June Numbers: The downward slope
Sales took a bit of a jump in the last week to finish the month stronger than expected. This seems to happen pretty regularly that the last week surprises to the upside.
The headliner is as always the relationship between the months of inventory and prices. New this month is the condo prices on this chart which are ticking upwards rather strongly.
Sales to list is still heading upward. We’ve never seen the market quite so tight in June. Sales to list ratio for single family houses is 91% while for condos it was 103% and townhouses are 110%!
Prices are up about 15% on the year.
Sale types are more or less in line with normal ratios. From here on expect sales and inventory to decrease for the rest of the year.
Looking at this June compared to our previous hot market, you can see we are still at another level for how low the residential inventory currently is. With conditions this tight, the price predictor (based on previous market history) says “If current market conditions prevail, you should expect the median single family home price to increase at a rate of about $121,000 (18%) annually.”
You may have also noticed a new banner on the side. While HHV has always mostly focused on the residential resale market, Citified is focused on providing information on new-build homes and commercial spaces. What I really like is the condo database that shows building details for every condo development planned, under construction, and newly completed in Victoria. There is also info on rental, townhome, subdivision, office, and commercial developments.
New post: The property ladder. Maybe it should be called the property fibonacci sequence. haha math joke: https://househuntvictoria.ca/2016/07/08/how-many-skyboxes-for-a-dirtbox/
Hawk, just to remind you, I agree with your predictions about a coming market correction, we just differ on the cause and the magnitude. I think a nice 3 bed 2 bath house in a good neighbourhood like Gordon Head, will decline to about $500k and I think nouveau investors who created the problem will be the prime losers when their hoarded houses take a bath as the ‘investors’ scramble to dump in a declining market. On the other hand, you think foreign investors will all jump ship simultaneously and cause a sudden massive crash.
LeoS, you might think it’s nonsensical now, but when I go to open houses over the past few months and listen to the other people talking about the house, it’s clear that the people are divided into two main groups: First time buyers and older folks who want another rental property. It’s a definite pattern in Victoria since last fall, so it got me wondering if it’s happening in other cities, so I called people I know in Seattle, Los Angeles, Shanghai, Shenzen, Zhengzhou, Vancouver, and a couple other places. It’s happening everywhere; first time buyers are competing with property investors. It seems very few existing home owners are moving up, down, or sideways; the market is dominated by first time buyers trying to get into the market and they are competing with ‘investors’ trying to grab another property; also a few downsizers. But don’t take my word for it; ask Marko what he is seeing. Ask NumbersHack, he seems to know what’s happening these days in China. Recall that China, in about January, put curbs on people buying multiple properties because it was causing rapid price increase that were preventing first time buyers from purchasing. That put a damper on real estate speculation, so the Chinese investors have been piling into commodity futures since about February, so if Hawk is partially right and I’m partially right, then the end of this mania is near.
“And their grandparents would have never smuggled any money in from Europe & US – give me a break, today is nothing compared to what your grandparents did.”
(note: The Independent article was from 2012 – before average home price was $2M, not $725k)
Interesting fantasy about my grandparents, Michael. Sure, an attempt at humour, but …
In fact, they all dodged bullets during WWII and fought for truth & freedom so that you could sit at a desk typing whatever you want anonymously.
My parents came here with $35. They did extremely well – worked extremely hard and made money from their business & real estate, but with a huge compassion for their community, and very strict adherence to the law. They fought prejudice directed towards them in the 60s because of their ESL.
So I know exactly what the difference is between racism & telling the truth about illegitimate activity – no matter who’s involved. My relatives fought for that ability to tell the truth.
Too bad lessons learned from our grandparents aren’t being applied better today – compassion for your neighbours, and an understanding that a healthy community is what is most important.
If they saw people cheering at how Metro Van real estate has reached the point where families can’t afford to live near where they work, they would be shocked that a community has reached such a crass level.
That’s why it’s important to hear what people like Ian Young have to say. “End the Quebec Immigrant Investor Program (QIIP), the fraud-drenched immigration scheme that still pumps thousands of foreign-funded millionaire homebuyers into Vancouver’s market. It is a betrayal of Canadian ideals that diminishes residency and citizenship to the status of mere commodities. It makes a mockery of the true worth of immigration as a whole. It is a scam, and it needs to stop.”
Uh oh…..look out below Mike, reality’s coming.
Vancouver Real Estate May Already Be Crashing: Stats
“He sees the potential for a price decline of about 50 per cent.
Such a correction would take Greater Vancouver’s benchmark price from $917,800 down to $458,900 — a dramatic drop, and beyond previous worst-case-scenario predictions of 30 per cent.
“The last move in any bubble is the biggest,” he said, noting a 32.1 per cent increase in housing prices on Vancouver’s west side in just one year.
“The NASDAQ went up 25 per cent in four months, and Vancouver real estate, with incomes growing at about two per cent, went up 30.”
http://www.huffingtonpost.ca/2016/07/08/vancouver-real-estate-crash_n_10869538.html
Can anyone with credentials actually provide an insight into exactly how many deals close on the final day of each month?
The Liberal press releases are insulting.
Christy Clark. Mike de Jong. Rich Coleman:
You’re lucky. Very lucky to be in a privileged position, and you’ve completely squandered public trust. I wouldn’t hire any of you to clean up after the Tally Ho but it’s about as qualified as you are in the Private sector.
Dirt cheap ? LOL Did you try out a new dispensary today Mike ?
https://www.youtube.com/watch?v=j4XhDpSgHrs
http://2.bp.blogspot.com/-ZWsQNhB12M4/Tf161ZP8iFI/AAAAAAAAAu4/iEFXxNao1KU/s1600/800px-Stages_of_a_bubble.png
One way to help the situation in Vancouver is to close the back door. I wonder if Mr. Sunshine will have the balls to do it…I doubt it
https://www.biv.com/must-read/#one-point-plan-tackle-vancouvers-chronic-housing-a
I bet it was Vicbot’s, Hawk’s & JJ’s grandparents 100yrs ago that hoarded and bid up land values to more than 10-fold what they are today, and now they have the nerve to complain about a few foreigners… sheesh! And their grandparents would have never smuggled any money in from Europe & US – give me a break, today is nothing compared to what your grandparents did.
Vancouver is still dirt cheap compared to 100 years ago.
http://thedependent.ca/featured/land-destiny-history-vancouver/
Vicbot,
A few of us know that feeling of banging your head against a brick wall trying to communicate with some on here who don’t want to admit to the obvious evidence stacking up on a daily basis and label it as ranting.
They would rather paint purple boxes, green arrows, scream racism, and quote Stats Can as gospel than admit the train barreling down the tracks without any brakes. It’s never different this time as they say.
Can you imagine how many places are bought via proxies in Victoria and and ticked the box as being from Victoria or Vancouver?
That is nonsensical. If everyone had a rental house then house prices might be high, but rental vacancy rate would be massive. “Hoarding” houses just means moving houses from the buyer pool to the rental pool. Our markets are both tight, so clearly this isn’t the case to a large extent. Hoarding is only a problem when the houses are left vacant.
Also interesting from Hawk’s BIV article:
“Chuang and other agents at the AREAA conference said it is not the nationality of the buyer but the source of the capital that is important. Money from China, the real estate agents said, can be transferred to a relative with an address in Vancouver, who then acts as the buyer.
“North added that, on larger transactions such as multi-family buildings, a Chinese national can open a Vancouver office. “Name the company Maple Leaf Enterprise and hire Joan Smith to head it. Suddenly you’re a Canadian investor. Actually, that would be a good way to go if you’re a long-term investor.”
“Burley agreed that is common for Chinese nationals to use local residents or companies as proxies when purchasing foreign real estate. “
“You may have a great hypothesis about why the market is the way it is but you’d better be able to have a supportable base for it and present it as opinion or it is not very credible … It is easy to get carried away with a theory but it has to stand up to questioning. Maybe you are on to something, maybe not”
Totoro, this is not MY “hypothesis”. I am quoting lawyers, researchers, the Canadian gov’t, BC gov’t, Globe & Mail, South China Morning Post, realtors, etc.
If you have some other quotes to dispute it – fine, post them – but don’t blame me if you haven’t read or understood these experts and articles. You think that I’ve come up with this out of my own head?? No, I didn’t. So it’s not appropriate to say that “you better be able to have a supportable base for it” or “it better stand up to questioning” – I’m not a witness in a criminal court case.
You are taking quotes out of context and twisting words by claiming I said there was a direct correlation between 10,000 vacant houses & money laundering – in fact, I said the opposite – that you have to take a variety of data from a variety of sources and, using deductive reasoning, connect the dots.
As Kenneth Pazder stated, “Stemming the flow of dirty money into Canadian real estate would terminate a number of high end purchases, which may push down some of the prices at the $10M – $15M range which would in turn push down the medium high end prices and so on.”
What he means is that when there is money laundering at the upper end, it affects EVERY real estate transaction in Metro Vancouver, from the top down. It makes all real estate less affordable for all. That’s why I said tens of thousands.
Otherwise, why on earth would the gov’t have ended self-regulation – if the illegal activities weren’t having an effect on affordability for all.
All aboard!
http://i.imgur.com/PSK5lAm.png
Meanwhile, back in the real world, Asian conference laughs at the fools believing DeJong and his phony numbers.
Asian real estate conference ridicules government foreign home buyers estimate
“A provincial government statement that only 3% of B.C. residential sales are made to foreign buyers and that Chinese nationals represent just 2.5% of Metro Vancouver home buyers drew rolling eyeballs and laughter at the packed July 7 Asia Real Estate Association of America (AREAA) conference in downtown Vancouver.
“No. Absolutely not,” said an incredulous Byron Burley, Shanghai-based vice-president of Chinese-language juwaii.com, China’s largest foreign residential real estate search engine. “It is way, way higher than that.” Burley noted that millions of Chinese nationals use his site, which has from 3,000 to 5,000 residential listings from B.C. at any time.
