[Hehe]

Originally Posted by Nssan

Yes, but you are talking about value decreasing in relative to another currency. If inflation does not creep up sharply, then purchasing power still remain the same within Canada. I can see your argument to be valid for foreign investors whom are seeing their investment diminish relative to their home currency, but in a broad assumption that those investor would be cash positive enough to ride the waves or hedge against other investment vehicles.

The thing is inflation will go up because Canada does not produce nearly enough product to serve the domestic market. Next time when you are at your supermarket grabbing everything you need, check how many of them were actually made in Canada? I can assure you that there won't be many, not even produce.

Originally Posted by Special K

Hehe,

As much as I want the RE market to tank with foreign investors pulling out. I see the opposite.

People holding USD (or CNY or HKD) will find CAD RE now 20% cheaper.

What I'm trying to say is, there's always two sides to our weakening currency and lowered overnight rate.

If anything, if foreign investors pull out. Downtown 1 bedroom condos will take a huge hit.

Yes, CAD just became 20% cheaper, but the general opinion is that it would move even lower. If you were an investor, would you risk coming in right now or when the CAD finally stabilizes after 2016? By that time, if the housing market is dropping, the same investor would again wait until the housing market shows stability because no one wants to catch a falling knife.

Originally Posted by UFO

Is that really 'all' that it will take though? Foreign money may have sparked the market here, but the critical mass was achieved when long time local owners cashed in on their equity and/or combined with cheap credit then re-bought properties in different value areas and drove those respective prices up too, and so on and so forth.

So if the foreign money decides to pull out of their properties from an investment standpoint and cut their losses or not buy property here to begin with, I don't think it will make everybody else down the line do the same too--since these people need their homes to actually live in. Not saying it won't cool the market, it will, but it will take a lot more than 'a few' of these owners to mark the change you are proposing.

If the CAD continues to drop relative to whatever native currency the investor is using, you could argue that it may cause an increase in RE market activity, as that native dollar now buys more CAD than previous. Just my uneducated opinion.

The problem is again focusing on the general view of the market. When investors start to pull out of the market, what message will this send to the market? It will say Vancouver housing is no longer attractive, so we are leaving. Then the entire market cools to a point that the only way to sell is by giving massive discount.

The domestic market will be the one leaving to carry this mess, unfortunately. Nevertheless, a drop in valuation creates a lot of problems. Say one bought a house for 1M and put 200k as deposit and needs to renew his mortgage in 2016. Any valuation below the 1M market basically wiped the buyer's equity originally invested. In the absolute worst case scenario, which happened in the US, was that the property is under water; meaning it's actually worth less than the amount still owed on mortgage. This creates a massive psychological and financial stress because buyer would realize their 200k equity is gone and now they need to find another 20% DP in order to continue to qualify for the mortgage they were paying, however low rate they can get.

This whole thing would create a chain effect pressuring down the prices of RE further and further. And no investor will be wanting to invest into this market because they know their money is worth so much more 6 months from today; be it domestic or foreign. This was how Japan got itself into the lost decade; even though it makes no sense to keep money in bank, the value of money actually increases (in RE term) over time while price of everything else is soaring.

This is of course the worst scenario... but from the latest policy, I can imagine it being totally possible.

Originally Posted by iEatClams

I still see a lot of the foreign money still happening, hasnt slowed down yet, but we will see in the next few months.

Here's the other thing, a lot of the chinese money is just happy that its now out of china with all the corruption crackdown. Even if the market goes down 20%, they are happy to get 80% rather than nothing. With the chinese government increasing their crackdown, the money is just going exit china faster.

I think 2015 RE prices will be higher than 2014 prices. but time will tell, I really hope I'm wrong as I think high real estate prices are bad for our economy.

The buyers in vancouver for RE are not your average joe, we're talking about $1.5 million + for west side and east van averaging over $1 million. New spec homes in east van are going for $1.4 million +

Yes, but if the price increase can't keep up with currency fluctuation, no foreign money would want to come in. Let's say if CAD will drop another 10% in 2015 and house price increase another 5%. By buying today, a buyer will effectively be losing 5% in one year. Why not just wait until the end of the year and buy it at 5% discount?