/news/articles/2016-04-15/canadian-march-existing-home-sales-rose-1-5-realtor-group-says http://www.bloomberg.com/news/articles/2016-04-15/canadian-m...

soperj 11y ago

Why isn't this drying up in Canada then?

jonnathanson 11y ago
I know basically nothing about the Canadian market, or the various factors (regulatory, tax-related, currency-driven, or otherwise) that might make it more or less attractive to foreign investment than the market in SF. I also know very little about which types of foreign buyers consider Canadian real estate attractive. Since I'm admittedly pretty ignorant of that market, I honestly can't say. The best I can tell you is that, while foreign demand in the aggregate might be global, there are many local factors that determine whether a particular market is or is not the recipient of significant investment at any given time. We can't assume a global/universal phenomenon applies itself evenly across all localities. Indeed, many of these locales might be substitutes for one another at different points in time and under various macroeconomic circumstances.
- turnip1979 11y ago
  My hypothesis is that the China/hk dollar peg is to blame. Edit: to clarify, the Chinese yuan and hkd are pegged to the USD. The recent strength of the USD has caused problems for China ...some people thing the peg will fail. If you are one of these people and you have lots of cash in China, you want to move the money out of the country and into a different asset class. The recent weakness of the Canadian dollar has made parking money in Canada very reasonable via buying of property. As a poor Canadian who owns no property, I'm pretty much outpriced of the real estate market in the city where I was raised .. with the exception of a condo ...those are being unconstru ted at an unbelievable pace. People I meet seem to own 2-3 condos a piece. Everyone thinks they'll just rent them out. I think we are almost guaranteed to have a condo collapse in the near future.
  - aianus 11y ago
    > People I meet seem to own 2-3 condos a piece. Everyone thinks they'll just rent them out. I think we are almost guaranteed to have a condo collapse in the near future. If you're not hung up on owning, this is a great spot to be in. I can already rent a luxury condo here in Toronto for less than (mortgage interest + property tax + maintenance) would cost me if I had purchased it. Rich landlords are effectively subsidizing our rents (which are very, very cheap compared to SF or NYC).
    - turnip1979 11y ago
      My worry is that a day will come when rents start to increase. My great fear is that this will happen precisely when interest rates are high. What will we renters do then? We will truly have no choice then. The housing market in the UK is going through something like this now.
      - laurencerowe 11y ago
        Interest rates in the UK are 0.5% and have been for 7 years now. These low interest rates, while necessary for the real economy with inflation near zero, support extremely high house prices. Mortgage interest payments substitute for rent so low rates imply high prices. As a renter without much in the way of assets a high inflation high interest rate regime is really beneficial. Higher rates would mean lower prices (thus lower required deposits) and high inflation would mean quickly building equity.
bodyfour 11y ago
Some of the difference in nominal price appreciation is currency driven -- the US dollar has been strong and the loonie has been (relatively) weak.
- soperj 11y ago
  Loonie has gone up over 10% in the last couple months, Vancouver has continued to go crazier.
cbhl 11y ago
It's easier to become a naturalized Canadian for Chinese nationals, isn't it? Maybe the Chinese buying homes in the Canadian market are actually planning to move there and raise kids (as opposed to pure speculation in the US market).
- heynk 11y ago
  Interesting thought - this NYT article suggests that many wealthy Chinese children are moving to and living in Vancouver. http://www.nytimes.com/2016/04/13/world/americas/canada-vancouver-chinese-immigrant-wealth.html?_r=0 http://www.nytimes.com/2016/04/13/world/americas/canada-vanc...
  - Mikeb85 11y ago
    The University of BC has an alternate name: University of Beautiful Cars. http://universityofbeautifulcars.tumblr.com http://universityofbeautifulcars.tumblr.com You probably don't need me to tell you who owns them...
    - nibs 11y ago
      University of Toronto Mississauga is the same, with respect to overly nice student vehicles.
Mikeb85 11y ago
Because you can buy citizenship here (Canada).
Apocryphon 11y ago
Isn't Vancouver and Toronto also easing towards correction? http://www.bloomberg.com/news/articles/2016-04-15/canadian-march-existing-home-sales-rose-1-5-realtor-group-says http://www.bloomberg.com/news/articles/2016-04-15/canadian-m...