“My intuition says it has to be much higher [than 3%]” said Michael North of the Asia Pacific Network Foundation, “just based on the number of people and the number of deals being done at this conference.”
https://www.biv.com/article/2016/7/asian-real-estate-conference-ridicules-government-/?utm_source=BIV
Agreed. It probably varies seasonally and we need information from a longer time period.
An incomplete study of 19 days is not fact. Stats Canada would reject that farce.
See: http://www.theglobeandmail.com/news/bc-government-releases-preliminary-data-on-foreign-home-purchases/article30790277/
% does change a lot – highest in Richmond at just over 14%. 3% is BC overall but Vancouver overall is 5% and Victoria just over 2%.
“Overall the rate of foreign purchasers appears to be around 3% (not to say that 3% is not concentrated in certain areas).”
Another sheep believing an incomplete study of 19 days excluding the last (and most important) day of the month. I’ll believe the Asian real estate agent who says 50 to 60% foreigners on the west side.
That’s the usefulness of debat Michael, it helps clarify thought.
It is not about false accusations, it is about distinguishing when you are stating an opinion and not presenting it as fact, because it is not unless you have facts. You may have a great hypothesis about why the market is the way it is but you’d better be able to have a supportable base for it and present it as opinion or it is not very credible.
The specific statement I had asked about was:
You instead provide a link to stats on homes in Vancouver that has nothing to do with vacancy rates, except rental vacancy rates, or shadow flipping, or fraud.
If what you are trying to say is that that is a high rate of shadow flipping and fraud because there are 10,000 vacant condos in Vancouver I’d say those things are not rationally connected enough to be strongly correlated.
It is not about only having stats, it is about logical inferences from the information you do have. It is easy to get carried away with a theory but it has to stand up to questioning. Maybe you are on to something, maybe not, but the shadow flipping and fraud being so frequent as to impact tens of thousands of Vancouverites seems like a hypothesis rather than a fact to me.
To put it in perspective, there are about 40,000 residential sales/year in Vancouver. Overall the rate of foreign purchasers appears to be around 3% (not to say that 3% is not concentrated in certain areas).
Maybe the source of funds for purchases by permanent residents is from overseas much more frequently, seems likely,, but your number would mean at least 50% of real estate deals were impacted by flipping and fraud. Unlikely imo.
“So basically you are presenting your opinion as a fact and making up the numbers you are stating?”
Now that’s going too far – gimme a break – falsely accusing me of making up numbers is not going to make your opinion stronger. That “stat” argument has just become a crutch to try to prove some kind of superior reasoning, and it’s backfiring, because it’s not valid.
It’s like refusing to see the forest for the trees. At some point in the real world, you have to use deductive reasoning, based on a collection of data, not a single data point, like all the researchers, lawyers, and realtors themselves have done.
There are 10,000 empty homes in City of Van – yes. As of 2011 there were 14,000 people in need of owner-held housing in City of Van. New Coast Realty has over 400 agents, one of which, Morning Yu, had 57 deals going. Even if you conservatively estimate, they are handling thousands of deals.
The real estate lawyer said the problems start at the top with money laundering and filter into the lower-cost ($1M) range, and so has a ripple effect on where people can afford to buy houses throughout Metro Van.
The Premier herself ended self-regulation for these reasons:
“B.C. Premier Christy Clark has put the province’s real-estate industry under government oversight, declaring the industry’s self-regulating body has failed to protect the public from cut-throat and illegal practices and has lost the public’s confidence in its ability to police itself”
“The panel’s report, and the Premier’s announcement, followed stories in The Globe that some realtors and brokerage firms were profiting from shadow flipping and other questionable practices.”
Be careful about using stats as a crutch to try to “win” an argument, because people catch onto the game. Things are not black and white, and complex issues cannot be represented by a single stat.
Investors actually ease market imbalances and provide more supply of living quarters.
Just a thought for all the blame-everyone-elsers on here, why not use that wasted energy to just figure out where things are headed thereby providing a service and prospering from your time.
dasmo, realtors say 50 to 60%. Some people want to believe the BC liberal 5% BS, maybe they’re card carrying members.
“Vancouver real estate agents were less cautious in their response to the government data.
“I would say 50% of house buyers, maybe 60% [are foreigners],” said Eve Chuang of Macdonald Realty.”
Totoro biggest problem isn’t hoarding…..
…it’s karma
Wasn’t that number for all of BC? What if it’s 30% in certain Vancouver neighbourhoods? Would that change the picture? Plus if it has such little impact then simply tax it an move on….
I comprehend just fine thanks LeoM, that’s how you started your last rant at me about being racist when the facts rolled out on China money laundering that you are in denial of. You believe 5 % is for real is even more telling.
How about going after all the other posters before me ? Easier to attack the renter, typical coward behavior.
Hawk, I thought the correlation of my two posts might be a bit too complex for you to comprehend. Let me put it into one simple sentence for you.
The 5% corrupt foreign investment is not the root cause of our high house prices; the root cause is Canadian ‘investors’ who are buying and hoarding several houses each, which prices-out first-time buyers and market-timers like you Hawk.
One more for your education LeoM, its happening everywhere on a major scale. BTW where did I say your friends were money launderers ?
From cyber scammers to drug lords, why China has become a global money-laundering hub
“SHANGHAI — China is emerging as a global hub for money laundering, not just for Chinese but for criminals around the world, The Associated Press has found. There are a number of options in China for cleaning dirty money, including through major state-run banks, import-export schemes, and informal money transfer systems that date back a millennium, according to recent police investigations and lawsuits in Europe and the United States.”
http://news.nationalpost.com/news/world/from-cyber-scammers-to-drug-lords-why-china-has-become-a-global-money-laundering-hub
Um, if this was the case would there not be a glut of rentals on the market? My rate of rental property ownership has not suddenly increased with prices. It becomes less attractive to invest in Victoria for rental income imo.
The stats show that about one in 20 Canadian households own some type of rental property – about five percent and there is no support for the conclusion that there has been a sudden surge in this rate – and this includes basement apartments which are pretty darn common.
Where this is a strong part of the market is with condos in TO and Vancouver – about 17% of condominium owners were investors.
Rental property ownership tends to be higher for households with residents under age 50, which the study’s authors think may be driven by basement apartments and flats that homeowners are using to pay down their mortgages. Households with over $100,000 incomes have a rental property ownership rate of 10%.
None of this points to being a trigger for house prices rising now – although the long flat period before the rise does as does the spillover effect from Vancouver. And buying a rental property is not really that easy to do imo – or even attractive for the majority of Canadians with the funds to do so.
There is a fine line between intervention in market forces and permitting the cycle to run its course. Given the 70% rate of home ownership and the impact of intervention I don’t know what the right balance is. Rental properties have much higher tax rates than primary residences. I suppose this rate could be raised further if government wanted to discourage this – but vacancy rates are really low and this would likely have further adverse impacts without any good evidence it will create the intended effect.
http://www.altusgroup.com/newsroom/research/?tag=Housing%20Report
So basically you are presenting your opinion as a fact and making up the numbers you are stating?
“So Hawk, if you want to rant about the root cause of the current global real estate phenomenon, then point your finger at Totoro and all the other real estate hoarders who are causing rapid house price increases that are forcing our entire younger generations to be life-long renters, with high rents that prevent renters from saving a downpayment.”
Are you off your meds today LeoM ? One minute your blabbing racist implying statements now you are saying I should be going after Totoro for owning a few rentals ? Sounds extremely unstable flip flop thoughts there bud.
LeoM,
Did you miss the one where the real estate agent threatened the client to make the deal because you were dealing with Chinese gangs buying houses in Vancouver ? Sounds like you don’t want to believe the facts in front of you.
Vancouver realtor accused of making threats
“In the recording, a woman he said had identified herself as Ms. Yang warns him in Mandarin: “I’m telling you – people above me are from Harbin [China] gangs. Gangsters, right? You don’t fucking want to be alive.” That call was followed immediately by another, also in Mandarin, from an unidentified man, also recorded. That caller repeatedly demanded to know the businessman’s address and told him, “You have lived for too long.” The Globe had the recordings translated.”
http://www.theglobeandmail.com/news/british-columbia/bc-realtor-accused-of-making-threats/article30024457/
Hawk, one more point for you to ponder. Don’t blame just the 5% of foreign investor, blame our fellow Canadians who hoard houses and have turned family homes into an investment commodity.
If you’re looking for a scapegoat, then I suggest you look at the real reason prices have skyrocketted; It’s due to the people who are hoarding multiple houses to become “investor landlords”.
People like Totoro who own multiple rental properties want us to believe that they are providing a valuable service by providing rental accommodation. The truth is that people like Totoro are the root cause why real estate prices have suddenly exploded into the stratosphere and rents have become too high for many families. Just imagine if every person in Victoria over the age of 45 could buy a second house as a rental property investment and if every person over 55 could afford to buy a third house as a rental investment property. In this scenario, the older generation would hoard more and more houses and the prices would quickly escalate and cause a buying frenzy. Young people would be trying to compete with older folks for houses in bidding wars. Young people want a home and Totoro wants another house as an investment property. Totoro wins the bidding war and the young people are forced to continue renting a suite in Totoro’s fifth house.
As the older generation buys more and more houses for rental investments, then fewer and fewer listing will be available, prices will escalate rapidly, young families are priced-out, and ‘investors’ hoard more and more houses.
The scenario is simple to understand; When everyone tries to buy three or four houses to become rental landlords, it causes rapid price increases, locks-out the younger generation, and gives a huge advantage to us older folks who can afford to buy two, three, or four rental houses.
So Hawk, if you want to rant about the root cause of the current global real estate phenomenon, then point your finger at Totoro and all the other real estate hoarders who are causing rapid house price increases that are forcing our entire younger generations to be life-long renters, with high rents that prevent renters from saving a downpayment.
LeoM, are you on another one of your witch hunts in order to falsely accuse me as a racist again ? I see many people talking money laundering before I brought it up but you didn’t go after them ? What’s your deal ?
