How many skyboxes for a dirtbox?

If you listen to the conventional wisdom from the real estate industry you should get into the market as soon as possible so you can start climbing that property ladder.  Get into a condo early, then trade up in a few years to a starter house, and trade up again a few years later.

Of course you can guess the primary reason the industry gives this advice:  more transactions means more commissions.  A better idea is to minimize your transactions and minimize transaction costs when one is unavoidable.

While the market was in the downturn between 2010 and 2014, the property ladder was completely broken.  Condos were dropping in value faster than detached houses.   Most people sitting on a condo in that time would have noticed that the rung above them on the ladder was moving ever further away.

In today’s hot market it’s debatable whether it makes more sense to jump in sooner or wait until you can afford something that you can stay in for the long term.   What’s not debatable is that condos are on the whole not appreciating at the same rate as detached houses.

One way to look at this is to see how many median condos you would have to trade in for a median single family home over time in Victoria.

skyboxes

I imagine if we compared them with a repeat sale index the trend towards detached homes out-appreciating condos would be even stronger.

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79 thoughts on “How many skyboxes for a dirtbox?

  1. In response to “Cook” on the attraction of a new condo over an old house. One of the reasons people like an older house is because of the character and the size of the rooms. New condos are “small”. There is nothing like having control over what you do to your own house. No strata. A well maintained and clean home can be as good as any new condos generally. They are meant for raising families. I am quite convinced that the materials in new homes are going to reveal issues just as old homes have. If it is not one thing it will be another. Wallboard from China is an example: Certain Plastic plumbing lines, venting fire hazard issues for dryers, calking compounds, Glues, stranded support beams, granite countertops, electrical boxes, stove venting issues related to sealed houses. You name it…. there will always be people tearing out what is fairly new and replacing everything with the latest “Trendy” thing. Kitchen cabinets generally last about ten years before they are considered “Out of date looking” and implode the value of your home for a trendy society that demands “NEW” all the time.

  2. Thanks for the anecdotal evidence Cook. That does support what I have been seeing with the increasing days on market. Nice to match up the empirical data to what is happening on the streets.

  3. Mon Jul 11, 2016 – 9am:

    Jul Jul
    2016 2015
    Net Unconditional Sales: 265 796
    New Listings: 354 1,235
    Active Listings: 2,240 3,942

    Please Note
    Left Column: stats so far this month
    Right Column: stats for the entire month from last year

  4. I also see the teakwood property still on market too. Where the last month crazy buyer purchased the other one unconditionally for over a million.
    And I went to a few open houses last week were they said offers would be accepted on Sunday/Tuesday etc. Alright areas spruced up homes and then I see they are still having another open house this weekend again.

    DOM isn’t significant enough yet to determine anything yet. Realtors are still doing those rush open houses offers after for a lot of homes. Likely just summer vacation etc, and a few more listings seemed to come up the first week in July adding to the mix.

  5. One of the economic indicators that I like to track is the days-on-market. The DOM measures market exposure and is the first to reflect a change in real estate conditions.

    The drop in the DOM for stand alone houses happened in February when it fell precipitously from 17 the month before to 10 days. And since then has bounced between 9 and 10 for the second quarter. That ultra low DOM made it advantages for agents to place an exposure limitation on their listings, such as 4 days, to entice multiple offers at over asking price. With a few agents suggesting to prospective purchasers that in order to win the property they buyer should multiply the number of offers by $11,000. Sure enough most of those prospective buyers did win the property.

    Things seem to have changed a bit this July. Perhaps this just reflects the holiday season but the DOM seems to be rising. It isn’t a remarkable change from 9 to 11 days. And if you’re bullish on real estate you might want to slough this off as just being seasonal. But seasonal or not – it is a change. And that change will likely reduce the effectiveness of the delayed offer marketing stratagem and lessen the dramatic offers over asking price this summer.

    And this is a good thing. Especially if you are a selling agent as your client may have a better chance of getting their offer considered without being bullied in a delayed offer or blind auction situation.

  6. Interesting news out of Australia – funny how it’s so easy for other jurisdictions to have such detailed data on these foreign loans, whereas BC seems to struggle with it. I guess Australia isn’t relying so heavily on real estate as the driver for their economy, and so they’re willing to rock the boat to the benefit of first-time home buyers.

  7. guess more foreign buyers will be coming here now

    Good point.

    If any foreign buyers laws came here it would likely take years to implement

    The provincial and federal governments have already said that they don’t want to do anything to jeopardize the equity of home owners. In other words they have no interest in solving the problem. This bubble (in Vancouver) is going to have to collapse by itself. It is too big to bring down in any controlled way.

  8. Interesting about Australia…guess more foreign buyers will be coming here now. If any foreign buyers laws came here it would likely take years to implement. Plus with government allowed to accept foreign political donations. Also the property land transfer tax is highest in Ontario and BC is a big money maker for the government just sitting there collecting revenue on every sale transaction. Some provinces like Alberta don’t even have transfer tax.

    I think maybe easier to persuade local municipalities to take action for foreign buyers (higher property tax on foreign owned property) or something Or on vacation Airbnb properties. Eitherway they dont even have the proper data to know the actual amount of homes owned by foreigners, investors, etc. They got a long way before a ruling like Australia comes here.

  9. good perspective on condo market. Its all supply and demand. I remember when the songhees area (anything over the bridge was pretty much just esquimalt back then) was being built everyone thought they were crazy. And lots of condos…plus then leaky condo incidents all over the city. Lots of supply and little demand at that time.

