July 11 Market Update
This post is 8 years old. The data and my views may have since evolved.
Weekly stats update courtesy of the VREB via Marko Juras.
| July 2016 |
July
2015
|
||||
|---|---|---|---|---|---|
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Unconditional Sales | 265 |
796
|
|||
| New Listings | 354 |
1235
|
|||
| Active Listings | 2240 |
3942
|
|||
| Sales to New Listings | 75% |
64%
|
|||
| Sales Projection | — | ||||
| Months of Inventory |
4.95 |
||||
Graphing months of inventory gets a little.. “squiggly” at the start of the month. This is because there are only a couple days of data so things like weekends have a larger effect. However it does seem that sales are starting to seriously slow down which is earlier in the year than usual. Will be interesting to see how the rest of July shapes up.
You can’t read either Mike, I bought it before the bottom and was common put insurance every intelligent investor uses.
BTW, the S&P was down a whole .7% which is a flat market. Funny how a failed economist has to lie about the truth all the time. Oh right, he’s not an economist anymore, probably never was.
Lol, I wonder if they also started shorting the S&P at the bottom in mid-Jan like you.
“Hawk, they made 14.2% while the S&P500 & Dow were both down in 2015 and the TSX tanked 11%.”
No wonder you flunked out as an economist Mike. The indexes are never the tale of the tape as it was the select positive sectors that made money in 2015. It was a stock pickers market and they obviously did well being in REITS and other equities/ETF’s which they traded in and out of I’m sure. Probably shorted oil too.
How did they do in 2008 when everything tanked and no one was spared ?
“All of the plan’s asset classes performed well in 2014/15 fiscal year. Combined public equities achieved strong returns of 19.0 per cent, while fixed-income returns were 9.1 per cent as they benefited from decreasing long-term interest rates. Investments in Canadian real estate were a solid contributor to the plan’s returns at 7.6 per cent.”
Hawk, they made 14.2% while the S&P500 & Dow were both down in 2015 and the TSX tanked 11%.
Only other explanation I would offer for lower medians is that there is so little inventory that the sales are what is left over. Lower quality, busier streets, etc for lower prices.
Also new weekly post: https://househuntvictoria.ca/2016/07/18/july-18-market-update/
“So far this month we’ve had 100 house sales in the core at a median price of $682,500 or $326 per finished square foot with a median days-on-market of 11.”
Wouldn’t that be a kicker if that number holds up down $57,000 in one month ?? The perma bulls might need group therapy. 😉
I only check IPs for new sketchy posters trying to write under multiple names. You’re grandfathered in.
Its a shame you can’t learn to read Introtwerp, might learn something about the real world outside of Gordon Head. You are clueless and sound worried your cushy government pension may be at risk when the walls cave in. They only make 14% when the markets go up, not when they tank.
ICYMI the markets are at the end of a 8 yesr run and overdue for a serious correction like your shack is.
When the market tanks the trades will be crawling all over each other for any work they can get and dropping their prices daily. Typical of every market top to have a shortage of trades.
Hawk and LeoM, you guys are morons. BC’s public sector pension fund, for example, is doing just fine:
bcIMC Reports 14.2% Annual Return For Fiscal 2015
In 2014, it was 14.7%
[Note to Admin: I’m on a VPN connected to Seattle.]
Totoro, thanks for the link. I was looking at the same charts on a different site and I can see that it’s rate of growth that will slow. Also, in looking at the age breakdowns I see that the number of young people is expected to decline which is the demographic that will be contributing to GDP in the next 50 years. I think that was the point I was trying to make.
Has anybody painted a house recently? We got a few quotes for around $6k and I was curious if that’s average for Victoria, or higher than previous years? It’s a combo of 40s siding & stucco.
I’m finding it hard to get tradespeople too and the prices seem higher than a couple years ago. Maybe reflects the hot real estate market rather than a shortage?
I need to have a bunch of work done around the exterior of my home and I’ve just given up hope for the time being. Luckily it is all elective improvement work so I am going to wait 2-3 years for things to slow down.
One sprinkler guy I called said he could come out an give me a quote in two months, lol.
Prices on certain things are a lot higher. I paid $34,000 to frame my home. My friend just paid $56,000 for a similar house.
As I’ve said over the last 6 years on the blog there is an ABSOLUTE shortage of trades. It was difficult to find quality trades people in 2013 let alone now.
Part of what I find so disappointing about this huge run-up in prices in Vic/Van/Toronto is that it feels like Canada is becoming like Europe. In other words, houses are primarily going to be available to those who inherit them. One of the greatest things about Canada is that to date success has been less reliant on inter-generational wealth than in Europe. I think that that’s really about to end.
I agree with you that it is disappointing and it sucks, but it could be the new reality. The only way into Oak Bay at this point is family inheritance or $250,000 to $500,000/year family income.
If prices were to level out right now in Victoria I still think there is some hope. A lot of rental applications I received at the Promontory on my unit were from individuals in their mid/late 20s and the incomes I saw were solid. A lot of the government job employee applications in this age bracket were making anywhere from $48,000 to $86,000 per year.
Take two $75,000 jobs, suite, and you can still get into a nice house in the Swan Lake/Lake Hill/High Quadra area.
In Vancouver obviously all hope is lost.
Rook,
I’m of the thinking it will coincide and the Chinese will be doing most of the selling to get the ball rolling in Vancouver. When they have to sell, they don’t dither, they dump like it’s the stock exchange.
The public pressure via the media is unprecedented in my lifetime which is what the perma pumpers clearly don’t get. It isn’t going away anytime soon with an election campaign just starting.
Horgan has so many bombs to drop on this corrupt liberal regime that Dix didn’t. They are also taking the hard ball route, no wamby pamby with Eby driving it into the public’s brain daily that something has to be done on several fronts to stem the money laundering and counter the palm greasing developers who have been controlling the government for years now.
With the CRA in there now too, there is at least a perception out there that tax evaders and shady real estate agents now have to look over their shoulders. The Feds will love to skewer a good pile of them to pacify the public after all the years of incompetence.
BC Stats predicts the province will have 6.1 million people in 2041. For the CRD they predict a 25% increase over that time frame from 376,000 to 470,000
Hawk , regarding the Chinese media.
With such lax laws which allow rampant fraud and tax evasion here in BC, imagine how much more homes will be sold to foreign owners once the bubble bursts, that is unless there crash coincides with ours. This all speculation of course.
Here – seems quite likely to me:
http://www.statcan.gc.ca/pub/91-520-x/2014001/section02-eng.htm
Michael, where are you getting your population numbers? the charts I see show population growth under three assumptions and the data on fertility rates in the last five years or so appear to have gone down, so the low growth assumption is probably most accurate. Am I looking in the wrong place? The wild card here is immigration.
Mauldin is a naysayer for sure, but refreshing to read someone who calls a spade a spade. Can you suggest a reasonable read that would provide me with arguments backing up your position?
The Economist already did the comparison of worldwide house prices, and Australia, Canada, and Britain still came out with the highest prices (except for Sweden). The Netherlands, Switzerland, Spain, Germany, France, Belgium, etc were lower.
http://www.economist.com/blogs/dailychart/2011/11/global-house-prices
Agro land is a different ball of wax – my family is from that part of the world and Austria is relatively small, covered in mountains, and has less farmland available than Canada – each country has to protect farmland for its own security.
That’s why I don’t think it’s a fair comparison to Canada. Europe has > 20 X the population of Canada in the same land mass, with more restrictive political boundaries & size limitations, which creates a totally different way of allocating land use.
@Marko: “They should put together a chart for 200 sq/m single family home on a 500 sq/m parcel of land. It is probably like 40-50x income in a place like Vienna.”
Part of what I find so disappointing about this huge run-up in prices in Vic/Van/Toronto is that it feels like Canada is becoming like Europe. In other words, houses are primarily going to be available to those who inherit them. One of the greatest things about Canada is that to date success has been less reliant on inter-generational wealth than in Europe. I think that that’s really about to end.