The facts are all out in the open on Asian/Chinese money laundering on every level of the media and is making you look like some old fool with issues.
Chinese cops are in Canada, how about that ? Would they be here if it was a few bad apples as you always say ? Why is the HSCBC nabbed for billions in drug money laundering ? How about your friends bank you said was so clean and it isn’t ?
Blow your personal vendetta where the sun don’t shine.
Michael,
you lost me at “unlimited”
Also, as the Vancouver real estate lawyer, Kenneth Pazder, said,
“Stemming the flow of dirty money into Canadian real estate would terminate a number of high end purchases, which may push down some of the prices at the $10M – $15M range which would in turn push down the medium high end prices and so on.”
https://www.linkedin.com/pulse/cooling-off-bc-real-estate-market-from-top-down-kenneth-pazder?trk=mp-reader-card
If there were official gov’t stats on this, then the gov’t would be too embarrassed not to put a stop to it.
So you have to understand the motivation of the BC gov’t not really wanting to cool down the market for various reasons (people’s equity, election, economic malaise) – unfortunately, that means ignoring some of the issues with money laundering that cause the ridiculous prices in the first place.
That, in turn, has a negative effect on the economy as people are displaced. There are a lot of smart researchers, lawyers, and, yes, realtors, looking into these issues and lodging complaints and don’t stand back and say “show me gov’t stats” because they know they’ve had to investigate it themselves.
“I think BC could do more to help FinTrac do their job more efficiently. But there isn’t an economic incentive for BC to cooperate.”
BC’s incentive is to keep China investors, dirty or otherwise, propping up this bloated pig. It’s political for the next election, nothing more.
From what I understand, FinTrac’s job is to just collect info but has no mandate to do anything with it. It’s some other department wether the cops or tax people to go seek that info. It’s a dysfunctional system that needs a serious overhaul ASAP.
If Justin’s plan is the same as BC’s to just keep doing studies and do nothing of substance then the criminals will keep running the show.
As Ian Young said on CKNW this morning, it’s not where the foreign buyers are from, it’s where the foreign money is coming from.
BC could easily check their taxes like they do for MSP and other simple checks but they don’t. As Jack said, total transparency is what is needed, no more hiding behind numbered and shell companies.
“The Canadian government makes no assessment of the frequency of occurrence. It assesses the risk and degree of vulnerability of the system.”
Frequency doesn’t indicate size of impact. A magnitude 9 earthquake happens every 300 years here and has more impact to millions of people than the magnitude 2-4 which are more common.
“Where are you getting this stat from?”
There are many stats that indicate the issues, eg., 10,000 empty homes in City of Van, according to Mayor. Then there’s City of Van pop 600k, 48k SFH, 50k duplexes, 9k rowhouses. 14k owner households “in need” of housing. http://vancouver.ca/files/cov/housing-characteristics-fact-sheet.pdf
Just re-read the articles on New Coast Realty to get a sense of the size of the problem in Richmond alone.
It’s well known that average income family cannot afford the prices. (Not even high income earners can afford, eg., anecdotes: friends who started successful tech companies and sold them for millions couldn’t afford to stay on the west side when their family grew – due to not enough beds for $3M. Other friends say there’s nobody parking on their street anymore – have seen it myself.)
High prices are also happening on a friend’s street in Burnaby ($1.6M for a small 50s house) & Maple Ridge – and the pop of Metro Van is 2.5M. It’s hard to pick which stat to draw from – there’s a ton to demonstrate than tens of thousands are being displaced by high prices. And if you have an excess of cash, that drives up prices everywhere.
There’s no one single, simple transaction that causes it – a flipper doesn’t sell, then causes a family to move – it’s a sequence of events that grow in scale with time.
Hawk, what is your definition of “money laundering”?
You use that term almost daily, usually in reference to Chinese people, but I don’t know what you mean.
I’ve mentioned before that I know many Chinese immigrants, they are all here legally, they are all highly educated professionals or students, most are engineers or doctors, and some are retired from high paid professions in China. They all have money Hawk, all earned legally by years of hard work and saving and investing. The culture in China is save, save, save, then pay cash for your house or car. Recently, the new generation in China is starting to embrace debt, so mortgages are quite common now, but many of the older folks in China are emigrating to the west and bringing their legally earned money.
When you say ‘money laundering’ what exactly do you mean? Money from crime and corruption or legally earned money that might have been moved from a Chinese bank to a Canadian bank contrary to China’s capital movement rules?
If these people are taking out mortgages and not disclosing the source of the funds then this could result in a case of mortgage fraud. Most launderers will stay away from breaking the laws in the country and will pay cash. No mortgage – no mortgage fraud.
I have known some people that were suspected of criminal activity and the police have gone to their bank to convince the bank not to renew their mortgage and thus brought forward a foreclosure. If you’re a criminal you may not want to have a mortgage. I think one of the big concerns from the banks are money launderers who finance the property to buy more property in another country and then stop making payments to the original bank. Hopefully the original bank will insure those loans through CMHC. No sense in the bank taking a loss when the taxpayer can pay the bill.
Read the report. The Canadian government makes no assessment of the frequency of occurrence. It assesses the risk and degree of vulnerability of the system.
http://www.fin.gc.ca/pub/mltf-rpcfat/index-eng.asp#_Toc424288854
Where are you getting this stat from?
I’d tend to agree that further regulation of mortgage loans to foreign borrowers is appropriate as a curb on foreign investment and house appreciation rates.
It is going to be interesting to see how the seizure of assets in Canada plays out as China brings forth more charges of money laundering and corruption going back as far as 2012. There wasn’t any incentive for Canada to cooperate but now the government will get 20% of billions.
You just might get all the evidence you need then Totoro with the Chinese courts convicting the accused in absentia because I doubt that the money launderers will return to China for the court case.
“A lot of focus on rare but extreme behaviour does not, imo, result in a reasonable assessment of what is going on.”
The Canadian gov’t doesn’t think this behavior is rare. The Dept of Finance says, ” the Department of Finance has identified the real estate industry as highly vulnerable to money laundering and terrorist financing given its “very significant” size and the fact that it often involves large sums of money changing hands … Those looking to hide their identities and the source of their funds can do so by conducting transactions through third parties and using complex corporate structures.”
http://www.cbc.ca/news/business/fintrac-real-estate-1.3533312
That’s exactly why FinTrac came out with a workbook for realtors, and found, just in their small data set, that 85 real estate companies don’t track money laundering properly.
Shadow flipping and fraud is also not rare if it has affected tens of thousands of people in Vancouver, caused US & Chinese gov’ts to lay criminal charges, & caused Canada’s OSFI to issue a warning to banks “verify borrowers’ income levels, especially when foreign money is involved”.
More importantly, the BC gov’t data of 3% doesn’t match any other researchers’ data, or even their own Bob Rennie, the BC gov’t Liberals’ chief fundraiser, who says, ““For single-family homes over C$4 million (about US$3.2 million), are we breaking 50% (foreign investment)? Probably.”
http://www.mansionglobal.com/articles/2498-vancouver-s-international-appeal
For any data set to be reliable, you need to define the entire problem first, and also compare the data set against similar data sets from other sources.
For example, if we wanted to count how many people were entering Pacific Centre Mall at Granville, we could stand on the street & count. But we’d miss all the people entering via Skytrain below. (which is what happens when you don’t track increases in assignment clauses or verify purchases by corporations)
Other reasons why the BC gov’ts data collecting is flawed: (a) Australian & NZ banks have stopped loans to foreign buyers because the risk was getting too high (Westpac said 15% of its loans), (b) National Bank said 1/3 of Vancouver homes were being purchased by foreign buyers, (c) Scotiabank revised lending in Vancouver due to higher risks, (d) SFU’s Andy Yan has estimated much higher numbers, (e) BC Hydro study showed higher % of homes sitting empty
In any case, let’s not forget the hundreds or thousands of homeowners duped by New Coast Realty, all the Chinese investors who over-paid for that $16M Vancouver building, and all the homes in Vancouver that have been flipped multiple times and sit empty, while thousands of families are priced out of the market.
Honestly, if the courts can find “proof” that this is happening, and our federal government is assigning resources to track it with every single real estate company in Canada, then why would anyone say the problem isn’t widespread. Just because the problem is complex or plays out in the shadows doesn’t mean it doesn’t exist.
I think BC could do more to help FinTrac do their job more efficiently. But there isn’t an economic incentive for BC to cooperate.
Maybe if BC got a piece of the 20%. It would be ironic that the BC government implemented many of the changes that allowed money laundering to flourish in the province and then in the end gets a cut by snitching on its “friends”.
Who is claiming prices are not stratospheric or unsustainable in Vancouver? They sure seem unsustainable.
As for money laundering, there is no credible data I can find to show a widespread pattern of behaviour.
This could be impacting high-end luxury properties in Vancouver disproportionately, and it has occurred, but the incentive for Chinese nationals to buy houses in BC applies to law-abiding individuals looking for a safe place to invest their money and this appears a more widespread source for the majority of foreign purchases.
Should Canada permit this? Imo not to the degree that it does.
I’d agree Canada should enforce money-laundering laws and how much this is contributing to the prices in Vancouver I don’t know. No-one seems to.
Money laundering:
Canada has some of the most relaxed laws in the world around money laundering
Cross the boarder with cash, have it seized and then pay a small fine ($2500) to get it back
Lawyers do not have to report any large cash transactions if they have reason to believe the cash was from legitimate sources.
Large scale renovations can be paid in cash
etc.
If there isn’t large scale money laundering going on the criminals are idiots not to take advantage of this easy way to wash money. Also it’s not only the Chinese doing this – think about all the money generated from the distribution of pounds upon pounds of weed being sold via all of the dispensaries! Those growers also need to launder their money.
Interesting UK propery funds problem. Just a sign of what will happen here when the bubble pops.