    I think that the condo market will go up for a little longer until the house demand goes down. For condos are a better investment for the investor who wants low mainteance long term rental income vs a house (yard work, building up keep, new roof etc) a condo strata takes care of that for you. My friend just rented a downtown condo the owner was from Hong Kong.

    For the baby boomers, as it stays a sellers market most of the open houses I have gone to are either rental properties or senior homes. They are sell out and likely getting into the condo market or for something smaller and easier to maintain

    For the out of towners they can come and go more easily. As more baby boomer are looking for a vacation place or retirement place for when they retire or semi retire. I have a friend whose condo is rented to a out of town doctor who just wants a place here for occasional work and get away.

    For first timers and others, as the sellers market has pushed more people into the condo market. Limited house listings you can get a old house with lots of work needed, or move out of town to get a house or get a brand new/newer condo.

    I personally romance with the idea having a hertiage or charming old houses but the maintenance and amount of money required to upkeep and bring to modernization (feel that its just a asbestos silver fish earth quake crumble hazard). I also am a little skeptic of buying a house that was a rental property as it likely would have lots of deferred maintenance on it too. But that is just my preference and taste many people are more romantic and up for the challenge. Is all things why a newer condo or building would be my choice over a old house that are in my price range in this market. Just another person adding to the condo rising market demand.

  10. Yep. Would be very easy to go a long way to solving housing affordability and we don’t have to spend a penny. Only lend on Canadian income and shutdown the investor visa program.

  11. I lived in a family filled apartment complex in Rotterdam. Nothing like it is built here. Can’t raise a family in a luxury micro loft…. Is there any family oriented condos being built out there? Two bedrooms with good shared outside space and proximity to a park? It’s simple…. The old capital city center would be perfect but they chose 500sqft condos that front onto a strip mall parking lot…

  12. We lived in a condo with two toddlers in Fairfield. Loved the area and walking ability to everything but as kids got older. Noise complaints started and 800 sq ft got small very fast.

    Have family in Europe yes they live in “condos” pretty large apartments in the city but also have a family farm house that go away in summer and when not working. With there 12 week vacation time. We are considering a newer town house vs a old large maintenance repaired house now.

    Also strata fees are pretty heavy and increase as building ages. 10 years ago we paid 200 a month now pay almost 400 a month not including special assesments. Mind you a older house would likely cost similar for repairs, maintenance and more to heat of poorly insulated.

  13. So BNN or Bloomberg or CBC or Financial Post quoting bankers saying they have backed off on lending, or new data from financial institutions countering perma pumpers don’t warrant discussion on the truth ? Only how 100 people showed at an open house and paid $200K over is worthy ?

    Sounds like you prefer self serving information and didn’t learn a thing with that masters about debate of facts. Since you just bought a house you have no interest in seeing the market seriously correct or crash which is understandable. Many house hunters out there do want to hear it which is what this site is about,but I’m sure are the silent majority.

    You could always try Vibrant Victoria where all the agents and developers hang out butt slapping each other. You’ll get all the biased info you want to hear to make you feel better about your new purchase.

  14. Vicbot,

    Good points. Imagine if instead of provinces and territories Canada was completely separate Countries. Could well have happened in our history a number of times, particularly in BC when British, Spanish signed treaties. The Oregon treaty was another…

    I imagine the family structure would look much different and be more similar to Europe if the travel between provinces was restricted. But, Big Country, Big Cars, Big Travel.

  15. Hawk,

    I can’t imagine why you felt I was singling you out…

    Being a homeowner is not a profession. That’s true.
    I did however open up the spreadsheet that I used that helped me make our purchase. It showed just over 500 hours of editing time. This was time used to mine data, comparibles that would have impressed anyone in the industry. I was asked to share the information however since the base information I did not own, I felt it was not appropriate.

    Having a Masters degree does not make one an expert in any field. I’m sure in your spare time you’ve read Malcolm Gladwells books. Some of them are very insightful and explain how our education system is flawed.

    I welcome contrarian views actually. The posts of how boots on ground open houses commentary and the number of offers are fantastic. The arguments that ensue are brilliant. But those who copy/paste from self serving websites do nothing to inject accurate information to the fray. Fox News faithful will never agree with a CNN discussion and vice versa. We differ, and I don’t support your links.

  16. Just another tidbit from my European relatives – they have a lot more extended family closer to where they grew up, which means they can experience the benefits of a lot of different types of real estate …

    Some family have both houses in the country/mountains (or “burbs”) and condos in the city. They also share country cabins amongst extended family. Many middle aged people have large houses in the countryside that are occupied full-time by 3 generations, because it’s just too expensive for the younger folk to get their own place (they just keep building the house bigger). Some have just small apts in the city, but often visit the country cabins on the weekends.

    By contrast, in Canada, a lot of kids follow careers that often take them thousands of miles away from home – it’s a much more “fend for yourself” kind of existence – where if you buy a condo – that’s what you have. Not a lot of country weekends with the rellies, growing organic food, making wine, taking part in more local arts/festivals per capita than here.

    In those ways, I think Canada is at a bit of a disadvantage – its size makes it more difficult for people to share the benefits of both houses & condos with family – so people always want more than they actually need.

  17. Yes Triple A, let’s all bury our heads in the sand and ignore all the new info coming out daily on the fast changing market conditions coming from non biased professionals in the business rather than living in the past. Being a (new) homeowner doesn’t qualify as a profession last time I looked.

    Agree on the ignore function, so many bulls offer zero substance on here, just rah rah rah.

  18. Totoro…

    Trolls tend to hyperlink. They’re not all 16 year olds in their parents basements but their mental aptitude is comparable.