I’m finding it hard to get tradespeople too and the prices seem higher than a couple years ago. Maybe reflects the hot real estate market rather than a shortage?
Good point Leo S. It’s getting tough to get bids on projects, and the two I finally received are alarming.
LeoM,
Indeed the pension funds and insurance funds are at high risk right now. Betting it big on the stock market is risky business. Ontario Teachers lost $20 billion in 2008 and would be $34 billion if similar crash today. Question is how much worse is next time with a credit bubble at multiples of 2008.
The bellwether for the US pension funds is not looking good these days.
Largest US Pension Fund Suffers Worst Annual Return Since Financial Crisis Due To Heavy Stock Losses
“It was the second straight year Calpers failed to hit its internal investment target of 7.5%. In 2015, Calpers earned only 2.4%, which suggests that as a result of the dramatic two-year underperformance relative to the funds’ own internal target returns, public pensions in California are not only significantly underfunded as of this moment, and getting worse.”
http://www.zerohedge.com/news/2016-07-18/largest-us-pension-fund-suffers-worst-annual-return-financial-crisis-due-heavy-stock
Curious where you get “smaller population” from? (beware, Mauldin has been howling deflation for ~20 years)
Even Statscan projections show Canada near 50M in 30 years, and BC nearing 7M.
Well it’s official now when the Chinese media announces that Canada housing is about to crash. Look out below.
Chinese Media Is Now Warning Canada’s Housing Crash Will Be Worse Than The US
“Shots fired! While our media has been pointing out how Chinese buyers are driving up real estate prices, the Chinese media has been dissecting our economy, government, and warning Chinese buyers of the dangers of owning Canadian real estate.
Worse Than The 2008 US Crash
Hexun, China’s largest finance portal, recently published an article pointing to Canada’s debt fueled economy. They noted that Canadians have the largest debt-to-income ratio of any G7 country, with the average spending 165% of their salary. To contrast, at the height of the US housing crisis in 2008, Americans carried what was then considered an outlandish 147% debt-to-income ratio – 17 points lower than where we currently sit. Canada’s total household debt reached $1.892 trillion dollars, with $1.234 trillion dollars of that as mortgage debt – roughly 65% more than we make per year. To put that 1.82 trillion dollars into perspective, we could have run the US government for 8 months with that amount of money.
“This is a very big bubble. And it’s going to end in tears.”
–Paul Ashworth”
https://betterdwelling.com/city/vancouver/chinese-media-now-warning-canadas-housing-crash-will-worse-us/#comment-586
Victoria Real Estate Board
Mon Jul 18, 2016 – 9am:
Jul Jul
2016 2015
Net Unconditional Sales: 512 796
New Listings: 630 1,235
Active Listings: 2,214 3,942
Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year
So far this month we’ve had 100 house sales in the core at a median price of $682,500 or $326 per finished square foot with a median days-on-market of 11.
Compare that to the last 500 house sales in the core over the last two months at a median price of $739,000 or $344 per finished square foot and a DOM of 9 days.
Hawk, you’re right, pension funds are the next big news. Not all pension funds are as well managed as the Ontario Teachers’ Pension Fund who are still averaging almost 9% annual return. Poloz warned about pension funds recently, but he’s late to the game. Pension cutbacks will be the hot topic during the next couple years.
thanks for the comment LeoM.
I think Mauldin’s point, or at least one of them, is that the global economy is not as strong as it appears because most of it moves on borrowed money. When we have countries like Greece and the other PIIGS, Japan and even the UK and US where debt/GDP is higher than one, bad things start to happen like defaults, austerity, deflation and even hyperinflation. Socially, I expect xenophobia and politically, you have coups (Turkey), democratic coups (UK) and protectionism (Trump). Ultimately, I think Mauldin would say we are looking at much of developed world taking on turtle positions and looking to get rid of debt through repressive taxation (forced bond buying) and devaluation (less money or worthless money on Mainstreet) or through hyperinflation (Japan). Some will ultimately default sending ripples or waves or even tsunamis through our highly globalized system. Is it not possible, given this setting, that we could be looking at a sovereign credit crisis as the next step in the Great Unwinding?
Is it not the case that if the US raises bond rates, we will be forced to in order to remain competitive for international lenders? Or perhaps I have that wrong. Not surprising to you I’m sure when I say economics is hardly by area of study.
If we can’t raise international credit, would we not be forced to up the rates on long bonds? We could I suppose increase production but of what and who’s buying if everyone is scaling back? The key here is a shift away from the party and towards the hangover. Once people start thinking they’ll get a better deal down the road whether it’s on lumber, gas, bitumen, fish, or real estate, everything slows down. (Vancouver’s recent slowing is probably because the Chinese gov’t police are cracking down on capital outflow, so I don’t presume to suppose it has started yet).
Here’s a back of the napkin prediction which I unequivocally reserve the right to change at any time: Governments in the developed world will race to devalue their currencies to get rid of debt, print loads more money (Japan is nearly in the quadrillions of yen), impose increased taxes in whatever form to fund their unfunded future liabilities, and they will look for “efficiencies” which usually means job losses I think. The Canadian gov’t will do all these things rather than raise interest rates because Canada and Australia are the last bubbles to burst and the bigger they get, the harder they pop. I bet their conversations are all about kicking the can down the road for as long as they can. No one wants to be left holding the hot potato (apologies for mixing metaphors). I think, and I hate to say this, but the healthiest thing for the Canadian economy would be a controlled deflation until such time that we are living within the means of a country with a smaller population which ours will be in 30 years.
“The chart Michael posted shows the Vancouver is significantly more affordable than many European cities in terms of condos.”
Which means Nanaimo is more affordable than Victoria. Last time I looked this isn’t Europe. Another pathetic salesman justification for a bloated bubble about to pop. Trying to flog some more condos for developers I guess.
How about people get off the HGTV house/condo obsession thing and let the pig self destruct or maybe stop moving here to a town with low selection and tight rental market.
LeoM,
The longer the low interest rates stick around the tougher time the pension funds will have as they are forced to take higher risk into an over valued stock market. The US can’t have it both ways with highest growth in the world with inflation and keep interest rates down forever.
Except this makes zero sense Michael. If kids of Vancouver families (who have likely benefited from the market) are being forced to move due to high house prices then that means no other “kids” (aka young professionals) will be going to Vancouver.
This the city suffers because even young professionals making $200k/year can never hope to own anything more than a shoebox so they leave. And entrepreneurs like you suffer because they can’t find the qualified people to work for them.
Good. Last thing we need is the government piling more money into this market. What we need is less money floating around. Cut at the source of the money going into housing that is not people buying to live and work here. That’s the only possible solution.
Problem is we have yet to have any level of government admit that solving the problem will mean a house price decline.
The chart Michael posted shows the Vancouver is significantly more affordable than many European cities in terms of condos.
They should put together a chart for 200 sq/m single family home on a 500 sq/m parcel of land. It is probably like 40-50x income in a place like Vienna.
Hawk, don’t bank on those rate hikes you keep mentioning. The global economy is relatively strong, despite what Poloz and Yellen are saying. BUT… The problem for Central Bankers is a lack of economic GROWTH and a lack of INFLATION.
Our governments rely on moderate growth and 2+% inflation. Without both happening simultaneously, governments can not rely on today’s debt being diminished in coming years through growth and inflation. For an example of how this works consider a house bought in 1975 for $50,000 when an average wage was $10,000 per year. Rapid growth and inflation during the next 10 years inflated the average wage to $20,000 which made it twice as easy to payoff a mortgage faster than the 20 year amortization and diminished the real cost of the house from $50k to 25k. For a hundred years, inflation and growth helped everyone from home buyers, to farmers, to factories, to governments, to pay-off their old debts with new inflated incomes. Without a growing economy and 2.5% annual inflation, our economic model from the past 100 years fails.