Over $20 billion trapped as London’s red-hot property market goes cold
“Commercial real estate has hit the headlines this week, a victim of the recent Brexit vote which has left over US$20 billion trapped in funds that not long ago promised investors a slice of London’s red-hot property market.
Money placed in real estate vehicles managed by big asset management firms such as Standard Life and Henderson may have yielded strong returns during the boom years, but with the pound in freefall and Britain headed towards economic recession, the flip side of such investments is fast becoming evident.”
http://business.financialpost.com/personal-finance/mortgages-real-estate/over-20-billion-trapped-as-londons-red-hot-property-market-goes-cold
Vicbot,
Great links. To think money laundering is not a major player in Vancouver is one being extremely naive. They don’t show up in Stats Can reports or BC Liberal farce studies over 19 days taken as fact. Vancouver is known for being the money laundering capital of North America for decades, not just the last 10 years.
It’s all nice to think the authorities will take care of them but criminals are extremely smart and have paid off lawyers working for them, it’s nothing new but now on a scale where our economy is now a false economy.
Lets see how long they stay if or when new tax laws and major amount of tax auditors are hired to dig deep into the land registry titles and shell companies running rampant.
You’re attempting to polarize the discussion. As it has been pointed out to you repetitively no one has suggested that all immigrants are money laundering or are criminals.
But vast amounts of money has been flowing out of China illegally and real estate has been one of the most favored conduits. As no crime has been committed in Canada this is considered legal. However, the long arm of China can now reach out and have property seized in Canada so that the money may be returned to China. And Canada gets its 20 percent cut. We just didn’t have an agreement between the two countries of how to divvy up the loot before. We have Chinese police in Vancouver that are running secret operations like fox hunt. Imagine that a foreign nation has a police force in Canada.
In the end you have to look at the reality on the ground. Reality is Vancouver prices are stratospheric. If you are trying to make the argument that it is not due to foreign investment, then it must be driven by local buying, which means it is a massive bubble. There isn’t a third option. You cannot both claim that there is no bubble and there is no massive foreign investment effect.
We don’t have stats on the number of residential real estate transactions bought through corporations. Lenders will tell you it is a very very small percentage of transactions.
An even smaller percentage will be sales to foreign buyers through corporations.
I do agree we should make sure we are taxing income derived from these sales appropriately, which appears to be the case, and that BC companies should be required to have at least 25% Canadian directors
As far as money laundering goes, the laws should be encforced but I disagree that this is driving the Vancouver market. I also disagree that the market is driven by “speculators looking to drive up prices”. Imo the market is rising and this creates incentive to buy. For those who fear being priced out, for those who have cashed out high value properties in Vancouver and want to move to Victoria or are priced out of Vancouver already, by foreign investors from China looking for a safe place to put their gains (less than 3% of sales in Victoria).
A rising market and low interest rates simply create its own momentum. It won’t last forever.
And imo Victoria is a terrible place to buy a rental property unless you are banking in long term appreciation. Ludicrous that mysterious speculators are driving up prices intentionally. No-one has a crystal ball or control of market behaviours to that degree.
My view is that if you are going to cite articles you’d better make sure they are based on sound research. A lot of focus on rare but extreme behaviour does not, imo, result in a reasonable assessment of what is going on.
Now that we have stats for the last three months we know that 3% of the sales in Vancouver have gone to foreign buyers with 5% of the dollar value. The numbers are smaller for Victoria. Both predominantly to Chinese foreign buyers.
What appears far more likely to me is that the average Chinese buyer is not from the super-rich elite or a corrupt government official. The average Chinese buyer is looking for a safe place to live for their family or a good place to invest money to create strong returns and preserve capital. Likely there are many Chinese who have made money legally this way and there is a focus on real estate in favour of other investment classes in the culture.
This scenario seems far more likely to be at the root of the buying in Gordon Head and many areas of Vancouver and it seems to me that it could be impacting affordability:
China’s tier one city real estate has appreciated dramatically permitting many Chinese to accumulate capital through home ownership.
And the currency restrictions on bringing money out of China are annual. Someone planning to buy in Canada could send $50,000/year per person ($100,000/year per couple or add adult children for more) to Canada legally for three years and get financing here for the remainder – something that many countries do not offer to foreign buyers.
http://www.macleans.ca/economy/economicanalysis/chinese-real-estate-investors-are-reshaping-the-market/
It seems that there has been a surge in new listings in the last week for houses in the core. And that may be lead to a longer market exposure from the current 9 days. That’s good for prospective purchasers as the delayed offers / blind auctions become less effective at pushing prices well above asking price and possibly above what would be a reasonable market value.
I also think that some of the homes bought since March are ending up as rentals and that should help to ease the tight vacancy rate and possibly put less pressure on rents to rise.
In my opinion what we have been experiencing this year has not been driven by those looking for a home to live in but by speculators. I find it difficult to call them investors as that assumes that the properties would provide an adequate return. Instead I consider these speculators simply hoarding real estate which temporarily drives up prices. Those that suffer the most from these carpetbaggers are buyers looking for a home to live in as they have to pay high prices today and then suffer the repercussions of a down market.
I make a distinction between an investor that is providing long term rental accommodation and a speculator that is hoarding real estate to drive up prices.
While some legitimacy exists for hiding the names of owners through corporations or using nominees this also allows a portal that has been and still is being exploited by criminals escaping their countries laws.
It has only been since last September that an agreement between China and Canada was reached to share the proceeds of unlawful activities against China going back to 2012. That would include China’s currency restrictions. While you may think that smurfing hundreds of thousands out of China by your neighbors is harmless when this is done by tens of thousands of people it can be crushing to China’s economy. Turning a blind eye to corruption can be de-stabilizing to our own country as the political party relies heavily on this nudge, nudge say no more activity. Let it go too far and our economic policies will be determined by Beijing as the politicians don’t want to stop the flow of money.
totoro, no one is implying that legal immigration is money laundering. The problem is that a lot of Vancouver houses are being sold & re-sold over & over again – there’s a reason. If you’ve missed the news on the money laundering, then just ask for the links or Google it, instead of assuming otherwise. Victoria is affected because Vancouverites are dealing with out-of-control prices, leaving their city, and pushing up demand and prices in Victoria.
The speed at which things got out of control in Vancouver has me concerned about the future of Victoria real estate too – it’s not good for the general economy and no one knows what’s next.
https://www.linkedin.com/pulse/cooling-off-bc-real-estate-market-from-top-down-kenneth-pazder?trk=mp-reader-card
Article by a Vancouver Real Estate Lawyer about the Money Laundering Scene:
“This inflow of money (Chinese principally, but there is also a lot of Iranian, Indian and American capital coming in) …”
“the only explanation which seems to make any sense is that some foreign purchasers are using the Canadian real estate system to launder their money.”
“Once a house is purchased in BC the seller has effectively washed it and it can be moved anywhere in the world easily by selling the property (as the seller then has the contract of sale and all the documents necessary from the lawyer’s office to “prove” that his funds came from the legitimate sale of Canadian real estate). ”
“In the criminal world, the fee to launder money can be 50% or more. In Canada, it seems to be NIL.
“Stemming the flow of dirty money into Canadian real estate would terminate a number of high end purchases, which may push down some of the prices at the $10M – $15M range which would in turn push down the medium high end prices and so on …”
http://www.nytimes.com/2016/04/13/world/americas/canada-vancouver-chinese-immigrant-wealth.html?_r=0
“In Vancouver, there are lots of kids of corrupt Chinese officials,” said Shi Yi, 27, the owner of Luxury Motor, a car dealership that caters to affluent Chinese. “Here, they can flaunt their money.”
http://www.vancouversun.com/news/alleges+Metro+Vancouver+homes+were+part+scheme+launder+money+embezzled+China/10926774/story.html
“U.S. alleges Metro Vancouver homes were part of scheme to launder money embezzled in China”
“U.S. and Chinese investigators now suspect the money for the Metro homes purchases came from an embezzlement scheme that was just one part of a massive corruption and bribery operation that nearly crippled the China Grain Reserves Corporation, also known as Sinograin.”
http://www.scmp.com/comment/blogs/article/1937267/stampede-inside-story-vancouvers-wildest-property-deal-gone-7200
An SCMP investigation reveals the obscure transactions behind a commercial real estate frenzy, including a two-hour stampede by investors desperate to pay C$60m for a site valued at C$16m. Then, a month after taking ownership, they resold it for C$68m
http://www.vancouversun.com/business/former+agents+battle+richmond+realty+agency+over+commission+fees/11779815/story.html
New Coast Realty shadow flipping
http://www.theglobeandmail.com/news/british-columbia/suspicious-transactions-reported-by-bc-banks-tied-mostly-to-china/article27640202/
“Vancouver-area banks reported suspicious transactions involving Mainland Chinese clients 17 times more often than those tied to citizens of any other outside country in recent years”
Totoro,
Correct.
I’ll try this another way. In 10 years, 50% more buyers have been added to the system (assuming all else equal)
Here is a interesting read after the BC Governments report on foreign buyers having a small impact on the Vancouver market.
https://www.theguardian.com/cities/2016/jul/07/vancouver-chinese-city-racism-meets-real-estate-british-columbia
No. Five percent per year is five percent of the sales this year or next.
Debatable. Money laundering normally requires illegally gained funds – usually through corrupt or criminal means – that are then “washed” through legal businesses and investments. While China’s rules on capital controls may be circumvented, I’m not aware the cash was “illegally gained” in the first place for most buying from Asia. The two families from China I know who sent their kids here and then followed and bought places got their funds from the sale of their own wildly escalating properties in tier 1 cities in China. Maybe they should not have been able to bring these funds out of the country but it appears commonplace to me and it is not like they were Mexican cartel. Do you have different information?
2 biggest stories this week…
Foreign buyers 5% of the market. Heard this before.
This is a big deal. Most of us will own a home for…? 10+ years? During 10 years Foreign buyers have become 50% of the sales.
OSFI ordering higher scrutiny. This isn’t a message to the big banks, this is directed at shody lending practices by mortgage brokers. Perhaps the brokers need more stringent regulating.