    I can search SCMP, Bloomberg, RT, BBC, and (uggh) Huffington post like anyone else. But I don’t care really. This forum works best when questions posed and information given comes from those in such professions. There’s a few posters whom if there was an ignore function would be silenced long ago.

    There’s a great article in psychology today that asks whether depression is an addiction. Brain food for thought…

  19. That will make the next 25 years of SFH performance in real terms quite different than the last, as the following generations aren’t nearly enough to offset.

    Maybe.

    That chart is already 10 years old and seems like it is only one factor. Here is a more recent 2013 chart for BC showing a pretty solid wall of future homebuyers:
    https://commons.wikimedia.org/wiki/File:British_Columbia_population_pyramid.svg

    The buying window spans multiple generations and the number SFHs in Victoria’s core is limited. Foreign buyers are about 3% and immigrants to Canada also add to the buyer pool. We need to remember that a lot of Asians have immigrated to BC legally and are not foreign buyers but add to the pool of Canadian buyers along with the generations after the boomers.

    between 2006 and 2011, found on average that 53 per cent of immigrants to Metro Vancouver during those five years became homeowners in that period. They bought roughly 100,000 homes in Metro Vancouver during the five years, ranging from suburban condos to ritzy mansions. “New Chinese immigrants were at the top of all this. Kind of incredibly, their rate of home ownership was 73 per cent,” said Hiebert.
    http://www.vancouversun.com/business/immigrants+help+drive+metro+vancouver+housing+market+study/11782608/story.html

    Boomers I know – my parents generation – tend to stay in their homes as long as possible – far beyond one generation coming up behind them. How do these factors impact the future of the RE market in Victoria? I’d suggest the boomer attrition rate and age-related preferences are only one of many factors. Boomers may have cash, but the next generations have credit and boomer parent assistance until and unless they inherit boomer money.

  20. I’m simply pointing out that the mountain of move-up house buyers, buying bigger & better over the last 25 years will soon shift to downsizing.
    If you shift the following chart ahead 10 years you can see that the ‘mountain wall’ is now turning 70. That will make the next 25 years of SFH performance in real terms quite different than the last, as the following generations aren’t nearly enough to offset.

  21. Not to forget Canada’s thinking on Eastern Europe these days. Don’t mind the bombers grandma.

    Canada will send troops, fighter jets to eastern Europe, Trudeau says, as NATO faces off against Russia

    In Poland, Prime Minister Justin Trudeau announced Friday that Canada will send troops and fighter jets to eastern Europe, where tensions between NATO and Russia have reached levels not seen since the Cold War. A Canadian frigate will also operate in the region.

    http://news.nationalpost.com/news/canada/canada-will-send-troops-fighter-jets-to-eastern-europe-trudeau-says-as-nato-faces-off-against-russia

  22. locals will say anything to help make themselves feel better living in a communist state

    Have you actually been to Eastern Europe? I have. I was there when the wall came down and I’ve been there multiple time since. Part of our family still lives there. I’d say reading reports from your armchair only gets you so far.

    There are significant drawbacks to the post-communist system, but there are some things about Eastern Europe that can be generalized to the region and, imo, the focus on family and community that is better than here. Community and family contributes significantly to happiness.

    And then there are country by country differences. Many eastern European countries are becoming attractive to North Americans as retirement destinations. Your money goes further and the quality of life (healthcare, housing etc. is high). Dubrovnik is often named in this category as a top ex-pat retirement spot: http://www.forbes.com/pictures/mjd45ehgdk/croatia/#311a9aa627c3

  23. I’m not sure I understand what you are saying.

    Are you saying that SFHs are no longer going to be the main source of wealth for Canadian families? If so, I would disagree. People need a place to live and our culture strongly values this and once you have it there is strong motivation to pay it off for retirement.

    In addition, there is a very large cohort of house-coveting folks behind boomers including gen x, y and z plus immigrants to Canada and a very limited amount of SFHs in the desirable core areas of Victoria. Boomers are just one group and the house buying window extends through multiple generations at a time: http://www.pewresearch.org/fact-tank/2016/04/25/millennials-overtake-baby-boomers/

    Are you saying that the overall long-term appreciation of Victoria core homes at 4% per year is going to fall and fall below condos? If so, I’d disagree. I would agree that short term this could be a negative return rather easily.

    I think that applying logic to the best evidence we have does not support negative long-term appreciation for SFHs or an increase in appreciation for condos above the SFH long-term appreciation rate.

    As far as 15% a year appreciation, that is an outlier when you look at long-term averages. Just like the stock market you need to back up and look at the rates over time to come up with a reasonable estimate of returns.

  24. I don’t know, the locals will say anything to help make themselves feel better living in a communist state they can’t get out of. Doesn’t look like a nice place to live under regimes constantly on the take.

    “CROATIA has been an economic and political basket-case for years, but the events of the past few weeks demonstrated that things could still get worse. ”

    “Ever since Croatia proclaimed independence from a disintegrating Yugoslavia in 1991, its politics have been dominated by the Social Democrats on the left and the Croatian Democratic Union (HDZ) on the right. Social scientists observe that for many Croats, voting has less to do with left- or right-leaning ideological beliefs than with whose side one’s family was on during the second world war. In Croatia this was also a civil war between Yugoslav communists and supporters of the Nazi-backed Ustasha regime.”

    http://www.economist.com/news/europe/21700837-balkan-problem-child-unable-stop-squabbling-even-football-pitch-its-government

  25. Buy one and in 25 years you will be financially better off than the condo owning family based on the available stats.

    I’d be careful counting on the last 25 years stats. 25 years ago saw the peak boomer buying their first houses at age ~30 and moving up into bigger and better houses ever since. I can confidently say the last 25 years for SFH prices in ‘real terms’ won’t be repeated in any of our lifetimes. It was the perfect storm as the largest generation in history went through their house buying years.