My point Hawk, is simply that rates will not rise, even though the economy is strong, because the economy is not growing, it’s strong but stuck at a plateau; call it ‘peak economy’.
And the lack of robust economic growth and inflation brings up another fundamental fact: Today’s young people are at a huge disadvantage.
Today’s young people must contend with lower wages, limited growth, low inflation, and, investors and house hoarders who have the means to out-bid young people because housing has become an investment commodity. Governments compound the effect on young families by ignoring the commoditization of basic housing needs. Governments have allowed basic housing to become just another commodity to be exploited by investors; both domestic and foreign.
Bitterbear,
Poloz will sit back and watch the US bond market force up Canadian long term rates a few times and banks will tighten lending more than present. The bond market pulling back last week is indicating rate hikes may be back on the table sooner than thought.
Just the fact the CRA is talking tough will be enough to deter the smart money launderers wether they are capable or not, their odds of getting caught are higher than ever which was zero previously to the leaked webinar info.
Michael, I know this issue around interest rates and house prices has been beaten to death here and, frankly, the discussion is as fruitful as pressing for religious conversion.
If I’m the guy on the Putnam bus (the reasonable man) and find that if the interest rate at renewal is more than I can afford, I sell as fast as I can at a loss if I must. If enough people do that, that drives prices down. If I’m the guy on the Putnam bus and find that the money I allotted for groceries, gas, taxes, bus fair etc goes up to the point where I can no longer make my mortgage payment, I sell as quickly as I can, at a loss if I must. Either way, I sell.
If, on the other hand, I’m a freewheeling, high rolling shyster, and the value of my house has gone up with inflation, I might take out a HELOC to buy groceries or otherwise steal from Peter to pay Paul at least until I sell my next batch of crack. Mr. Ponzi would be so proud.
I’m the former, not the latter. To each his own.
thanks for the words of support, Hawk.
I recently read in an Australian paper that the Chinese government is tracking down and jailing people who have violated their $50,000 capital outflow rules. the government can also nationalize their businesses and take the contents of their bank accounts. Boggles the mind to think what that must be like and the level of desperation for someone to take that risk.
Are you of the opinion then that Poloz will follow where the Fed leads?
Rook, you are also correct . Mike is indeed a pompous douche bag who would rather see communites destroyed like Vancouver where neighborhoods have no soul and turn into ghost towns devoid of families and spirit as long as his bank account is higher than last month.
It’s a pretty sick pattern of thinking because you can’t have it both ways. Fortunately peak house has been reached while Mike’s denial meter is on overload.
Bitterbear,
You are correct , the Chinese will bring in their own laws soon to stop mass currency outflow before the pot runs dry and they have to do a stealth devaluation on the yuan which is already sitting at a 6 year low.
Christy Clark is indeed as useless as tits on a bull. Did you see how many Asian real estate business people she took on her last two Asian junkets ? Do you think she will screw the hand that feeds her ? Of course not.
If the foreign numbers are really only 5% then she been doing the shittiest job ever as she wastes tax payers money travelling there to drum up near zero Asian real estate investors.The numbers are a fraud.
The US is bent on two rate hikes this year which Poloz prays for nightly so it can pop this bubble without his name on it. Darkest before the dawn as they always say. Hang in there.
I expect shockingly little from the government because 25% of BC’s GDP is dependent on RE in one form or another. RE provides twice the dollars of our three major industries, excluding cannabis, those being forestry, fishing and oil and gas. They simply can’t afford to interfere.
I think the Chinese gov’t will take away the punch bowl, not Christy Clark. Christy Clark will skirt around the issue by giving speeches in an incensed tone of voice and vowing to gather more data, levy chump change taxes and have a stern talk with Quebec about their investor immigration policy. That will take another couple of years and hopefully by then the problem will have been dealt with for the Liberals not by them.
Oy, I sound bitter.
AirBnb rules by Dec. Effect debatable.
Extra revenue for city and continue on.
http://www.cbc.ca/beta/news/canada/british-columbia/vancouver-has-5000-short-term-rentals-enforcement-coming-1.3683209
The Endgame sounds like an interesting read. I agree that we’re in for a long time of uncertainty, uncharted territory – the Great Depression and Japan’s Lost Decade are examples of similar situations. It’s nerve-wracking either way – whether you buy RE or not.
No matter if RE goes up or down or stagnates, ultimately gov’ts have created a world that depends too much on people driving up debt to collect more assets or to squeeze a few more bucks out of tax avoidance schemes – instead of investing in new businesses that create value-added products & services, and new jobs & industry. It’s economic stagnation. Other industries have to become as big or bigger than RE in BC – now they’re not.
In the past, people actually drove the economy by “saving” money and spending it on useful things – now, it’s just an endless cycle of “borrowing” and making “the other guy” pay for it (either taxpayers who have to make up for the tax avoidance schemes, or renters who have to deal with rental bidding wars)
I feel your pain Vicrenter.
One thing that might happen is deflation. Others on this blog are more knowledgeable than me on these issues, so I hope they weigh in.
If I understand things correctly, Japan might have sparked a currency war with everyone starting to race to the bottom. With dollars buying less stuff and stuff accumulating, prices for that stuff could drop. If that happens (doesn’t feel that way to me as I walk through the Root Cellar), but if it does, there would be a psychological shift in the market with buyers waiting for prices to drop. I think this is less likely to happen because governments seem to have no shame in printing trillions of dollars in QE.
I have the sense there is another edge to this sword, but I’m not sure what it is. Maybe smarter people than me can explain these things. Seems that we are in a weird spot with the government awash with QE which helps the government’s bottom line but drives the plebian masses into ever higher levels of debt.
It’s a mad, mad, mad, mad world. I’ve lost faith in banks, in the separation of gov’t and central banks and the ability of media to inform us. Bottom line, we are and have been for decades living beyond our budgets on every level. I just don’t know whether these interventions will keep the party going. I suspect that we will or perhaps have started seeing the beginning of the end game in the spin, the twisted messaging, the tortuous stats (are they lies, damned lies or just statistics?), the social movements rocking neighbourhoods and the political unrest around the Eurozone. We do indeed live in interesting times.
Good luck!
I value your viewpoint Rook. I just think it’s better for kids if they’re pushed far from the nest to make their own way.
@Bitterbear,
“waiting for interest rates to rise and house prices to drop”?
Wouldn’t that be the same as saying “waiting for [inflation] to rise and house prices to drop”?
Thanks for your comment, Bitterbear.
I guess I’m just seeing a lot more risk for investors in this market than for home owners. My own personal situation of having sat on the sidelines for too long is no doubt creeping in to colour my judgement on all of this, but it does feel more and more to me as though waiting around for prices to drop is a losing game.
sorry, meant to address to Vicrenter
Michael,
You sound like such a proud douchebag.
“Kids having to leave has to be one of the better things about rising prices”
pfffffff
We get it. You have money. You own houses. What else do you value I wonder?
Vicbot, I think you are right that people holding multiple properties will suffer more than those holding one but if they are renting, that will be offset to some degree.
I just finished reading Endgame and I’m part way through Code Red (John Mauldin). What I am taking away from these books is that the global economy is basically a gong show and that low interest rates are likely to remain with us for quite a long time as governments try to stimulate their economies and pretend that everything is OK. Mauldin seems to be leaning toward deflation with continuing QE which I assume means low rates into the future which will probably keep house prices high ie more of a bulge than a bubble. The bubble on the bubble is probably foreign investment in Van and Toronto when once addressed will normalize prices there but probably not affect Victoria to a very large extent.
I have sat on the sidelines for many years, and despite the low interest rate prognostication, I will probably continue to sit because at my age, it would be financial suicide to drop money in a long-term loser. I think money is there to make you happy and I can be happy putting my money into other stuff. But, I think if people are waiting for interest rates to rise and house prices to drop, the wait will long.
