A weekend topic starting with Better Dwelling. "The Canadian property bubble was recognized by an unlikely entity — the Canadian government. MP Adam Vaughan dropped the b word this week. Vaughan isn’t just an elected official, but also the Secretary to the Minister in charge of most of the country’s housing policy. In an exchange, Vaughan said, 'Getting the air out of the bubble without an explosion has been tried several ways.. the stress test, increase supply, speculation tax, etc… each time the market only slows to take off again… and the other challenge is that a drop in market prices might also unleash pent up demand.'"

The Globe and Mail. "The Governor of the Bank of Canada says there are signs of speculative behaviour in the country’s booming housing market and voiced concern over the pace of mortgage borrowing among highly indebted households. 'While the resulting house-price increases are rooted in fundamentals, we are seeing some signs of extrapolative expectations and speculative behaviour,' Tiff Macklem said during a media conference call to discuss the central bank’s scheduled monetary policy announcement."

"'Our concern … is that against a background of rapid price increases, people will extrapolate. They will expect that those price increases will continue indefinitely and they will overstretch to buy houses. That would be a mistake,' he said."

"In its Wednesday announcement, the Bank of Canada kept the benchmark interest rate at 0.25 per cent but said a potential rate hike could occur in the latter half of 2022 instead of 2023. The idea that the key interest rate would remain near zero until 2023 has given home buyers more confidence to borrow."

"Mr. Macklem defended the bank’s decision to keep interest rates low, saying the bank needs to look at the whole economy, where employment is still well below prepandemic days. 'Right now, the economy needs our support,' he said."

From Stuff New Zealand. "New rules for the property market mean interest rate increases will now have more of an impact on house prices, ANZ economists say. At the end of March, the Government announced a range of changes including an extension to the bright-line test and the removal of investors' ability to offset their loan interest against rental income for tax purposes. They said the game had changed 'a lot in a short space of time' for property investors but the structural issues of a lack of housing supply remained."

"'All up, the Government is likely to be successful in taking the heat out of the market, but tilting the playing field from investors towards first-home buyers will never be enough to address New Zealand’s homelessness problem, overcrowding, and high cost of living for some of our most vulnerable. For that, the Government needs to continue to aggressively pursue positive supply side policies (such as freeing up land and cutting red tape) to such an extent that it will challenge the narrative that housing is scarce and always will be, and that house prices are one-way bet (not our view). But politically, that’s not easy to do when so many voters have already bet on housing for their retirement.'"

From Scoop. "Stories last week from Radio New Zealand: Expert analysis: low interest rates vs soaring house prices. interviews with two highly competent economists, University of Auckland property economist Michael Rehm, and former Reserve Bank monetary economist Michael Reddell. The hologram of another such economist, Arthur Grimes, was present also."

"Ryan goes on to ask a couple of long questions, which include an assumption about the role of immigration in the 2013-16 house price inflation, and a reference in Rehm's writing to a 'Ponzi scheme' analogy, though she may have been confusing a Ponzi scheme with a the manic behaviour that fuels a speculative 'mania' or 'bubble' (refer Kindleberger and Knoop)."

"Rehm's main response – his 'following the money' point – was a good one; the price inflation this century of 'land-house packages' – in the regions as well as in Auckland and Wellington – was most determined by the 'pumping of money' into the real estate sector. He blames commercial banks' competitive lending policies, rather than interest rates or immigration or financial greed, to explain why 'house prices are so disconnected from fundamentals.'"

"But he largely missed the international dimension of this money supply problem, which has included loans into New Zealand banks (eg ANZ Australia lending to ANZ New Zealand, and a high connectedness of many NZ residents to foreign sources of finance). Of particular importance is that Rehm has studied the pre-2008 real estate bubbles, and he therefore was aware of the need to downplay the role of very low interest rates in stimulating land-house bubbles."

"Ryan: 'How does this central bank and government – who are working parallel to each other – exit this huge period of quantitative easing that has inflated asset prices everywhere, it's the stock market as well. What is the endgame, the bond buying, the Reserve Bank prints money and buys government debt with that money through the secondary market; that keeps a lid on the cost of borrowing. Basically, that's the means by which the government can spend and borrow. That stimulus is massive. At what point does it begin to have negative consequences?'"

"The New Zealand government, indeed, is fiscally austere to its core. Even with the opportunity to address substantial social and economic problems last decade by borrowing at record-low interest rates (and using its balance sheet to facilitate local government borrowing), the government – irrationally – has refused to budge; it has neither invested in our people nor our capital. Rather our governments have left the masses of available money to the land speculators to do with it whatever they have wanted to do; to create illusory wealth, and to borrow against that wealth to create a society characterised by unsustainable middle class imported consumption."

Two reports from the Los Angeles Times. "Recent research by the Irvine consulting firm found low yields globally are driving investor interest and money is pouring into single-family housing nationwide from pension funds, private equity groups and other institutional investors. Tregg Rustad, a real estate agent focused on L.A.'s Westside neighborhoods, said some sellers start to panic when they don’t get an offer on their house within five days — a seeming eternity in today’s market."

"'They are like: ‘My cousin, my brother and my sister-in-law — they are all telling me we should have 10 offers by now. What’s going on?'"

"The price keeps dropping for Eli Broad’s architectural marvel overlooking the Pacific Ocean. The billionaire philanthropist just relisted his Malibu home for $58.5 million, down around 22% from his original ask of $75 million."

The New York Post. "What a steal! Developer Ara Hovnanian and his wife are in contract to buy a $10 million penthouse at 420 W. Broadway, otherwise known as the Soho Gallery Building. It was formerly owned by billionaire hedge funder Bill Ackman and his first wife, Karen — they had bought it for $17 million in May, 2015. (Bill then sold his half to Karen for $7 million in 2018; she then listed it for $15.5 million.)"

The Georgian Straight in Canada. "Not everyone gets to make money in the hot real-estate market of Vancouver. Some risk losing their shirt. Let’s look at 380 West 62nd Avenue, a Marpole area property listed this week. B.C. Assessment record shows that the single-family home on a 50-foot lot was purchased on February 11, 2018 for $4,280,000. On August 6, 2019, the same property came on the market, when RE/MAX Real Estate Services listed it for $4,380,000."

"No buyer came forward, and so the listing terminated on September 19 of the same year. Another listing agency, Sutton Group-West Coast Realty, tried to sell the four-bedroom, two-bath home less than a week later. On September 25, 2019, the Marpole home in front of Winona Park returned on the market with a price of $4,280,000."

"After more than a year, the listing expired on November 1, 2020. By that time, the price has been reduced to $3,980,000. Now it’s the turn of RE/MAX Real Estate Services again to try and sell the home. On April 21 this year, the property was listed for $2,990,000. Vancouver realtor David Hutchinson said this example speaks about the 'blessing and the curse of the Cambie Corridor.'"

"'A lot of people made money. There was a lot of investment and speculation. And, of course, some people lost money,' Hutchinson said. 'What the city got in return was a lot of overpriced housing,' Hutchinson added."