    My long-term plan is to focus on where that population bulge will now start to pay a premium for amenities over the next 25 years. I’m even starting to consider things like wheel-chair friendliness as the leading edge is already age 70. The bonus with these 4 focus villages, is you’ll also get lots of high-paid techies, health care workers, etc.

  26. Marko,

    Could you fill in the blanks for me…

    View Towers I believe when it was constructed was over height. Was there a large number of fines that went with this?

    The entire reason Westshore is such a predicament is that the height restrictions were imposed years ago. There is no reason that the city with proper city planning couldn’t have come up with a beautiful plan.

    When we first heard the term property ladder it was from a realtor. He drove us to an area of Vancouver on the East side that we were not at all interested in at the time. I felt I was being force fed a sales pitch from the industry. But you know what? We would have been more than $1.5M wealthier if we had of listened. We have no regrets, but those are facts.

    Simple math will show you that renting for $2000/mo for 5 years is $120,000. But rents increase typically every year by x%. At 10 years this is roughly $250,000 after increases. In those 10 years you’re living under someone else’s rules, and you’re at the mercy of the owner selling.

  27. I don’t know, residents of Zagreb are pretty happy with their quality of life.

    http://www.croatiaweek.com/zagreb-residents-happy-quality-of-life-in-european-cities-survey-reveals/

    One thing that is interesting is that the housing cost/income ratio in Victoria is considered “low” in comparison. In Zagreb prices are twice what they are here compared to income.

    http://www.numbeo.com/quality-of-life/compare_cities.jsp?country1=Canada&country2=Croatia&city1=Victoria&city2=Zagreb&tracking=getDispatchComparison

    You would think Canada would have some decent soccer players with all the back yards to play in.

    Again, this is a structural/cultural issue imo.

    You need a group of kids to get good at soccer imo. Groups of kids are not playing soccer in backyards. Kids are only playing soccer on teams at scheduled times here – there is not a big culture of heading down to the school yard to play off-time. You see more ultimate Frisbee and basketball going on informally in good weather.

    Kids here are playing hockey in winter in many places on outdoor and indoor rinks like kids are playing soccer in Europe. That might be why our players are better than Croation hockey players in general.

  28. I don’t get this touting Croatia as some example of clean urban livelihood for Victorians to look up to. The place is a constant source of corruption on the same rating scale as Turkey. Maybe all these athletes try harder in order to get out having to live in a concrete box with 10 other family members.

    Survey: Croatia and Slovenia most corrupt in EU

    https://euobserver.com/justice/120064

    Croatia: Government Collapses Amidst Corruption Scandal

    https://www.occrp.org/en/daily/5372-croatia-government-collapses-amidst-corruption-scandal

  29. Another reason why condos don’t appreciate the same as houses is because you can so easily build more & more on the same land area (just build up).

    Europe isn’t really that comparable to Canada – it has a population of 743M to Canada’s 35M (same land area), and is also constrained by geopolitical boundaries. Apples to oranges.

    I definitely see a need for condos for singles & elderly here, but I just disagree that we have to clearcut forests. Victoria’s population is expected to decline starting 2025 (stats have been posted here before, so it’s probably not necessary to repeat them).

    Population growth is a mix of Owners & Renters, & a mix of singles & families. If you group kids, teens, and adults into families, and also subtract those retiring or passing away – then you end up with additional housing units in the hundreds per year for owners & renters, not tens of thousands.

    We witnessed this in Vancouver – unfortunately some developers exaggerated the need for density to the point where much of those condo units were & ARE being sold to investors, pushing up prices, and families have to commute >2 hours across toll bridges, generating more pollution.

    We saw that as soon as high-rise condos went up in an area, land prices for homes in that same area shot up, because more & more developers wanted to build more condos.

    So it’s not as simple as “Move to where it isn’t expensive” – it wreaks havoc on everybody (including people like me who have a house and just want a stable, environmental friendly community).

    Then – low & behold – Bob Rennie says 50% of $4M houses (not luxury) in Vancouver are sold to foreign buyers: http://www.mansionglobal.com/articles/2498-vancouver-s-international-appeal

    Whaddya know – the local population can’t afford them. This really wouldn’t be good for anybody, even those who currently own, because it makes neighbourhoods disappear.

  30. Marko, I likely answered this question already but the functioning of the overall community is the issue here.

    I have no problem with small space living: we have four kids and a dog in 1400 square feet and it is great. I would have no problem with living in a condo with kids if it worked: here it does not work due to the lack of a community of people making this choice. Given the environment, I think it is a sub-optimal choice myself if you can afford more because of the capital gains tax exemption etc.

    In Europe the kids are having a great time down at the ugly playground for the building with the grandma’s who are neighbours watching. Here parents are driving their kids to fancy playgrounds on the weekend in their limited free time. They usually don’t know the other people using the park. It is actually more comfortable to have kids over for “play dates”. Life just functions different. Geography has a role as well, our cities are more spread out as is the population in general. People tend to like what they grow up with and invidualism and individual space is a strong cultural value.

    And again, SFHs appreciate faster, cost more and financing is available. Buy one and in 25 years you will be financially better off than the condo owning family based on the available stats. Does that matter? Yes, to most people imo.

  31. The apartments may be ugly concrete buildings but they are concrete and filled with families of people who are educated and who create community. That does not happen here imo except maybe in some co-op apartments or family housing at UVic which we loved

    This is a really good point I’ve never considered before.

    A house is objectively a better choice given all the options and your cousins would, I bet, be in one if they lived here.