We settled with RBC for a good rate that they matched using ratespy. However, during the process we looked into 2 separate brokers. Neither could tell me who the mortgage would be with, only what the rate would be, and obviously the term. Neither could compete with RBC which has had my business for over 25 years. Couple this with no fees on any of my accounts and the Avion cards fees waived it was an easy choice. I actually wanted to give the brokers every benefit of the doubt but they couldn’t come close.
More or less what it is. Certainly much of the money leaving the country is circumventing their own capital controls
Sometimes; however, they are collecting this on the first purchase and their share of the full capital gains tax and 50% income tax on profits and most corporate sales of real estate assets are not share purchases but asset purchases so the property transfer tax is paid again in any event.
I don’t believe you do know what you are talking about. You would not be “red-flagged and investigated”. You would simply need to file and pay your taxes properly and this is a normal, legal transaction JJ. Even small time investors of little consequence sometimes hold real estate in a corporation because there are circumstances in which this is advantageous for fairly complicated but effective long-term tax and estate planning reasons.
I don’t believe money laundering in BC real estate is a pants on fire emergency unless you are calling foreign investment from China through legal immigration and investor programs and the legal purchase of real estate by foreigners “money laundering”. If I lived in a country with an unstable economy and had lots of capital I’d be looking to other countries too – Canada’s laws enable this, apparently to the detriment of affordability.
You often get fixated on a hyperbolic point of view. Over the years it has gone to the imminent crash to a bankruptcy crisis, to money laundering, to hoarding (anyone who buys a house by your past definition), to the overwhelming tyranny of real estate auctions. All these things might happen but in real life, and certainly in Victoria, the vast majority of transactions are much less dramatic.
The real estate industry needs more regulation and Canadian laws need to change. It appears the first is going to occur and has occurred to some extent already.
You mean there’s unlimited room for more, especially in Canada seeing how much of the world’s government debt is already well into negative interest rates. I know the bears always like to lay blame, so you may want to direct your blame at us boomers who are buying up bonds (and our city) as they enter retirement. Then again, they’re just doing what everyone has always done at their age… I say let’s get ’em! Where’s my pitchfork?!
A big advantage to holding real estate in a corporation is that property purchase tax is not paid on transferring shares. The BC government is therefore missing out on potential property purchase tax payments.
I know what you’re talking about when you say there is a disadvantage to holding real estate in a corporation. And Totoro, you would never hold real estate in a corporation for those reasons. But I’m not talking about small time investors of little consequence like you.
Because if you did, you would be red flagged and investigated in more detail.
Criminals hide in anonymity. That doesn’t mean that all of those using a corporation are criminals. Just to make it clear to you before you start to take things out of context. This is about transparency. If we had had transparency then we would have known that several of the condominiums in the Olymipic Village were bought by those in Mexican drug cartels. And if we had an agreement with Mexico then those condos could have been seized as proceeds from money laundering.
Marko, can you tell me what 2102 Nicklaus Dr sold for, looks like it was originally listed for $949,232 and was then dropped to $939,832…thanks in advance.
totoro, what is happening in Vancouver is not what assignment clauses or corporations were meant to be used for by law-abiding citizens. They’re being used to shadow flip, and to sell a $16M property for $60M, then flip it for $68M. Real estate agents are also using assignment clauses to put properties in their names and then flipping it to offshore purchasers, who then flip it again to launder money. People in Vancouver are going after New Coast Realty over things like this, as 1 example. The Chinese & US gov’ts are also going after corrupt officials who have stolen money and used it to buy houses in Vancouver and the US.
There’s plenty of evidence already cited on this blog, and just re-read all the articles in the Globe & Mail, the Province, South China Morning Post, New York Times, etc. That’s why FinTrac is getting involved as well.
It’s not simplistic to make a reference to the problem – it’s definitely a complex issue.
Totally disagree. There is already a very large tax disincentive to hold residential real estate in a corporation . Or, to put it in reverse, our government gets a big tax benefit from this type of ownership. Because it is not really a great way to hold real estate unless you are in a red hot market and anything is going to be profitable this generally seems like a good barrier.
What I would say is that they should change the rules as to who can own a BC corporation. In other provinces you need to be a resident or a minimum number of directors need to be resident. Same with individuals, seems like residency should be required.
It appears to me that “money laundering” is not the big issue.
One bigger issue I’ve seen identified is non-resident relatives who make and pay income tax in third countries at much higher rates than Canadian salaries and they use this higher income/asset level to fund ownership of a high-end property by a resident spouse or relative earning little income in Canada and receiving benefits for dependent children. That spouse or relative gets the capital gains tax exemption when they sell and can share the tax-free money to their non-resident spouse. Seems like it should not be permitted to me.
These are automated blanked mandates. It’s not worth the bank’s time to decide case by case whether something requires an inspection or not so they just do it.
I had read that in Australia, foreign students were purchasing multiple pre-construction condominiums. The students were being paid a 3% commission from a person back in their home country to buy the units. I suspect those condos were then being brokered to other buyers in that country.
Nothing illegal about this at all. The students could do this under a BC numbered company and in that way it is possible to skirt around the property purchase tax as only shares would be transferred between individuals rather than the title changing ownership.
And that’s the key to stop this activity. Residential property should be held in a person’s name and not a company. And because of the similarity and often different spellings of the same name, I would say the owner of residential real estate should provide finger prints as their identity along with names. That would go a long way in preventing money laundering. Criminals want to hide their identity and they certainly don’t want to be finger printed.
Residential properties held in a company name would have to meet regular reporting standards otherwise the properties would be taxed at much higher rates.
I’d require it if I was lending money. A bank is not going to withdraw financing because a hot water tank needs to be replaced. A bank might withdraw financing if there are asbestos issues or issues that affect insurability like knob and tube wiring. No insurance, no mortgage. Seems reasonable because you are lending on the value of land and building and the ability to resell/rent in interim if foreclosed upon.
With your all cash deals you didn’t need financing so you get to take on these risks freely. Go to it.
…and there is little room for more.
That is simplistic.
Assignment clauses are a pretty common thing. I used one recently and it was not to make a profit or “shadow-flip”. The new rules state that the seller specifically has to consent to the assignment and any profit from it goes to the seller unless waived by the seller.
Also, many Canadian business owners buy rental and/or commercial property through holding corporations with retained earnings. The government receives a lot more capital gains and income tax revenues from corporate ownership. The income tax rate on revenues is about 50% – no small business tax rate available and no capital gains tax exemption.
The information regarding who is/are the director(s) of a BC Corporation is publicly available. 25% of Canadian corporation directors need to be resident Canadians. If a corporation is a foreign corporation this is registered as an extra-provincial corporation and this is also public information.
There is no need to “hide” the nationality of a purchaser as far as I can tell: you don’t have to be a permanent resident or Canadian to own property in BC. I would agree there should be some rules that make sense and make it less attractive for foreign investors in many circumstances to buy Canadian real estate if they are avoiding appropriate taxation while their resident families take advantage of services based on artificially low incomes.
What you may be alluding to is the fact that good data has not been collected on real estate transactions. Seems like these practices are changing.
Am I the only one who is tired of hearing about how some individual is to blame for things? Let me let you in on a little secret, elected and appointed officials in Canada have some power and can set tone in an organization, but they are not almighty and targeting/blaming a figurehead is usually pointless. Look for the issues with the system or mandate and you’ll be able to determine what might be improved.
What evidence do you have of this? People buying rental property generally have to qualify for the mortgage based on at least 20% or more down and a higher interest rate and the debt service ratio is used. The bank will only account for market rent income with a vacancy rate calculation. There is no evidence that rents are doing anything but going up at the moment.
The people who might be in trouble if prices drop are those that have to sell for some reason. The people who might be in trouble if rates rise are more likely recent first-time buyers without rental income or those that lose their jobs, fall ill or get divorced.
If rates rise a lot then affordability will be impacted for many. Seems unlikely at this point given the impact on the economy. But this is just crystal balling yet again…
“Yes, but again it’s not the gov’t who is “quantitative easing”, it’s the central bank ‘investing’ in bonds.
Also Canada’s BoC has not done any “quantitative easing” like its BoJ, Fed & ECB peers.”
It is part of government as an independent crown corp and it doesn’t really matter who eased the bond market, the point is that bond rates were pushed down globally.
I am talking about “LOCATION”. When someone pays 3 million dollars for a post war, tear down house in Vancouver he is not paying three million for the house. He is paying 3 million because it is Kitsilano or Point Grey. I’ll tell you…..it is so hard to have to listen to fools say that it’s still a good idea to “check that hot water tank…you never know …..you might be stuck with the cost of that”. If you can afford to pay fifty thousand dollars and a hundred thousand dollars over the asking price do you really care about the cost of a hot water tank???? Apparently the banks think it is a good idea:) I have been involved in buying more than one house…cash offers with no subjects… without seeing the inside. Each resulted in getting a terrific deal. (Drive by only.) Other people lost out on them because they were still waiting for the inspection report which would tell them that the window on the top floor was needing painted or that they might need to call in an exterminator after seeing two or three mouse droppings on the basement floor.
Its plain deduction that tells us funny money is involved in Van. It’s beyond any shred of fundamentals. Friends who own two very successful businesses, one a well know bar/restaurant, the other a brewery. They bought a duplex to share with the family about five years ago (which was crazy expensive then). They thought about going their separate ways last year (the house not the businesses) but could not afford too. I mean these are successful business owners that can’t afford Van and they have skin in the game….
Mike de Jong also needs to tell us what % of homes were bought through assignment clauses and corporations, which can hide the nationality of the purchaser – again, a problem with the way real estate transactions are being reported and games that are being played especially in Vancouver.
Yep, if bare land financing was easy I would not have sold my house. I am working with a broker that specialises in this, and construction loan,s and I started to feel troubles on getting the loan on the lot (50% of lot value). So I expedited the sale of the house. I would not have pulled the financing together for our lot otherwise. As it was the money from the sale was only in my account for one day so the timing was close. I suspect the agent would have let the deal fall through considering the sudden newfound interest in the lot….