There are no good choices only less bad ones.
Where the whole situation is the saddest / most concerning is for people who want a home to live in, not an investment or rental property. And I think that that’s far and away most people. I take JJ’s point that in a crash investors are “going to get screwed holding a lot of property where the mortgage is greater than its market value.” But people who own only their own homes will not necessarily be in quite the same boat. I have been very wary of buying at the top of the market for the last 6 years. The idea that I’d buy a place and then see it drop $100,000 in value the next year has always made me feel ill. I hate thinking that I’d regret the purchase, etc. But ultimately, if I can afford the mortgage and have a stable income, it’s more sour grapes than a truly desperate situation. (I understand that some people would lose their jobs in the event of bad economic times and that that would lead to a desperate situation. I just want to distinguish between how bad it would be to be an investor planning to sell/flip properties and then watch the market crash compared to being the owner of one home.)
Michael, the plural of anecdote is not data.
Yes young 20-something kids getting more world experience is always good.
But where it crosses the line and affects the entire economy is when the cities offering jobs have no family-friendly housing (to own or rent) within reasonable commuting distance, and also when there are zero options to move back later (eg., if middle-aged kids want to move back to take care of aging parents – offloading our health care system – while taking care of their own kids)
… all because of some short-sighted gov’t policies that have skewed how people make money.
Kids having to leave has to be one of the better things about rising prices. Best thing for them is to be forced out from under mommy’s wing. The few people I know who have been financially coddled into living here their whole lives are often quite shallow with low self-esteem…and certainly don’t appreciate where they get to live.
Someone has been flipping through an Econ 101 textbook.
We still love you JJ, even with your batting average this past decade.
Vicbot, I agree with you. Although don’t think everyone on this site is using real estate for investment or capital gains. But is sad that our government is letting housing be a business transactions forcing families out of neighbourhoods and no longer affording a home.
They put money into affordable rentals but nothing to affordable housing for first time buyers (middle class) or hike up taxes for investment properties to discourage this kind of action, etc. hopefully they do look at this one day before it gets out of hand.
To me, it doesn’t matter whether prices go lower or higher because it doesn’t impact my long term plan.
But it matters WHY prices are going lower or higher, and the impact on actual people working in the city – because if prices rise too fast for too long (for owners & renters), entire neighbourhoods disappear – like happened in Vancouver with over-speculation & corruption.
The “downtown living” chart below is misleading – it’s totally different than SFHs & family-friendly spaces – which a population needs to grow and survive.
In fact, Canada is already #2 in the world for the highest RE prices – after Australia (look at the “Prices in Real Terms” charts).
http://www.economist.com/blogs/dailychart/2011/11/global-house-prices
“thanks largely to their big cities, housing appears to be more than 40% overvalued in Australia, Britain and Canada.”
I already own RE, but I’m not depending on that area to fund my retirement, so I don’t cheer at 20% yoy gains for Victoria or Vancouver for similar reasons as the citizens’ group HALT: “What you guys are doing is wrong. It’s corrupt. You’re not looking out for citizens … I am a homeowner myself, and my parents are obviously homeowners – my colleagues, too. And we are not happy. Most of them don’t care about equity. They’d rather have their kids grow up and live in Vancouver and have regular normal life, not be forced out to who knows where.”
For a satirical look at Vancouver in 2040:
http://www.theglobeandmail.com/news/british-columbia/the-year-is-2040-and-vancouvers-houses-are-worth-80-million/article30944616/
Yep. In a big fancy pants beach house this weekend. Of the 6 or so couple million $ houses in the bay not a single one is occupied this July weekend during summer holidays. Costs no more than a downtown hotel room to rent once you put some family in it.
I mention neckbeards and Introvert slithers out from under its rock once more and brings a moron with him.
Did Just Jack just insult nerds (neckbeard meaning a shy nerd who hangs out on Reddit).?
Did you, again, for the literal 20,000th time and for the 7th time this morning type out a post rambling about giving advice to people to sell now and then time the market and swoop in and buy at a discount??? W T F.
New readers, please note. Just Jack and Hawk are permanently negative, and have tried to time the market in the past and are forever locked out of owning a house ever again. They post on this blog for a decade, everyday, every hour, same negative posts, hoping for a correction so large they can jump in again when houses are back to 1986 prices, that’s when they both sold betting they were right and they could time the market.
Just buy what you can easily afford, if you can’t afford then rent or move. No need to stress, life is too short.
You’ve said versions of this for many years, and never has there been a sharp fall — or even a moderate one — so thanks for sharing your garbage opinions.
Looks like we’re on the identical path to repeat the 2008 recession. US delinquency rates are on the rise following the same patterns as the last 20 years.
With US interest rates and Canadian mortgage going to rise, it looks like the perfect storm is forming. If banks are tightening the mortgage lending now, you can only imagine what it will be like by fall/winter.
There’s been a ‘disturbing’ rise in delinquency rates
Few are paying attention to the quick and sudden rise of the delinquency rate.
http://www.businessinsider.com/the-fed-should-be-terrified-about-the-rise-of-delinquency-rates-2016-7
Condo prices popping are just a sign of the end of the business/credit cycle. Priced out speculators move into the next lowest sector just as the US interest rate hike chances are starting to rise bumping up Canadian long term mortgage rates.
Fed’s Harker Says Two Interest-Rate Hikes May Be Needed in 2016
http://www.bloomberg.com/news/articles/2016-07-13/fed-s-harker-says-two-interest-rate-hikes-may-be-needed-in-2016
Suckers watch year over year prices betting on what happened in the past will continue.
The smart ones watch trends that influence prices to see the potential in the future. If you’re buying for speculation you need to know where there is a demand and where there is a shortage then it’s a good bet that prices will rise. Or more important when it is a good time to sell so that you don’t get caught following a market down. You can always buy back in when the indicators fall back in your favor.
My opinion is that the market is stressed and any fall might be sharp. If you don’t have the info before the public start selling you’re going to get screwed holding a lot of property where the mortgage is greater than its market value. Buying is easy – knowing when to sell is the tough part.
Any neckbeard can buy a condo from his basement suite. He just won’t know when to sell and crystallize all that profit and the odds are he’ll follow the market down into the toilet.
Vic condo median is already up 19% past year, but my bet is Vic/Van rises into the Stockholm-Singapore range in the coming years.
http://i.huffpost.com/gen/4517144/original.jpg
The real action these days are condos in the core.
45 sales in the first week of July versus 47 new listings. Days on market at 21
That’s an increase in sales from last years 31 with a decrease in the DOM from 30.
New listings were slightly down from last years 50
NLS went from last years 1.6 down to 1:1
Very few “delayed offers” because of the DOM. Should the DOM drop below 14 expect the agents to pull that marketing trick to get some real crowd pleasing 20 percent over asking prices.
However prices can be a bit sticky for condos. After all this is were those poor renters crack open their piggy banks to get onto the property ladder. Or is it? Seems that there are a lot more out of town purchasers in the condo market these days than the stand alone house market. Only 26 out of the 45 (58%) purchases went to Victorians.
Will condos see the next giant leap in prices? Something that the bulls should be considering. You can never be too rich, too thin or own too few condos.
JustJack. The first week of reporting for Victoria included Canada Day, and only a couple non Holiday reporting days. I would say that the time period of your data analysis could never be extrapolated as the market correcting.
You appear to cherry pick your data to line up with a market correction from the many posts I’ve seen while lurking on this blog for a month.
My favourite is when you chose say mid April of one year to end of October of another, and say “hey look this is proof of a crash”, but if you included all of April and end of Octorber numbers we are in a healthy market!
It’s insane!
Time for a look at the first week of July for detached housing in the core.