    Yes, they would go for the house any day. All I am saying it isn’t the end of the world to live in a condo like people make it out to be. Finances aside I would rather live in a 1,500 sq/ft brand new condo in the Songhees than a 4,000 sq/ft brand new home in Cordova Bay, for example.

  32. I think it is what you make of it.

    To an extent, but the greater impact of cultural norms and availability of other affordable options that are perceived as, and objectively are, more desirable mean, imo, families will continue to want to live in SFHs if they can afford it.

    Your cousin has a good quality of life in the 650 square foot apartment. My relatives in Eastern Europe do too. But that is because it is normal and the apartment community accepts kids and often small dogs/cats too. The apartments may be ugly concrete buildings but they are concrete and filled with families of people who are educated and who create community. That does not happen here imo except maybe in some co-op apartments or family housing at UVic which we loved.

    Here in the apartments that accept kids are generally purpose-built rentals you often get people on really low incomes. Many are single parents and all of them hoping to move out and into a place with more space – and a really high rate do so there is a lot of turnover. I lived in such a place as a young kid. There was definitely a stigma associated with it, and while I enjoyed some of the friends I made, the values and conduct of some of the residents were pretty sketchy. I would not want my kid growing into a teenager in that environment and I would look to a basement suite in a house instead, or more likely a shared house with another family, if my budget was limited.

    I too have enjoyed living in apartments as a young adult, there are some wonderful character buildings around Victoria, but with kids the feeling of having to control noise or being relegated to the few places that accept kids is less fun. And often our building techniques don’t do much to minimize noise. Those that do are usually in downtown areas with no play spaces where the homeless issue is prevalent.

    So in comparing Europe to here you are not comparing apples to apples. A reasonable person with family there makes a choice to live in a small condo. A reasonable person here would not even if the budget is limited, except perhaps in some areas of Vancouver where options have run out.

    In other words, it is not all about having a dog. A house is objectively a better choice given all the options and your cousins would, I bet, be in one if they lived here. A condo for a family is an outlier choice here that would only work for me if it was an intentional community of some kind like they have in Scandinavia. Co-housing has always seemed to be a better choice to me and that motivated our multi-family purchase. We’ll see if it works out that way.

    Co-housing began in Denmark in the 1960s when young professional families bought adjoining properties to share childminding. Now an estimated 8% of Danish households are co-housing; shared facilities now typically include gardens, maintenance and eating.

  33. What is the benefit of the SFH objectively speaking? Don’t get me started on a pets……it’s like buying three cars and saying you need a three car garage. Pet = luxury item (medical service dogs excluded).

    In Croatia the majority of the population lives in condo buildings yet, for example, the country pumps out an insane amount of top tier atheletes for a population of only 4.3 million. Tennis, soccer, basketball, etc.

    You would think Canada would have some decent soccer players with all the back yards to play in.

  34. “I just came back yesterday from 6 weeks in Europe and you would be surprised how many people live happily in condos with families.”

    Another developer promotion ? Don’t think many here will agree on a claustrophobic lifestyle just to save some gas and half an hour or so.

    “Unit is about 650 sq/ft and the living room doubles as a playroom.”

    So the play room is like 150 Sq ft with toys scattered every square inch. Yep, every Canadian family should live like this, no pets, no space allowed, I imagine no love life either with bunk beds in the same room, and ride your bikes through congested downtown traffic with the crackheads for leisure.

    2007 looked just like this, cranes and holes in the ground everywhere, a year later the holes were still there and the cranes not moving or being dismantled.

  35. Condos have strata fees that typically exceed SFH taxes for the year.

    Except those condo fees cover maintenance and upkeep, as well as energy costs for common space (and sometimes for the units too). I’m not convinced that strata fees are actually an extra cost over SFHs. It’s just that SFH owners delude themselves into thinking their maintenance and energy costs are less than they are.

  36. “What data? I haven’t seen any. Drawing graphs into the future is not data.”

    Since Mike is leveraged to the hilt, it’s no wonder he draws charts only going up. The data points to an overvalued market, even in Victoria based on average incomes. At 9 times income it’s a bubble here too. Banks historically lend at 3.

  37. The main reason condos don’t appreciate as fast is that they have a smaller percent of land attached than a house imo

    That’s probably the best explanation.

  38. I just came back yesterday from 6 weeks in Europe and you would be surprised how many people live happily in condos with families.

    My cousin (PhD chem), her husband (P.Eng), and two kids (3 and 7) live in a one bedroom condo (looking to upgrade to two bedroom) and I would say their quality of life is better than the majority of families in SFHs here. They are out riding their bicycles every day, playing in the park outside the building, no useless junk in the unit, the kids are really happy and active.

    Unit is about 650 sq/ft and the living room doubles as a playroom. Linear style euro kitchen to save on space, master bedroom has queen and bunk bed for the kids. Laundry in the bathroom.

    I think it is what you make of it. If you are fixated on the notion that you absolutely need a yard for your future dog “Bo” and a backyard for your kids that will take a backseat to the Xbox than yea condos are shoeboxes.

  39. In the end he had the bank agree to short sales and he walked away broke.

    I thought eight houses were a lot but he told that some of his friends owned more than that and they lost everything too.

    I know a family friend that went from having a 20 person construction company to nothing in the 80s. Had to restart and lives in waterfront home now.

    My thoughts on this are if you are <35 yrs old it is the time to take risk. Even if you go broke you can still recover 35 to 65. Piling on fresh rental properties in this market in your 50s is somewhat risky if everything blows up.