Seems pretty reasonable to require an appraisal and home inspection to me and part of a risk management process.
Lenders need to make sure that a property meets certain criteria and the value is not just in the land. The value is in how saleable the asset is or how much income it can generate. Land is much harder sell than land and a habitable building and you usually cannot rent bare land out in the interim to recoup losses. A hot market will not last forever and buying for tear-down, rebuild and profit only works in a hot rising market imo. Mortgages last longer than this type of market does usually.
Bare land financing is much more difficult to obtain mostly for these reasons.
Liberals pull another bonehead stunt. These clowns have seriously lost contact with reality using only a couple of weeks numbers as the so called real truth.
“NDP Housing Critic David Eby says he’s “appalled” that the province is using this data, arguing it has a lot more information it can draw from to look at who is buying property in BC.”
http://www.news1130.com/2016/07/07/bc-homes-foreign-nationals/
“Canada’s real estate market wasn’t really affected by the 2008 recession because the gov’t lowered interest rates ”
That and the gov’t bailed out the banks to the tune of $114BB. Our banking system is exposed to the same risk as any other. The reason why it looks stable is because the government aggressively spends our money wiping away the impacts of greedy bank management to keep banks lending and the RE industry afloat. It is the only game in town after all.
Yes, but again it’s not the gov’t who is “quantitative easing”, it’s the central bank ‘investing’ in bonds.
Also Canada’s BoC has not done any “quantitative easing” like its BoJ, Fed & ECB peers.
Sort of. Employment is the #1 influencer of default rates. If you’re unemployed you won’t pay your mortgage for long. But loan to value is another important one that is positively correlated with default rates. If you have less skin in the game you are more likely to default, and as you say your mortgage is likely higher and costs more to carry.
Yes. The person with a low down payment requires CMHC insurance which takes 99% of the risk out of the bank’s hands. So even though the borrower is higher risk, the bank isn’t exposed to it (you are, as a taxpayer). The banks are definitely not idiots.
“When you have a small mortgage…..you can always rent a house for less than anyone else with bigger mortgages and still survive”
Agree, that’s probably the key. If you can lower the rent then you’re OK. I think part of the issue is that some speculators are stretched to the max and couldn’t lower the rent and still keep up the payments.
“Minor point, but bond market investors control interest rates (with central banks as followers). Our gov’t has no control over rates.”
That’s where big-time quantitative easing took over.
I still think that real equity in a house is more important than someone with a good job who has only a small amount down on his house. If I have learned anything about real estate over the past forty plus years…. it is that the owner should have the ability to hang on through bad times. If he has a relatively small mortgage then the house can “always” be rented. I’ve been through many ups and downs and I’ve never lost one months rent. When you have a small mortgage…..you can always rent a house for less than anyone else with bigger mortgages and still survive. In the worst financial crisis people need a cheaper place to rent more than ever.
Minor point, but bond market investors control interest rates (with central banks as followers). Our gov’t has no control over rates.
Actually I am convinced that banks are idiots. I’m sorry to say that but it has been my experience. For example: They insist on a house inspection. These are useless in my opinion because you are not buying the house. In desirable locations such as Vancouver, Victoria etc….you are buying the land. (Is anyone going to argue that a 3 million dollar tear down home in Vancouver,Kitsilano on a 33 foot lot has any value? Does anyone really think they are buying the house?)
The first thing the home inspector gets you to do is sign a waiver that says that the report has no value. I see people making offers of fifty thousand dollars over the asking price and the banks still demand an inspection because they want to make sure the hot water tank is good. Ha Ha. Have to laugh. I had one inspector report to me when he saw some mouse droppings….he said …oh oh…you may have to call in a professional exterminator to take care of that”. And the banks love them. I have zero respect for the banks.
@derykH I don’t quite agree with your assessment of the article. FIs want the largest loan possible since that’s their profit and employees are compensated to get the large loan. Reducing risk is certainly important but they are weighing this against potential profit and the value of the asset if they need to seize it. In the past Canadians did not walk away from debt and choose bankruptcy (I recognize that Alberta is different re no-recourse). However, I do believe that comparing 1989-1995 time frame (Toronto real estate experience) to today isn’t considering that personal levels of commitment/ethics have changed and people may be more willing to head into bankruptcy and are likely far more leveraged than in the past (especially since bankruptcy rules have changed since 90s). Banks aren’t idiots but I’m surprised at what seems to be some incredibly poor controls. I think our government (all levels) policies are idiotic – the banks/builders wagging the dog. I also sense a very cruel group on the sidelines – waiting to say “I told you so”. If this crashes rather than softly settles, most of us will be negatively affected – even if not our own personal finances, we will see government cutbacks, etc. I’m very discouraged that things have reached this level of frantic & mind-boggling transactions.
deryk, I think both situations can be a problem in a down market. If the person loses their job, it could be because of a recession, which affects the rental market – renters are more mobile and can quickly leave the city for another job, or move in with roommates, or find cheaper rents in other types of rentals. It’s been much harder for landlords to find renters during past recessions.
Canada’s real estate market wasn’t really affected by the 2008 recession because the gov’t lowered interest rates, but now it can’t really lower rates much more. In past recessions, real estate was affected by oil prices and economic stagnation. What’s creating a new type of economic stagnation is that that speculators are making it difficult for your average family to live & work in certain cities. So now the gov’t is realizing that runaway real estate prices are creating a barrier to economic growth.
So……Let me get this straight: The banks would much rather lend to someone who has a job with a good income even if that person can only make a very small deposit on his or her house? As a lender, I would prefer to have someone who has “tons” of equity in their house. If the market drops….. and the person with the high paying job get’s laid off…how is he going to make his high payments??? The person who has a ton of equity in the house is in a stronger position because if he loses his house he can rent it out and move in with mom and dad or into a small space. The rents would cover the mortgage because the mortgage is very low and so no problem for the lender. I’m convinced that banks are idiots.
Also from the article: “OSFI told all mortgage lenders they should not rely on collateral values as a replacement for income verification, especially in areas of Canada where house prices have been rising rapidly.”
This is in reference to multiple mortgages – telling lenders not to depend on the value of people’s homes as a basis for their next mortgage. Crazy that it took them this long to say it.
As Hawk said, a little late in the game to be starting some due diligence.
“Income that cannot be verified by reliable well-documented sources should be treated cautiously when assessing the ability of a borrower to service debt obligations,”
It worries me that this is something that needs to be spelled out..
A little too late in the game.
Canada’s top banking regulator tightens scrutiny of mortgage lending practices
“Canada’s top banking regulator is stepping up expectations for banks when it comes to mortgage lending.
The Office of the Superintendent of Financial Institutions issued a four-page letter to financial institutions Thursday spelling out the regulator’s expectation for mortgage lending practices — including income verification.
“OSFI is aware of incidents where financial institutions have encountered misrepresentation of income and/or employment,” said the letter signed by Superintendent Jeremy Rudin, which warned that borrowers who rely on income from sources outside of Canada “pose a particular challenge for income verification.””
http://business.financialpost.com/news/fp-street/canadas-top-banking-regulator-tightens-scrutiny-of-mortgage-lending-practices
My error I needed to put 4+. Sorry
Looks like there are only 4 listings in Broadmead and all four have four bed two bath or more. Not sure where you are looking.
945 falaise crescent
813 royal wood place
4677 boulderwood
4680 boulderwood
Vic I used 4 bedrooms and 2 baths, not sure if you used the same. Would not be surprised if I missed something, I was just shocked. Those parameters showed not a lot in the core. 3 Bedrooms brings a more obviously.
Step
The Governments can talk a big game but the issue is and they know it, is RE is the only thing keeping our economy going. Pretty scary…
GWAC – there must be some mistake because there are at least three more listings in Broadmead and many more in Saanich East generally.
A really interesting read – but read the whole article b/c what went down fast, also went back up (1974 time period – check out the price of houses!).
http://business.financialpost.com/personal-finance/mortgages-real-estate/ontario-tried-a-speculation-tax-on-property-and-the-market-collapsed-overnight
I just went to MLS. Broadmead 4 bedrooms 2 baths. Unless I missed something this is the only place that came up. Looks like it needs work.
Scary out there. No inventory
https://www.realtor.ca/Residential/Single-Family/17150435/4677-Boulderwood-Dr-Victoria-British-Columbia-V8Y2P8
Sellers can decide whether to disclose the existence and/or terms of offers to other licensees and/or buyers. They can authorize their agent to do this.
http://www.recbc.ca/psm_hierarchy/subsection/?sub=offers
http://www.theprovince.com/business/local+business/27people+buying+blind+home+inspections+drop/12038192/story.html
Very scary you are paying up to buy and than a nightmare. Really feel for those buying.
Leo S,
Yeah, I know its YOY but I suppose some readers may not…
I was curious about something – at a recent open house I heard a realtor responding to a question from people who had dropped in. They said, “how much have the bids over [ask] so far?” The realtor replied “100” ($100k)
So are realtors allowed to convey this information, or are they supposed to keep it secret? Maybe it wouldn’t have mattered, because the expectation was that there were a lot of bidders.
The house sold for $160k over asking. List price was set high for this market, at $150k above assessed. (pleasant place in Saanich East, 2-bed, 1-bath main floor, with lots of renos needed in the kitchen, bath, & basement)
1768 Mortimer sold fast. I guess Mt Tolmie is hot too….
Rook,
I agree, I don’t think the liberals have the guts to do anything that will effect their high risk Panda bonds with China, that the public isn’t even allowed to know the interest rate on our money. They will float around the edges with tough talk and a weak spec tax that will have zero effect.
Global BC trotted out a gold guy this morning to deny there is a housing bubble, go figger. This guy hasn’t even called gold right for many years. Part of the Ozzie Jurrock group, must be maxed out on real estate.