We had 28 houses sales this first week which is down from the first week in July last year when we had 39 house sales in the core.
New listing for the first week were 76 which is up from 62 a year ago
Days-0n-market last week was up from the month before at 12, but still under last years DOM at 14.
NLS for the first week this year is 2.7:1 compared to last year at 1.6:1
That’s certainly puts the NLS into a buyers or bear territory. But the DOM is firmly set in a sellers market.
Now for everyone’s favorite stat, the Sales to Listings Ratio.
36% of buyers paid more than 5 percent over asking price compared to just 10 percent of buyers the year before.
The real crowd pleaser of 20 percent and more over asking price happened only 2 out of the 28 sales. They sold at 21 and 22 percent over asking. A year ago there were no house sales in excess of 20 percent over asking. The two highest back then were at 14% over asking.
So how would you call the first week? Bear or Bull?
I don’t agree with not paying your taxes, but I’m not going to be reporting on my neighbours or friends. An audit is onerous and the penalties and interest are pretty significant and there is a potential for criminal prosecution. I think if more people understood the consequences they might agree that it is not worth it to save what they are saving.
http://www.taxplanningguide.ca/tax-planning-guide/section-4-everyone/be-aware-penalties-interest/
Totoro is right, it’s not too late to voluntarily report your past tax evasion. If you don’t voluntarily report your violation of tax laws, then your friends and neighbours can do it for you:
http://www.cra-arc.gc.ca/leads/
Not too late to voluntarily disclose – there is a program for it: http://www.cra-arc.gc.ca/voluntarydisclosures/
Save yourself stress, penalties and interest if you are worried.
All the discussions on this blog during the past few days about the benefits or detriments of having s suite, was well timed.
CRA is hiring 50 additional auditors to target undeclared revenue and profits from Real Estate, especially in B.C. Flips, GST avoidance, undeclared income (suites, AirBnB), buyers who buy/fix/flip, money launderers, and many other forms of RE profit that is not declared as income.
And for our local American residents; the CRA will be sharing their results with FinTRAC and the IRS under FATCA treaty rules.
A huge percentage of audits are initiated based on anonymous tips, probably from disgruntled clients/associates/tenants/neighbours and pissed-off friends!!!
Apparently the CRA intends to fast-track a few high profile audits in each category to put the fear into dishonest people. Too bad these audit results are hidden by privacy rules, unless criminal charges are laid.
http://www.theglobeandmail.com/news/british-columbia/cra-plans-lifestyle-audits-in-vancouver-as-part-of-real-estate-probe/article30945381/
http://www.cbc.ca/beta/news/canada/british-columbia/vancouver-real-estate-crackdown-tax-cheats-south-china-morning-post-1.3681632
Good point, JJ – the collateral backing the loan should be an important part of the whole process again.
Interesting that a new citizens’ group has just been formed to demand response from gov’t on the excessive speculation in the market:
http://www.theglobeandmail.com/real-estate/vancouver/citizens-group-rises-up-for-vancouver-real-estate-reform/article30937362/
“Like a lot of people, Justin Fung is fed up with Vancouver’s housing affordability crisis. So he harnessed that anger into the formation of a non-partisan group called Housing Action for Local Taxpayers.”
I understand what you’re saying Vicbot. In fact that’s what CMHC thought back in 1995 when they changed from looking at the collateral of the loan to looking at the person. The risk was not with the property but the person. After all properties don’t lose their jobs, people do.
However today, CMHC and OSFI are revisiting that decision. Now they believe that they should have looked harder at the collateral backing the loan because there is risk associated with real estate.
The market for most types of properties in most areas is high risk today. A prudent lender should be reducing the loan to value ratio requiring stronger covenants. And some trades and professions should find it extremely difficult to get financing on rental properties. Especially if they already own multiple properties that are showing only a minimal positive cash flow.
405-728 yates, era. 1 yr old 2bed/2bath with parking purchased @365k. listed today asking 529k under an airbnb business– makes up to 6k/month….
jaw dropped again….
with this small unit, it could grab/has such potential.
The calculations are useful, but there’s more to the decision.
These are different types of investments – RE, index funds, stocks/bonds – and ROI is calculated differently for each (based on different amounts & timing of cash outlays & expenses).
For a young person starting out, the level of risk with RE totally depends on their life situation – mainly their job – or spouse’s job – and any chance they’ll need to move.
It’s just not a good idea to buy RE without at least a 10-year holding period.
In Victoria, that’s a crucial question when you’re in your 20s – due to limited # of companies or business opps, a lot of people are forced to move to other cities (Vancouver, Toronto, Calgary, Ottawa) for better opportunities for themselves or their partner – many come back to Victoria by their 40s.
Then, once you have a house, if you have a suite – I agree with Leo S, especially every 10 years, it can be a lot of work/headaches and/or expense to maintain – depending on the the age/quality of plumbing, appliances & kitchen/bath fixtures, weeping tile, heating system, hot water tank, flooring (carpets, damaged vinyl), electrical safety, etc. As you get older, I think privacy becomes a bigger issue.
It’s the long term expenses & liabilities that people sometimes under-estimate, eg., landlords have been sued for safety issues caused by previous tenants. Doesn’t happen often, but it’s important to weigh all these risks with your own personal situation and time you can put into understanding it.
Screen your applicants carefully, no whining if you don’t.
We have a small suite and it takes care of property tax, heat and house insurance. Had a backed-up drain once in 15 years.
I’d be fine with that setup. Even a traditional side by side duplex is fine. But up/down in a house never designed to have multiple dwellings inside (which is the vast majority of suites in Victoria)? No thanks.
What is the value to me of not having strangers living in the house? Hard to tell, but maybe $200-$500/month. Just hard to put in as a line item but it is definitely there for me at least.
Part of the problem is most suites are adapted in Victoria so the setup, soundproofing, etc., is not ideal. With a new house you can design accordingly so you have much less of a feeling that a stranger is living with you. For example,
https://www.google.ca/maps/@48.4701295,-123.5227308,3a,75y,146.72h,77.75t/data=!3m6!1e1!3m4!1s0XIY5V4YCDAcXgI4xFu_zA!2e0!7i13312!8i6656
Tenant has their own driveway and can’t see them coming and going to the suite entrance. Suite is above garage and has no shared walls with main part of house.
A suite isn’t zero work but it is pretty close to zero as it gets. I look at it from the angle of I have to setup two clients on mere postings per month to net what I net from my suite income. I would say I spend on a yearly basis less time on my suite/tenants than one mere posting so it’s really 1/24 of the work I do in my business to generate the same income.
I also have a good relationship with my tenants so the 6 weeks I was away they water my plants, etc.
The very first time we had a tenant move into our basement suite, I will admit, it was an odd feeling. This feeling lasted for perhaps a week or two.
But one simply adapts to a new “normal.” It’s probably how people who move into a duplex for the very first time feel — only in this case, we can choose not to live in a duplex-like situation whenever we decide, and our duplex neighbours give us money monthly.
It’s not zero — and no one has ever claimed that it was. But in my experience — as well as in totoro’s, it seems — the effort required for the endeavour is far closer to zero than it is to even a part-time job. (Other landlords’ experiences may vary.)
I agree with Leo that categories are bad. The way we’ve been doing it has worked well for years; I think it would be foolhardy to make drastic changes.
[Note to Admin: I’m in Calgary, so my IP address will be different.]
@Ash. Sure, I’m not saying it’s a bad investment, just saying it isn’t fair to compare a passive investment with an active one and pretend they are equal.
What is the value to me of not having strangers living in the house? Hard to tell, but maybe $200-$500/month. Just hard to put in as a line item but it is definitely there for me at least.
@Leo: before I owned a house with a rental suite, I used to agree with your assessment that it’s basically like taking on another job. Now that I’ve been living it, I have to say it is remarkably easy money. Maybe I’ve just lucked out with a good tenant, but there’s been almost no work involved. In terms of hidden costs, the biggest surprise for me was just how much income tax I end up paying – even after accounting for all eligible expenses.