  40. Another more obvious reason for the comparative lack of appreciation in condos is the fact that Victoria in particular but all of Greater Victoria in general seems hellbent on throwing up so many of them. You can’t drive for five minutes without seeing a “mixed-use” multi-storey cell block under construction. There are literally thousands of new units, with hundreds more on the drawing board. People wouldn’t generally choose to live in apartments and condos, given a choice; it’s a way for local municipalities to stack and pack more taxpayers, supported by glib “sustainability” (here-is-your-shoebox- you-will-like-it-because-it’s-green) rhetoric. Bubble valuations feed the ideological beast, as people can’t afford anything else, even with too-easy credit.

    So what is your solution to a growing population? Do some more clear cutting on Bear Mountain and in the Westhills and clog the roads with more cars?

    Lived for years downtown in a shoebox, loved it. I only live in a house now is because it makes more financial sense (better appreciation and tax free, huge suite income, etc.)

  41. No. Condos have strata fees that typically exceed SFH taxes for the year.

    Plus you have to pay taxes on the condo as well.

    It would appear that BC assessments rarely factors in parking spots (or lack of) and you don’t pay strata fees on parking spot either. In some downtown buildings such as the Era parking is going for around $200/month. Given there is no additional cost to owning a parking space you get actually get a decent return on adding a $30,000-$40,000 parking spot to your unit. To get $200 per month it needs to be in a building where there are quite a few more units than parking spots.

  42. No. Condos have strata fees that typically exceed SFH taxes for the year.
    There are also an excess of number of units with exciting names that Bob Rennies systems exudes.

    I have nothing good to say about Rennie. Complete waste of Bone Marrow.

  43. The main reason condos don’t appreciate as fast is that they have a smaller percent of land attached than a house imo. Generally buildings depreciate and land appreciates. Appreciation differences compound over time widening the gap. I didn’t realize the degree of difference until seeing the chart – tx.

  44. He uses data to arrive at his viewpoint rather then a fixed viewpoint that most here have.

    What data? I haven’t seen any. Drawing graphs into the future is not data.

    Prices in Victoria are 12% lower then 2007 adjusted for inflation (median)

    They most certainly are not. The median SFH in 2007 cost $498,000. That is $572,000 in today’s dollars. Current median is $656,000 or 15% higher. Where did you get 12% lower from?
    Median condo in 2007 was $274,000 or $315,000 in today’s dollars. June it was $326,000.

    I do agree there is no bubble here, but your data is way off.

  45. Another more obvious reason for the comparative lack of appreciation in condos is the fact that Victoria in particular but all of Greater Victoria in general seems hellbent on throwing up so many of them. You can’t drive for five minutes without seeing a “mixed-use” multi-storey cell block under construction. There are literally thousands of new units, with hundreds more on the drawing board. People wouldn’t generally choose to live in apartments and condos, given a choice; it’s a way for local municipalities to stack and pack more taxpayers, supported by glib “sustainability” (here-is-your-shoebox- you-will-like-it-because-it’s-green) rhetoric. Bubble valuations feed the ideological beast, as people can’t afford anything else, even with too-easy credit.

    I could not disagree more with Michael’s graph (below) or his assessment of the state of the broad markets. That institutional graph is comical.

  46. I subscribe to Michaels viewpoint, which by chance has been correct ever since he started posting here. He uses data to arrive at his viewpoint rather then a fixed viewpoint that most here have. Sadly, if you have used real money and put it down or out depending on a fixed viewpoint of the future, you will lose it all, which seems to be the situation for the bears here who priced themselves out of the market by thinking their perma viewpoint was correct, and gambled.

    Prices in Victoria are 12% lower then 2007 adjusted for inflation (median). I do not see the bubble here.

    I do not see the issue. If it is too expensive then move to where it isn’t.

    Problem solved.

  47. Here’s some free education for you Mike on world debt and how it’s not the beginning but the end of the cycle. Keep buying those loonies, you’ll need them when this all unravels.

    Never knew Bank of Japan owns over 50% of the entire ETF market and top ten holder of 90% of 225 stocks on the Nikkei exchange. Scary.

    A Story of Debt

    https://www.youtube.com/watch?v=CLQsT9BPHpg

  48. Mike, you really need to learn how to read a chart. We’re coming over the top and entering the recession zone. Canada’s economy only produced 700 jobs last month, property prices have peaked, commodities are way over bought from the bottom many months ago and are beginning to fall after hoarding by China.

    The TSX is still way under the peak 2 years back down 1500 points. Safe stocks have been purchased all year, not growth stocks, loonie is dropping, and you need a new advisor.

    http://stockcharts.com/h-sc/ui?s=%24CRB


  49. We are here^
    Commodities, stocks and property (likely even prairie prov’s) have all recently bottomed past couple years. TSX bottomed in Jan at 11500 (now 14250). Bond yields are the next to bottom before we can enter the ‘early upswing’. Late upswing will be sometime 2020s.

  50. Interesting article indeed Vicbot. These BC Liberals clearly have no ethics nor morals. I have lost track of the scandals in just the past 4 years from Quickwins to get Clark elected, to cheating to get the leadership, to Deletegate to hiring back people to head the party executive who are under criminal charges.

    Health ministry scandal leading people to lose jobs, and their lives was the worst, with still no clear investigation results.

    It’s the most pathetic political leadership ever in BC. SiteC will be the biggest boondoggle ever after the LNG scam to get elected. Meanwhile Clark takes real estate companies to China while the bubble is about to blow and the public is tapped out. The incompetence is incredible yet all these corporations donate multi millions. No corruption here folks, carry on.

  51. I interviewed a few people that went through the 1980’s crash and one story was memorable because it wasn’t about interest rates.