LeoS,
Here’s why the no home inspections are going to turn into a nightmare for many. Another reason why this pig has to explode, common sense is being thrown out the window.
http://globalnews.ca/news/2805973/more-metro-vancouver-homebuyers-forgoing-home-inspections-despite-risks/
Hawk
I’m not so sure you should be so sure the liberals will do anything about fraudulent foreign money. Smoke and mirrors.
Our city should be jumping on this issue before it gets too out of hand here.
It’s not just Victoria and Vancouver with insane bidding wars; its global, including Seattle:
http://www.seattletimes.com/business/this-mold-house-decaying-home-too-dangerous-to-enter-sparks-insane-bidding/
House Prices in Victoria could never drop by about 50%…right??!!
Sure they could. Easily.
The only number that matters to purchasers is the monthly mortgage payment; the actual house price is just an obscure number, with uncertain meaning to the average math-challenged purchaser.
The monthly mortgage payment is about $2600 on a $650,000 mortgage these days at 2% (annual interest paid is about $13,000)
The monthly mortgage payment is about $2600 on a $325,000 mortgage at 8.25% (annual interest paid is about $27,000)
I doubt if interest rates will increase for years; BUT, if they do increase, then house prices will drop until the monthly mortgage payment is about the same as it is today at 2.25% (with slight corrections for wage increases and inflation).
80% drop-off in prices won’t happen because rates won’t go over 10% …but… What if rates go up and some people can’t afford to renew their mortgage at a higher rate, then they are forced to sell in a declining market… Let’s not even think about that…
Definitely a big shift is underway from houses to condos in Vancouver and to a lesser extent in Victoria. Houses just simply too expensive for most. JJ’s stats on local buyers being thinned out are telling.
http://www.theglobeandmail.com/real-estate/vancouver/the-latest-front-in-vancouvers-real-estate-bidding-war-condos/article30761958/
“Over all, for sales of detached homes in the City of Vancouver, there was a flipping rate of almost 6 per cent, based on 390 transactions having at least two sales during the 30-month period, including demolitions.”
Anyone know what a “normal” rate of flipping is?
“As few as 10 per cent of homes sold in Greater Vancouver and the Fraser Valley are being inspected before deals close, a number that is drastically down from about 75 per cent a year ago”
http://vancouversun.com/business/real-estate/people-are-buying-blind-home-inspections-drop-drastically-in-no-subjects-market
Vancouver is scary. It just has to break. It’s difficult to comprehend how it is possible without foreign capital and corruption at its core… Wait, Hawk is getting to me… Going to read some Tyler Durden articles now….
@Reasonfirst. I think they meant YoY gains. It’s worded badly.
“Bearilla the wait will be worth. It is an 50 to80% crash.”
Extraordinary bull markets have extraordinary endings. That’s been proven many times over in history.
RE: BNN Article
Is it my reading comprehension or does that article make it sound like YOY gains all happened in June?
http://www.bnn.ca/News/2016/7/5/Vancouvers-housing-market-gets-even-hotter-as-prices-surge-almost-40-in-June.aspx
Last month we had 15% fewer house sales in the core. Out of those 288 sales some 66% indicated their address as Victoria. That’s down from 73% shown in the first quarter of this year.
High prices are having a heavy toll on Victoria buyers, driving house sales down in the core for the second consecutive month.
Bearilla the wait will be worth. It is an 50 to80% crash.
To lose one’s mind you have to have one to begin with. But don’t worry bears the crash is just around the corner. Your 10+ year wait is surely just about to be over. Ha ha ha ha ha ha.
Still heating up in Van. Crazy how their core price gains just in the past year are more than Vic homes cost.
http://www.bnn.ca/News/2016/7/5/Vancouvers-housing-market-gets-even-hotter-as-prices-surge-almost-40-in-June.aspx
The spill over should lead to a hot autumn in Vic.
According to the story I posted HCG has 25b in sub prime mortgages outstanding and 90% is in Toronto. Why are they not diversified? How come they are not in Vancouver?
They have propped up their stock since the fraud news with $150 million buyback program and upping the dividend to 9%. How long can that last is the question.
Cohodes point is they have hardly any cash to withstand a market correction. Owning 90% of $25 billion in Toronto mortgages is not a good thing. Another subprime disaster in the making.
Apparently his first position was fall 2014 when it was $51
random interesting Toronto housing facts.. The home Capital one is very large.
http://www.mortgagebrokernews.ca/news/torontos-housing-market-in-numbers-209775.aspx
Probably not a bad stock to short in this environment. Not for the faint of hart. Went from 23 to 40 and back down to 30 very quickly this year as news came out. Wonder where he got in
“He is the one shorting Housing related companies. ”
Just one, Home Capital that fraudulently lent out $1.9 billion.
(Also best not to assume someone hasn’t lived through a time of conflict – usually they are the best prepared.)
Well said Vicbot.
Vancouver home sales hit third consecutive monthly decline
https://www.biv.com/article/2016/7/vancouver-home-sales-hit-third-consecutive-monthly/
Marc Cohodes cooper river lost 50% when his shorts starting surging during the 2008 crash. He than liquidated his hedge fund. He than became a chicken farmer. He is the one shorting Housing related companies. Time will tell.
When a person says that the market “can’t get that bad”, and then a 2nd person offers proof that it really was “that bad”, it’s a reasonable debate. It doesn’t mean that the 2nd person “wants” it to get that bad.
(Also best not to assume someone hasn’t lived through a time of conflict – usually they are the best prepared.)
http://www.investing.com/rates-bonds/canada-5-year-bond-yield
5 year bond yields – ready to spike at any moment – ever since the beginning of HHV 🙂
Low mortgage rates for the foreseeable future, though not really a good news story as the low rates are sign of a weak global economy. Yield curve flirting with inversion?
Don’t be such a doom and gloomer Triple A, you might get a reputation. 😉
July 12th. Kind of a big deal.
UN Hague ruling on South China Seas to which China says it will not respect. An international convention to which China has signed off on.
That the US has 2 Carrier groups (15,000 personnel between 2 aircraft carriers, 4 destroyers, 4 frigates, 2 supply vessels and a few submarines) in the Sea is eyebrow raising. That China has openly stated it will protect its Sovereignty “at all cost” is concerning.
The last thing the free world needs is this crisis to escalate. Never mind credit liquidity, how about rations. These doomsday posters here I don’t think realize how good they have it. You want the market to be bad but not so bad. You want to remind us all how bad it was in the 80’s but you yourself have not lived through a true time of conflict.
“Meanwhile Vic/Van went up another ~70% in the six years following ’89 when TO decreased 50 per cent. ”
Victoria prices fell 40% in the early 80s. (The bubble burst later in Toronto.) So if that 70% is accurate, there was a 30% recovery in 6 years or 5%/yr.
Then after 1994 prices decreased again in Vic/Van by 14% to 23% over 5 years (up to 5%/yr) depending on whether you’re talking actual dollar values or inflation-adjusted.
Listen and weep. Thank God someone has the guts to call it what it is.
Betting on the housing bubble burst
http://globalnews.ca/video/2804456/betting-on-the-housing-bubble-burst
Michael,
“the bigger they are- the harder they fall”
“Meanwhile Vic/Van went up another ~70% in the six years following ’89 when TO decreased 50 per cent. My guess is something similar happens this time.”
You mean after Expo 86 and the floodgates opened for Asian money to come pouring into Vancouver and BC. You won’t see that generational event happen again in your lifetime. The gates will soon be shut by the liberals or they will be out on their ass as the NDP will ride their new money laws against foreign money launderers to victory.
Historically there is a seasonal slowdown at this time of the year. But not always. In hot markets like in 2001 and 2007 prices kept rising.
It kind of an oxymoron. We are in a hot market with falling sales and lower house prices.
Meanwhile Vic/Van went up another ~70% in the six years following ’89 when TO decreased 50 per cent. My guess is something similar happens this time.
Even Calgary has turned the corner.
http://business.financialpost.com/personal-finance/mortgages-real-estate/calgary-detached-home-prices-bounce-back-but-market-still-slumping
There’s at least another 5-6 years of increases for Vic. After all, it was only 3 years ago that we bottomed with lots of property going for 30% off.
There’s always a seasonal slowdown this time of year.
I could see an insane % in Van after it goes up another 40%. But that would still leave the benchmark home at 1 million… In Vic if there was an 50-80% drop it would have to be Armageddon. I would get extremely bullish if prices drop more than 30% from here. But I probably couldn’t buy in because a credit freeze would need to be involved plus some sort of skyrocketing rates…. To many people used to that $799,000 price tag will get frothy if it’s now going for $500,000 or lower. a SFH for $150k though? A lot of people could buy that for cash so good luck with that…. Just like we hit resistance to increasing prices we have the same with falling prices as evidenced by the last decade. The opportunity for this decade has passed IMO. You are going to have to wait it out for another opportunity to buy in at for a deal. It certainly wont be next spring…
In every generation, there’s a big correction or stagnation in the economy – it always happens – every 30 to 40 years, on the scale of the 80s. (each new generation forgets what happened before)
It’s only scary if you haven’t planned for it or pretended it doesn’t exist. (nobody knows exactly when – it may not be real estate that triggers it)
If your time horizon is long, and you have alternatives to your current job, you can ride out the bursting of the bubble, just like my parents had to do in the 80s (and their parents had to ride out a war).
Speculators who are depending on multiple loans to fund their investments may experience the worst of it, because they can’t find customers or renters or vacationers to help pay for it all.
Prof Herbert Grubel wrote an opinion piece about this today:
http://vancouversun.com/opinion/opinion-vancouver-housing-bubble-wil-burst
“In 1989, the Toronto bubble burst, and six years later house prices had decreased 50 per cent. Many speculators lost all of their life savings. Financial institutions were in crisis. All home building activities stopped. Unemployment increased. The flow of immigrants decreased sharply. A general economic recession developed … Governments cannot prevent the bursting of the Vancouver bubble.”