Also, I don’t expect people to agree with me on this. But in my case I don’t think I paid much, if any, extra for the house because it had a suite. If there’s a discount for Oaklands houses with finished basements but no suite, I’m not seeing it. It’s rare to find a finished basement without a suite in this hood, and when you do, they seem to sell for no different than those with suites. (Recent sale on Asquith is one example). Would of happily paid what I did for my place if the basement was finished but with no suite.
@LeoM
Not that I know of. Just did a quick search and can’t find anything like that for wordpress..
Another option would be just pages in the resources that allowed comments. I.e. rentals, suites, housing types in Victoria and what to watch out for, etc.
And you wonder why 60% of families will be leaving Vancouver, that number won’t be far off here either. Peak house is here now, and the downside will be brutal when the renters revolt.
OK, it’s now officially insane. Not only have first time buyers been priced out of ever buying because the hoarder RE investors are willing to pay $200k over asking, but now the renters are being kicked in the balls by the landlords who are buying all the homes. There is going to be a civil war revolution against RE investors, by the renters, if it gets any more insane!!!
http://www.cbc.ca/news/canada/british-columbia/vancouver-rental-market-bidding-war-1.3680027
You know what they say about those who drive hummers. I think for most after selling a $3 million shack it would be the last high end car to buy besides the fact their ugly.
LeoS: Is it possible for you, as Admin, to create ‘Keywords’ that can be ticked when we post comments? Then have a search feature that will search by a specific Keyword And/Or/Not Keywords? The search results should be in chronological order. This might negate the need for a forums site.
I’m of two minds on that one. I’ve seen too many forums that have way too many categories and it just kills conversation because most of the threads are dead. On the other hand it would be nice to have a way to search and promote really high quality discussions about certain topics so they don’t get lost in some long ago article.
What do others think about this?
When you cash in your Van shack @ 3M, you hardly have to heloc to have house & hummer here 🙂
Admin…
I can’t remember if I’ve asked before but if an update is coming in the next months, year, could you expand it into more of a forum website?
Sometimes subject gets off topic at hand but still good info. I’m guilty of this as much as anyone.
Suggestion for forum threads:
How much homes sold for in one.
Expand and organize discussion groups by municipalities.
Insurance, Home inspection questions
State of the current market
Etc. Etc.
Yes lots of drug dealers drive the Ferrari’s and half million buck cars. Crack sales must be up at tent city.
Your pompous ass boasting of your wealth and bad market calls at market tops do nothing for your character Mike, and usually a sign of low self esteem. Pretty sad actually.
They’ve all been bought using their home equity line of credit. I just spoke to one guy today who is going to buy a Tesla using the equity in his home.
A $100,000 car only costs you $400 a month. You can collect pop bottles on the weekends to pay for it.
It’s insane the number of half-million$ cars I’ve seen around town lately. New people down from us have a higher-end Ferrari.
If it’d make you feel better Hawk, I could donate 1 of the 500 shares of Exxon I added at its bottom last August (eventhough I did advise you to buy). Do you drink scotch? or how about a new bong? Do people still use bongs or is there a better device now?
Council show force the two and three bedrooms on the lower floors where the price per sq/ft is cheaper. Won’t be of much use to familities in the form of penthouses or higher floors due to price point.
Yeah because those families will be able to afford a $1M three bedroom condo. I’m sure that will entice them to stay.
A lot of very expensive cars in Victoria these days. More than in previous summers. The island in changing and not all is going to be good.
Was driving around today thinking the same thing.
Commodities (other than gold and silver) are going to break a lot higher. Market is sensing a lot of stimulus coming around the world. I am with Hawk here. When the free money ends boy is this is going to be fucking ugly. Not going to be for a long while yet though. The normal cycles are are all fucked up due to government metaling.
A lot of very expensive cars in Victoria these days. More than in previous summers. The island in changing and not all is going to be good. 🙁
That’s funny Mike, for someone calling for a massive commodities boom breakout in a bear market in October then had to roll the dice and buy to average down many moths later to cover major losses while praying the market didn’t collapse.
Most smart investors buy put insurance on a regular basis and if expires it’s no big deal, unlike Mike who buys consistently at the tops. No wonder the economist gig didn’t work out.
Selling real estate now is the smartest thing you could do. Vancouverites leaving en masse will be quite the sight and they won’t be moving here, they want somewhere you can find affordable rentals.
I always tell millenials that RE is a better investment for them than stocks. The problem for newbies is they’ll sell, or even worse ‘go short’, at bottoms. RE’s illiquidity and forced principal paydown are a good thing for youngens.
Tick, tick, tick…..
60% of Vancouver families plan to leave city in the next three years
http://www.metronews.ca/news/vancouver/2016/07/14/60-percent-of-vancouver-families-plan-to-leave-city.html
Okay.
I just included suite income as a balance to the differential between rent and owning on a monthly basis without a further breakdown.
I do take all the factors you listed except my time and privacy when doing a spreadsheet – I’ve linked the one I use. I spend more time posting here than on management so maybe that should be a line item.
@totoro. Nowhere did I say those things can’t be calculated, estimated, and taken into account. Of course they can. I’m saying people don’t and then make inaccurate claims about returns. Case in point: your comparison below.
No it does not all the time. Look at what happened in the 1990s (see post below).
Human behaviour re. forced savings, ability to asses the deal etc. makes it better for most most of the time imo.
One – Carrying cost – come up with a calculation that includes the appreciation on the additional purchase price – fine to account for this. Plus the additional interest cost is tax deductible. And maybe you are paying more and maybe you aren’t, lots of people have more house than they need.
Two – Again, this is tax deductible and calculable. We’ve had this discussion before. Average homeowner doesn’t spend too much on this overall according to the stats and depending on the condition of the place they bought. You are a homeowner now so you’ll likely have a good idea.
Three – Track it and assign a value. My time is pretty minimal unless there is turnover. We hire people to do repairs.
Four – Loss of privacy – is there a monetary value to this? I’m not sure. Seems not logically supported. What about all those duplex and condo owners? Same loss of privacy and they are paying less but their place appreciates at a lower rate than a SFH and they have less to appreciate from. And you essentially own two units for the lower cost of a SFH.
Five – Zero vacancy rate in eight years. Non-issue in Victoria. Maybe one day it will be, I don’t know.
Six – You insure the risk. Your insurance costs are 30-50% more.
Now that is where the real cost is.
Sure you can count it, but then it isn’t an apples to apples comparison anymore. Someone who does index investing will spend essentially zero time on their investments. Running a suite, despite the claims on here, is not a zero-effort endeavour. So it is very much like taking on a consulting job. You are exchanging extra work for extra returns.
You can easily go further on that continuum. What about someone that owns a home and puts every room except 1 into AirBnB? They are definitely making a ton of money, but only because they are willing to work harder at it. That doesn’t mean it’s a better investment than the stock market.
You can but people rarely do. Here is the other things you need to take into account but no one ever does:
1. Carrying cost of the extra debt required to acquire a house with a suite or space for one OR cost + opportunity cost to put in a suite.
2. Increased maintenance cost of all the appliances/furniture/finishings in the suite
3. Time to administer the suite
4. Value of loss of privacy in your home. You are no longer owning a single family home, you are living in a duplex.
5. Vacancy rate
6. Increased insurance risk from additional occupants.
7. Time taken to argue about suites on HHV.
I’m fine with suites (we have one) but I’ve never seen anyone honestly and fully account for the costs of a suite.
I see your point but that is not the behaviour of someone with their first 100k to invest in Canada.
The facts don’t lie. If you have stats to the contrary post them. I posted what people actually do and there is data to back it up. Very few people are using margin investing with this cash, 70% of Canadians are buying homes and most first-time buyers are using leverage.