    This fellow was in the construction trade and bought and rented houses. He had 8 houses and they were all paying for themselves and things could’t be better.

    Things started to change when the tenant vacated one of his houses. He thought nothing much about it because he never had a problem finding a new tenant. But this time it took longer and he lost a months rent. Then another one went vacant and the same thing happened. It was taking longer to find a tenant and he was getting behind at the bank.

    And the economy kept getting worse as more people were leaving Victoria to work in Alberta and he had to drop his rents to find a tenant. And it still got worse. Eventually, he just didn’t make the bank payments on one house and the lender foreclosed. Then the next house was foreclosed on.

    In the end he had the bank agree to short sales and he walked away broke.

    I thought eight houses were a lot but he told that some of his friends owned more than that and they lost everything too.

  52. Interesting article on the contrast between OECD’s warnings & what BC politicians do:
    http://vancouversun.com/opinion/columnists/douglas-todd-b-c-politicians-almost-alone-in-seeking-foreign-donations

    “B.C. is one of the few jurisdictions in the world that welcomes political donations from foreign individuals and corporations … The B.C. Liberals allow this practice even though the Organization for Economic Cooperation and Development this year declared that foreign donations to political parties threaten sovereignty … money may be a means for powerful special interests to exercise undue influence, and ‘capture’ the policy process.”
    “it is mostly a handful of African countries that lack bans on foreign donations”

  53. ” I knew several people who were wiped-out by 1983.”

    So did I, which is when I rebought for 50% off. Until you’ve seen it, you won’t believe it for most. The concept that buyers stop buying for a very long time and prices dropping in big ways doesn’t compute for this generation.

    2008 wasn’t even a blip here because of our bank bailouts for $114 Billion and were inspired by Harper to keep lending as the trade off. Not going to happen next time.

  54. The speculator is after short term gains. Things don’t go the right way, they bail. We also have amateur investors buying rental properties for $575,000 that only rent for $2,100 a month.

    One couple from Vancouver bought a starter shack in the city with the plans to move to Victoria when they retire in 5 years. The rent doesn’t cover the mortgage and opportunity costs. So they will be paying between $500 to a $1,000 every month over the rent they will receive for the next five years. Then they’ll have to pay capital gains tax, if they are lucky, when they change the use of the property from rental to home occupation.

    These are amateurs that have not thought things out. In half a year, the stupidity of what they have done will come to them. And that house will once again be up for sale. That house has been up for sale four times in the last ten years.

    Most likely many of those on this blog can point to a house or two that is always coming up for sale on their block. The same house up for sale over and over again.

    As Totoro said, the numbers just don’t work for buying a rental property in Victoria.

  55. Michael, not every spring in every year.

    In hot markets sales activity stays high and prices keep rising. And while we have low listings – we still have listings.

    There are 275 detached houses to choose from today in the core. About the same number of condos to choose from too.

  56. Hawk is 100% right about 1981; I was there too. The people who were wiped-out in the following 24 months were the first time buyers and the house hoarders (real estate investors) and over-stretched builders who had purchased multiple houses, were buying more, renovating, and then trying to flip. I knew several people who were wiped-out by 1983.

    It’s the same thing happening now with house hoarders causing rapid price escalation that is preventing first time buyers from buying a home.

    http://www.cbc.ca/news/business/house-prices-brexit-negative-interest-1.3659726

  57. When I sold my first place in spring of 81 before the crash the place sold within hours at asking price, no conditions. Sales were hot, and the market was falling all over itself the rest of spring into summer then the slowdown came.

    Every spring does not mean guaranteed price rises for years to come. The buyers that spring found out the hard way and paid for it dearly over the next 10 years. Talk about a major ouch.

  58. Shocking how sales peak in every city, every Spring, every year! Who could have ever imagined the seasonality of the housing market?

    Same tactic, every year (yawn)… give it up JJ! 🙂

  59. And as Professor Sommerville has said first sales will decline followed by a rise in listings. Only then will prices decline. An overly simplistic view of real estate, in my opinion, but then he is just a professor.

    So here are the sales for houses in the core.

    Month Sales, Number of
    Aug 2015 184
    Sep 2015 179
    Oct 2015 204
    Nov 2015 151
    Dec 2015 106
    Jan 2016 122
    Feb 2016 228
    Mar 2016 318
    Apr 2016 376
    May 2016 338
    Jun 2016 291
    Jul 2016 ?

    and here are the listings

    Month Active Listings, Number of
    Aug 2015 598
    Sep 2015 547
    Oct 2015 467
    Nov 2015 437
    Dec 2015 341
    Jan 2016 347
    Feb 2016 378
    Mar 2016 418
    Apr 2016 398
    May 2016 368
    Jun 2016 365
    Jul 2016 399 so far this month

  60. Between Deutsche Bank potentially blowing up ($32 to $12 a share), with $53 trillion in derivatives and the Canadian banks shorts trading activity up 23% to 56% the past two weeks, the signs of a global slowdown could be a reality. Not to mention Italian banks needing a massive bailout that no one wants to help out with.

    World War 1 is the Canadian economy which is hitting the gutter outside of BC and how long can we sustain it, when most is based on real estate and it’s related offshoots. Personal household record debt levels, and almost zero wage growth kind of sets the table for the inevitable.

  61. Michael, even if our median house price stays the same, the year over year change will increase next month. That’s because in July last year median sales prices were in decline. That’s the problem with using the year over year indicator.

    We are in a different market from last year, making any comparison between the two years ludicrous.

    Far better to look at how the month over month median is changing for houses in the core.