JJ 80% crash. US was less than 25% and you remember the bailout required. Our whole economy is supported by real estate. We have nothing else going on. If we went down 80% national. I think we would be close to Armageddon.
GWAC, we have gone through some pretty tough market corrections before. Some corporations, real estate agencies and trust companies will fail but it won’t be Armageddon.
http://www.economist.com/blogs/graphicdetail/2015/11/daily-chart-0
Average was around 20% to 22% it looks like.
US average 372 to 292
House prices did not fall by 80% national in the US. Flint maybe.
Victoria goes by 80% so will most of Canada.
“All the banks, Gov, pension funds and most private companies would fail. Unemployment would be 30 to 70%. We would all be going to soup kitchens. Guns and violence would be the order of the days. Pure stupidity to think along these lines.”
Now that’s called being stupid. Did that happen in the US when they tanked in 2006 to 2008? A bubble eventually implodes upon itself when buyers stop buying because they fear prices will drop, then it feeds on itself. May mean a nasty recession which has a higher chance of happening in a long time, not Armageddon as gwac is calling for.
I bought my second place at 50% off . There were no cavalcades out of Victoria or soup kitchens but many people did leave town to find work elsewhere. As Jack said, people just stopped buying. People told me I was crazy for buying then but you could sense the market had bottomed, just like you know it’s the top right now. Lots in Whistler were going for 10K from 30 to 40K previously.
Gwac must have been 10 years old back then and doesn’t get it which is understandable. Until you’ve seen it you don’t want to believe it.
JJ
All the banks, Gov, pension funds and most private companies would fail. Unemployment would be 30 to 70%. We would all be going to soup kitchens. Guns and violence would be the order of the days. Pure stupidity to think along these lines.
Hawk pure stupidity…So the average home in Langford will be 100k. Seriously have you lost your mind.
Gwac, if the market tanked by 80% you would have massive unemployment in the construction trade, incredibly high vacancy rates and a line of u-haul trailers stretched from the downtown core to the Ferry terminal.
Could it happen? It’s highly unlikely but it is possible.
In that situation people just don’t list their homes for sale unless they have to. That means the marketplace is one where the sellers are under duress to sell. Most likely the owners are gone and have walked from the property and it is up to the judge to gavel a sale. You would have had to live through one of these foreclosure markets to understand how horrible they are. Properties just stop selling.
I only consider this as an extreme because it is such a gargantuan decline. But in the end it is all about supply and demand.
I’ve seen 60% in Victoria gwac, have you ? It’s only another 20% but most likely the 80% would be in Langford where bearkilla’s rental and your up island property is where rec properties get smoked.
I suppose “hot” is being defined in the core’s detached house market as how fast a property sells and how much over asking price?
Last month in the core, houses sold in under 9 days and a little more than half sold for more than asking price.
But is that a reliable way to gauge the market when agents are under pricing and under exposing properties to create a bidding war? Delayed offers or blind auctions have the effect of creating excitement with some purchasers paying outlandish prices as they are caught up in the hysteria. And it is those outlandish prices that get reported in the media.
This morning there are 235 houses for sale in the core and 178 of them have been listed for more than 10 days. And those asking prices range from a low of $375,000 to a high of 15 million. Exclude the nutter at 15 million and prices only go up to 7.5 million. My guess is that about one-third of them are over priced and need a reduction in their asking price.
If I was looking to buy a home, I wouldn’t bother with properties that have just been recently listed. Too many purchasers are chasing those new listings. I’d look at properties that have been listed for more that two weeks. The nut bars aren’t squealing their tires to get to these ones. And the fewer bidders the better the chance to make a good deal.
80% tanking sounds legit to you?. So the average house in Victoria will cost 150k when done. Yep you have hit a new low of stupidity.
Well I hope it plateaus for a bit. Shows signs of sanity after a frenzy. It would make sense that there was pent up demand building up and we just experienced a pop to release that. Once the blood hit the water though there were fins thrashing. It was enough to change everyone’s language pretty fast though. Suddenly “it’s only a million” is easily sputtered from the average persons mouth….
Great interview on Global BCTV with Marc Chohodes calling for a 50% to 80% tanking when all is said and done. Sounds legit to me with all the massive HELOC’s and credit card debt at record levels.
Did an excellent job calling out the corrupt liberals with their lame ass excuses and denials as well.
4 months of the same SFH average price now. I still don’t believe a price plateau can exist in this kind of market but it is interesting.
We’ve had a 15% drop in house sales in the core from 339 in May to 288 in June.
The count of active listings between the two months were 368 to 365 respectively
New listings remained the same at 343 to 344 respectively
The Days-on-market remained the same at a median of 9 days
The Months of Inventory increased from 1.09 to 1.27
The median price for a house in the core declined from $760,000 to $747,450
So what is likely to happen this month? Looking back on what averaged for the previous 4 years that would indicate that active listings would decline by 3.5%. New listings will fall by 10%. Market exposure will increase marginally by a half percent. The months of inventory will rise by 10.5% and the median price will decline by 1.6%
What will be interesting about these predictions is not that history will repeat itself but how and where July numbers may differ from the historical averages?
Thank you Leo for using nominal values. Filtering is filtering after all… Didn’t we have this debate years ago? It seemed like everyone was against me and my nominal preference….
Thanks Leo S for the shadowstats links!
That’s what I’m seeing a bit of as well. Sellers have caught on to the market conditions and are getting back to pricing ahead of the market rather than everything selling in a bidding war.
And do you use the official CPI, or the Core CPI, or the shadowstats version that is 5 times higher? And is it even valid to adjust housing prices based on the cost of some vegetables?
That’s why I prefer to use nominal values, or measures where inflation cancels out, like price/income and affordability.
http://www.shadowstats.com/alternate_data/inflation-charts
https://www.youtube.com/watch?v=RP34yHPntxc
Interesting to hear Mike Nugent say many sellers are pricing their houses too high and buyers are sending them the message by not getting the sale.
FrancVictorian,
Mike’s stock charts only start where he bought at and we never hear about all those losers from 2014.
“Graphs can be very misleading when they don’t factor in things like inflation or dividends.”
Agree, FrancVictorian. I always find Leo S’s graphs very detailed & informative, but there are a lot of other graphs (other authors) that can be misleading, depending on what bias the graph’s creator has, eg., sometimes the scales of the x & y axes are adjusted to exaggerate up’s or down’s at various stages.
Also, the inflation factor is always a big one when comparing stock returns vs bonds vs real estate and other investments. If those aren’t inflation-adjusted, you think “wow” the rise of real estate (or the stock market) is amazing since the 1980s! until you look more closely. Mutual funds are notorious for playing with “average annual returns over lifetime of fund” (if the fund has only existed for 2 years, they’ll extrapolate based on index funds to come up with a “10 year average”)
Even official CPI stats can be misleading. “Housing costs” are calculated based on monthly mortgage payments – so house prices can soar, but “inflation” might still be 2% because of ultra-low interest rates.
It would be interesting to come up with “real inflation” stats that use the true costs of all assets that people need on a daily basis (food, houses, gas, and clothing/goods “Made in Canada” and not made illegally by underpaid kids), and see how they’ve gone up compared to private sector wages. eg., bought a Tilly hat “Made in Canada” recently & was amazed to see it’s more than twice the cost of the one I bought 15 years ago, a 6% inflation rate)
2510 Asquith sold for $526,600.
Wow, condo median sure has launched lately @ 19% gain.
Strange to see it higher than houses.
No. Although inflation was pretty tame in those years. You are talking maybe an extra 10% decline between 2010 and 2015
Can anyone tell me how much 2510 asquith st sold for?
gwac, there are barely enough Oak Bay townhouses to create a significant sample size. I can think of those ones behind Pure Vanilla off Cadboro Bay, the few just off Oak Bay Ave on Yale, a complex on Granite and the Uplands Golf Course gated area (if you can consider those to be townhouses). That’s probably 50 units in the municipality.
Are the dollar figures in that first graph inflation adjusted? If not, then about half of that “increase” disappears. Or, to put it another way, values dropped considerably between 2010 and 2015 in real terms.
Graphs can be very misleading when they don’t factor in things like inflation or dividends. I found it amusing when someone recently extolled the TSX’s rise this year, but failed to notice that it’s well below 2014 levels and, inflation-adjusted, is probably sitting somewhere around 2006 levels (of course this ignores the 2-3%/yr in dividends — there were some meagre gains).
Anyway, I think it’d be interesting to have plots in real terms (inflation-adjusted). Taking into account USD/CAD exchange rates might also be instructive.
Leo
Would that not work itself over yearly data or there is still not enough sales even over a year to see what is going on?
Last comment from their full release. Oakbay SFH has averaged slightly less than a 7% return in 11 years since 2005. HPI 100 to 193.5. Other areas less. Not exactly a Bubble as other would make it seem.
Don’t put too much (i.e. any) stock in those numbers. From my article about this last november: https://househuntvictoria.ca/2015/12/02/november-numbers-and-a-surprising-insight-into-the-hpi/
Case in point: The VREB claims that the “benchmark” townhouse in Oak Bay increased in value by $23,300 (4.5% from October to November 2015). Sounds great right? That’s an annualized rate of 53%! Well Just Jack uncovered the truth behind that number.
“There were no Oak Bay townhome sales in November. When I say no – I mean there were zero townhome sales. In October there was 1.
In other words, the increase in Oak Bay townhomes as stated in the MLS HPI is 100% pure fiction.
Just reading the VREB release. Oakbay Condo/TH have not been a great investment like SFH since 2005. They have under performed other areas. No Hawk I am not invested in either. I am just curious as to why?
comment about inventory VREB
When we look at month over month numbers, sales are down almost 9 per cent in June compared to the record breaking sales we saw in May, which may be due to the very low inventory available,” notes Mike Nugent, 2016 President of the Board. “It’s likely that sales would be higher were there more on the market to buy, but with the current conditions people may be hesitant to give up the homes they have.”