So, if you want a theoretical discussion about stock market ROI using leverage show your data and give a concrete example. Maybe it will convince people stocks are a better way to go.
Is is never valid to compare a ROI to an ROE.
There are calculations that will allow you to compare an investment likes stocks and equities to real estate but you have to calculate the internal rate of return and the net present value of each investment.
But you never compare the return on investment of a non leveraged asset like a stock to the return on the equity of a leveraged asset like real estate. Your wrong from the beginning trying to compare a $100,000 non leveraged investment to a $500,000 leveraged investment . The more you leverage the property the higher your return on equity.
The easiest way to show you how wrong this is is to assume that you bought the real estate with cash just like the stocks or equities. Now calculate your returns. It isn’t that your calculation is wrong it’s just that you are comparing two dissimilar investments and then saying this one is better because the return is higher. That’s the hustle.
If you want to compare your rate of return for your property then compare it to other real estate properties that have similar leveraging. Not to a bank account, shares or bonds.
Again, post the data or the numbers and include a measure for risk assessment. Just jibber jabber unsupportable commentary otherwise.
My assessment for risk in RE is extremely low. You can insure against disability/illness. The biggest risk for most is relationship breakdown or job loss, not market downturns. My assessment of leverage in stocks is that the risk is much higher and the returns lower based on ability to borrow and interest rates and the fact stocks can’t be rented out during hard times. But maybe your assessment is different.
Amazing what happens when a recession hits and suddenly no one wants to live there anymore or buy your over priced flipper condo. A year free rent ? Many a wannabe property king just got roasted.
I swore Mike said Calgary was a buy not too long ago, too bad you can’t find any tenants to pay your mortgage.
Landlords scramble to fill near-empty skyscrapers dotting Calgary skyline: ‘We’re not overbuilt, we’re under-demolished’
CALGARY — Near-empty skyscrapers and rising vacancy rates are pressuring landlords to offer big incentives – such as a year of free rent or money for renovations – to keep a shrinking number of tenants in their downtown Calgary towers.
And with more than two million square feet of new construction set to become available, the soft market for Calgary landlords is expected to last for as long as a decade.”
http://business.financialpost.com/news/property-post/landlords-scramble-to-fill-near-empty-skyscrapers-dotting-calgary-skyline-were-not-overbuilt-were-under-demolished?__lsa=08b1-1171
“It’s about risk and life decisions”
None of those returns calculates risk.
Life decisions?
That’s a hustler’s wrap up of a schlock investment. Can’t appeal to their money sense then appeal to their soul.
I’d disagree Leo. It is not like taking on a consulting job. It is like finding some additional way to benefit from your investment. Plus it would be like saying anyone who buys a rental house cannot count the rent in the ROI therefor negating the real return on the asset. You can assign an hourly rate to your time to properly account for this factor.
I think you should definitely include it in the calculation for ROI if you have suite income. Same with any type of asset, all net returns get counted if they are generated by the asset.
I’d say it’s perfectly valid to compare investments by a “what is the impact on my net worth pre and post” method.
However I don’t agree with adding in the suite being a fair comparison. That is taking on an additional business opportunity and it has real and in-kind costs associated with it. It’s the same as the guy investing in the financial markets doing some extra consulting work on the side.
Is that the most intelligent thing you can say. “I can and I did” You can do a lot of things in this world but that doesn’t make them right.
Try your example again, but this time assume that neither investment is leveraged. And if you’re going to include rents also include dividends.
I can and I did.
It is also about risk and real life decision making by the average first time home buyer.
There is a risk premium attached to leveraged investing in the stock market along with higher rates and lower ability to borrow and no rental income potential. Margin buying is not a choice I see first time home buyers making instead of buying a home – they tend to invest what they save as they save for a down payment. I have; however, seen a HELOC used for this.
If you think it is an invalid comparison that is fine – post your own example – would be interesting to see.
What I posted was my observation as to how it works for most. And the majority of Canadian’s net worth is in home equity, usually through a mortgaged primary residence, not leveraged stocks. What savings Canadians do have – well, not only do they not use margin investing, they keep 60% of it in cash largely because they are afraid of losing money in the market. 51% of Canadians associate investing in stocks with gambling.
http://www.moneysense.ca/invest/60-of-canadians-saving-for-retirement-just-not-wisely/
http://www.ratehub.ca/blog/canadians-invest-cautiously-to-save-for-retirement/
No Totoro, it isn’t right to mix up two distinctly different ways of calculating returns and then compare them to each other. That’s a hustle. If you want to compare different types of investments then you have to compare them under the same premise. You can’t compare a leveraged investment against a non leveraged investment. That’s bullshit and you just failed the final exam on investing. But feel free to find any professor that will agree with you that you can compare the two.
No, it is the normal way to evaluate investments. What will you have in your pocket after tax should you sell the asset at any point and time along with the returns less expenses in the interim period
As far as buying stocks through leverage, you could but you won’t get $400k at 2.5%. You’ll be limited by your personal credit, the interest rate will be higher, and the criteria applied to margins. I wouldn’t do it myself due to the risk level, but if you think that should be factored in as a reasonable comparison for a first time buyer feel free to post what you calculate.
Yep.
Rate of return was 15% for the market. 100,000 became $404,555.77 over 10 years if left to compound but not accounting for fees. Even with taxation that is more than the housing market returned. Average house price was $179k in Victoria in 1990 and $251k in 2000.
That’s a real estate hustlers math comparing the return on investment (ROI) of the stock market to the return on equity (ROE) in real estate.
You could have leveraged the original stock purchase like the house purchase. At least then it would have been an apples to apples comparison. Or you could have determined the internal rate of return (IRR) for both investments and then compared those. But comparing an ROI to an ROE is just a hustle.
Yep, toss the education and honest work kids, just suck up to the right people, pump their places online and you’re in before the public. What a scam.
Pre-selling and re-selling: Vancouver realtor calling foul on ‘impossible’ condo market
“The other two-third of buyers were likely friends and families of the developer and marketing agencies, and big-wig clients with well-connected realtors, according to Saretsky, who wrote about this issue in a blog post Wednesday.”
http://globalnews.ca/news/2823397/vancouver-pre-sale-condo-market-impossible-says-vancouver-realtor/?sf30924489=1
Mike, you conveniently leave out my quotes when I said I have been buying back in to a few choice gold plays. Typical of a pumper worried about the coming crash to waste time digging up wrong old quotes.
Maybe you should look up your own quotes. Glad I didn’t take your advice on buying the commodities boom breakout last October you called ecstatically, that proceeded to tank huge for several months, same with your natural gas call back in January that tanked 40%.
Not to mention all those failed “in the bag” LNG calls you made, what a blunder. A failed economist indeed.
Maybe the 90’s totoro, as I believe the tsx nearly quadrupled between late’90 and ’00.
Here’s what Hawk was saying right at the bottom in January (as I was telling him “buying opportunity of a lifetime). He’s probably been short for 6 months, lol. He hates it when someone quickly googles what was said.
Seriously Triple ? Last 3 months the TSX is up 900 points mainly on gold stocks and some commodities and still way down from it’s 2014 high. The Dow has been flat for the same period up just under 500 points til just past week when it broke out on more central bank buying and a massive short squeeze. Retail has been selling for months as the central banks prop up the markets.
Yes I’ve a few nice winners in the 3 and 5 bagger range with much more to come. An advisor is a waste of time in junior mining, they usually have an ulterior motive to rope you into a financing or sell you their richer clients shares. If you need a few advisors that’s even worse.
Marko,
I don’t waste time digging up old quotes. I remember what I read, several times.
Have we had a ten-year period when real estate did not outperform stocks in Victoria for first time home buyers who have $100k to invest in a home with a suite or the market?