    Month Sale Price, Median
    Aug 2015 $659,500
    Sep 2015 $640,000
    Oct 2015 $677,250
    Nov 2015 $620,550
    Dec 2015 $672,500
    Jan 2016 $655,500
    Feb 2016 $681,500
    Mar 2016 $740,000
    Apr 2016 $759,500
    May 2016 $760,450
    Jun 2016 $743,000
    Jul 2016 ?

  62. Although the Independent article was incorrect about “myths” (a lot of data from Profs David Ley, Josh Gordon, etc disputes that), it says the “orgy of borrowing, spending, and inflation” in Vancouver started in 1886 & ended in 1913 (27 years) One lot went from $90k to $8k from 1913 to 1915. It really only picked up again after the Depression & WWII, 30+ years later.

    There are some parallels today with that same time period of 20+ years, if you look at how speculation started in earnest in the 1990s, after Expo 86 & Hong Kong going back to China.

    When condos first became the rage in Vancouver, we started seeing all the empty ones (lights out, others on, night after night). As Chris alluded to, high prices were partly fuelled by unchecked underground activities. eg., BC’s largest underground economy. this was a discussion around the water coolers back in 2003 and still continues today:
    http://www.theglobeandmail.com/report-on-business/dark-side-of-bcs-economy-grows-like-weed/article773635/

    Then as LeoM & TripleA have pointed out, all the speculation with condos and houses, because of easy ways of flipping & low-interest investing have just increased prices for people to actually purchase a home or condo to live in. (When we were buying, our biggest competitors were the flippers & speculators)

    Then you have illegal B&Bs added to the mix, which became more of an issue with AirBnB’s business model, which helps realtors prepare ROI brochures for investors who can turn apartment buildings into hotels or multiple houses into distributed hotels (see studies by PennState & LA’s “lanne” group)

    You now also have people fleeing places like China, including the crooked types who are hiding assets:
    Vancouver lawyer Christine Duhaime, an expert in money laundering law, said, “in one case a Chinese businessman forced nearly 200 employees to each transfer $50,000 to his Vancouver bank account, all within several days. “He bought a $7-million mansion in Vancouver and had some spending money left over.” And “A lot of the illicit money coming into Canada from Chinese citizens is laundered through real estate in Vancouver,” Hayley Labbé, a senior forensic investigator with the firm MNP LLP, told The Province.

    As that Independent article said, it’s become another “orgy of borrowing, spending, and inflation” that may take a long time to recover from.

  63. The evidence keeps mounting, this bloated pig is letting out gas before the next stage of lower prices kicks in.

    Experts, investors see warning signs of real estate slowdown in Vancouver

    “Academics are reluctant to make predictions without a few more months of data, but a pair of UBC business professors say that the signs for a possible slowdown are evident.

    “Declining sales matching with rising listings is exactly the type of first thing we start to see when markets start to change,” said Tsur Somerville. “We see sales changes, volume changes before we see price changes.”

    His colleague Tom Davidoff agreed, but he pointed out the Bank of Canada’s prediction last month of a possible “correction” to the nation’s housing market could have spooked some buyers.

    Still, there were already suggestions this spring from the Canadian Real Estate Association that the market may have “topped off” after a dip in sales in April.

    There’s no hint in the numbers of prices cooling off so far, but there is scattered anecdotal evidence of homeowners dropping their asking price after they fail to get the desired offers.”

    http://www.theprovince.com/news/local+news/experts+investors+warning+signs+real+estate+slowdown+vancouver/12046281/story.html

  64. Over the past year the median condo is up 19.0% and median house up 15.4%. It’s possible we’re reaching an inflection point as the boomer bulge is now starting to retire and downsize. I don’t think we’re there yet, but possible.

  65. This isn’t 1912 Mike, it’s an overvalued parabolic blow off top you always talked about. It’s here, now.

    Vancouver is the weak link in the chain in the global crack-down on money laundering.

    That’s according to former Wall Street short seller Marc Cohodes who tells CKNW’s Jeremy Lye why in order to save Vancouver’s real estate market, it might be necessary to destroy it.

    http://www.cknw.com/2016/07/08/201079/

  66. Prior to 2010 speculators were holding onto multiple Condo Pre-Sales. Holding 5 or more assignments were relatively common in that speculative area of they market st that time. And then the music stopped, and the market unraveled, but was significantly impacted within the condo market. Yes, SFH did decline but not by the same amount.

    Interesting that government did nothing at the time to curtail the issue of pre sale assignments before it imploded. By default, government is reactionary to previous events. In today’s news environment a news piece a day explores the depths of today’s issues and Voila! Governments hands are tied.

    Some similarities and differences between the condo market in 2009 and SFH today.
    1. New Condos are speculative in nature. Their prices reflect easy access by first and latter home buyers because of their price point
    2. Pre sale Assignments were being sold multiple times (flipped) until final draw
    3. Homes provide a long term shelter, especially for young buyers who may need space to grow.

    Final thought. If house prices stay at their current levels for 5 years, the value of the home will have decreased a minimum of 15+% against inflation. Prices do not have to nominally decrease to become poor investments.

  67. the lot for $725,000 in 1912 would be roughly $18,000,000 in today’s dollars (~2500% inflation since then). So yeah, Van’s still cheap compared to then.

    Except it didn’t say how big or where that lot was.

  68. The main reason the condo ratio has went from 1.5 to 2 between ’88 and now is boomers started going from condos (apts) to houses in the 80’s as they started raising families, but now that they’re turning age 70 they will slowly start heading back from dirtboxes to skyboxes.

  69. For interest sake, the lot for $725,000 in 1912 would be roughly $18,000,000 in today’s dollars (~2500% inflation since then). So yeah, Van’s still cheap compared to then.

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