There is no denying that the real estate market in Vancouver is red hot – prices have been rising with no end in sight. But one market analyst thinks we will see the bubble burst.
Marc Cohodes used to run one of the largest hedge funds on Wall Street. Now, he’s eyeing the Canadian housing market. Recent headlines of real estate deals in Vancouver include a 7,200-square-foot heritage mansion for sale in Vancouver’s Shaughnessy neighbourhood for $21 million and a a $2.398-million price tag for a ‘fixer-upper’ in the Point Grey neighbourhood.
The Greater Vancouver real estate board says the benchmark price of a detached home in Vancouver hit $1.56 million in June, which is up 38.7 per cent in one year. “I think it’s a money laundering-induced market,” said Cohodes. “Where the local politicians, or the BC Liberals, are kept or in cahoots with the real estate brokers, developers, lawyers, that angle. And they have sought Chinese money to keep the market propped up and it won’t last.”
“China has capital controls on and Vancouver has become the money laundering mecca of either the world or North America and something is going to change and change drastically.” Tom Davidoff, an economist at UBC’s Sauder School of Business, said while he agrees with Cohodes that overseas capitalism is an important driver of our market, “whether there is anything illegal going on, and whether we should think of that as a bubble or a trend, I think are more challenging questions to answer.”
Cohodes said if the provincial government doesn’t step in to change the market, they’re going to be voted out. “This is sheer insanity,” he said. “What’s going on is you’re pricing local, hardworking people out of the market and as I’ve said before, the housing market in Vancouver resembles the Vancouver stock exchange and penny stocks many years ago and that didn’t end well at all. Davidoff said if something isn’t done, “Vancouver is going to become a playground for the rich.”