I don’t know because I don’t have that data readily available, but my guess is probably not given the ROI on the market is probably about 7% so $100K turns into $196,715.14 after 10 years – not tax exempt unless in TFSA.
If the couple bought a $500k home their 100K investment turned into $240,122.14 at 4% appreciation per year – tax exempt plus about $40,000 in principal pay down. And assuming the suite income balances out any extra costs for home ownership. In our case it made owning cheaper than renting.
Given that affordability has declined over time seems likely that the numbers were more favourable than this in past 10 year periods.
Big difference is risk – the homeowner is leveraged and if they have to sell in a down market it all falls apart.
Probably we’d all agree that if you get a chance to make use of your education (choose something that leads directly to work – something that includes internships or co-op programs), then you have as many doors open as possible. Start a business, or just diversify – because some decades RE does well, other decades various types of stocks or bonds do better – if you take a long term 20-year point of view, then it all works out.
I swore you said a couple of times you weren’t very good at stocks Marko, when stocks you owned and posted here went down soon after. Now you’re a pro. Very odd.
Feel free to quote me.
I doubt it Hawk.
The last 3 months have been the best rally I’ve seen in 20 years of investing. TSX index is up 20% but if you focused on growth stocks you should have made minimum double that, and if you’d invested early in junior mining you should have tripled your returns. There are still good advisors in town which I use.
As they say, stocks ks climb a wall of worry.
They should say that about RE too!!
Btw… Your articles you link I find more applicable to stocks.
I swore you said a couple of times you weren’t very good at stocks Marko, when stocks you owned and posted here went down soon after. Now you’re a pro. Very odd.
All that is correct Vicbot – only point is that the degrees with their associated jobs don’t generally lead to big payoffs. Tech stock options sometimes do. Business sometimes does but it is a lot of hard work. RE has with relatively little effort and much greater chance of success than tech stocks.
But, who knows whether that will continue. Probably over the long term.
Well said nan. I recall him saying he wasn’t a good salesman but was in line for a Tesla salesman job. Go figger.
I work in sales but I don’t think you have to be a good salesperson to be successful in sales. For example, in real estate I do very well using the concept of REALTORS® don’t sell, buyers buy. Zero sales skills but I’ll still rack up 100+ transactions this year.
I would like to work in sales for Tesla, yes. However, I think you understood that as being on the floor at a store? I bought my personal Tesla online using PayPal, no salesperson involved. There is a sales team behind the process but they aren’t necessarily salespeople as we’ve come to know them.
Totoro, there are many other examples of people making more than on RE. These people have either started businesses with angel-investor capital (not their own money) and made millions, or have bought stock that have skyrocketed, or collected the stock options have been phenomenal. Not just the owners – the hundreds or thousands of employees – engineers/IT/sales. Anywhere from tens of thousands of $ ROI on a few hundred $, to tens of millions in stock options and stock splits.
One prime example was a 6-year turnaround. If you have the tech idea, and it’s useful & successful, you win big, especially with engineering & CS degrees. I saw it happen in both public & private companies as well.
Not really, unless you open your own law firm, have a walk-in clinic or start your own engineering firm – and are successful at these, which takes a while and a fair bit of start-up capital.
For the past 20 years someone working at an average wage who saved and invested in real estate using the maximum leverage they qualified for would likely have beat the savings rate for the average professional working for someone else who invested their savings otherwise.
That is the magic of the compound interest on leveraged capital when the bubble does not burst.
In terms of education I don’t regret my Respiratory Therapy/B.H.Sc., as it allowed me to start making great $ at VIHA at a very young age. It gave me an opportunity to have a solid financial footing to explore other options.
However, my M.H.A. from UBC was a complete was of time. It really set me back $100,000 and two years through the combination of costs and reduced income.
I work a lot averaging over 70 hrs per week flipping paper and I make good money working at my day job; however, the majority of my net worth has come from various savvy non-work (stocks) or very little work involved related moves.
For example, in 2011 I bought a pre-sale at the Promontory for <200,000. Now it is worth ~ $300,000, as of yesterday renting it for $1,295/month. My variable 2.10% mortgage is $500 and change, strata fees $150ish, taxes $120ish, insurance $20ish.
I would say I’ve invested less than 80 hours in purchasing the unit and renting it out a few times.
If it wasn’t for stock and real estate I am guessing my net worth based on a savings rate from my income and 3-4% interest on it would be maybe 1/3 of what it is. So 1/3 hard work, 2/3 savvy moves. I’ve literally made more money in life executing stock orders and putting my signature on real estate purchases than I have working. That is why I say hard work isn’t the end all be all.
“This really isn’t the place to start bragging about how much money we’ve made, so I won’t go there, but congrats to you on what you’ve made so far.”
Unfortunately it’s been like that for a while now on here Vicbot. Classless boasting of temporary paper wealth seems to be the thing with this new generation, but they have never learned what it’s like to to really lose yet. When that time comes soon, you’ll never see more whining, and blaming the government or anyone else who mentioned the word crash. It will probably be all my fault. 😉
“One of the smarter bills we need to pass is to lower the dropout age, thereby allowing us to save smart kids from our education system.”
This really isn’t the place to start bragging about how much money we’ve made, so I won’t go there, but congrats to you on what you’ve made so far. Education is different than what you say though.
A business degree might have been useless for you – but there are a ton of other degrees or diplomas, eg., engineering, law, medicine, etc that lead to bigger opportunities than RE. Without their education, a lot of the people I knew wouldn’t have started tech companies or other businesses (biomed, consultancies) or made the millions of $ in stock options – and developed the tech gadgets & interfaces you use every single day. (or electricians who’ve started their own businesses)
Most of the people I’ve known that have dropped out or have high school, continue to work incredibly hard with smaller take-home pay, take fewer vacations, have less savings, less means to afford a home, etc. They always say they wanted to do more school, to get higher wages. They just weren’t as lucky to be in a position to get a degree – that’s why I also offer free services to some so that they can get by.
Maybe in Victoria you don’t see this as much, but you sure see it in the bigger cities.
“I agree for those content being stuck on a slightly higher rung in the rat race.”
Mike – Earning more is more likely to help you escape the rat race, either through diligent saving and investing or by accumulating capital to go on a different venture.
The folks I know that have become really wealthy all had extensive education. Most in engineering or computer science. All started their own businesses and work really hard. I know a few more that have become wealthy in construction/land development/property management. They also had university degrees, though arguably could have done without. I do know a number of people that never completed high school and have gone on to found or run very successful businesses, so I agree that lack of formal education does not have to be a barrier.
@caveat
I agree for those content being stuck on a slightly higher rung in the rat race. I know lots of high-earners who have very little financial independence. I can honestly say that my economics degree was my biggest setback, and I’m not just referring to the student loans. Besides, when’s the last time an economist has ever got anything right? 🙂 One of the smarter bills we need to pass is to lower the dropout age, thereby allowing us to save smart kids from our education system.
Tax on vacant housing pushed for Victoria
http://www.timescolonist.com/news/local/tax-on-vacant-housing-pushed-for-victoria-1.2300806
“In fact, I doubt many millionaires have any net cash at all. I would think that most hold portfolios and RE with leverage attached where appropriate.”
Good point nan. Most like Mike will most likely be over leveraged as well and all it takes is one or two bad deals to cave the walls in. Many young millionaires don’t stay millionaires, they blow it, gamble it, or take too much risk and/or die young.
Heard some real horror stories of some millionaires in the 8 and 9 zero range come crumbling down due to too much leverage from a couple of bad deals. Making it big is one thing, holding on to it is the other.
One guy I know is a millionaire but is on the ropes and may not be worth that once the law suits pan out. The business world is not always a friendly place wether in real estate or investing, thinking cocky that your a pro and know it all. You never know it all.
No interest rate rise again this morning. With every passing month I’m happier that we were convinced to go variable.
The folks who REALLY “won the timing game” are starting to die off now. That would be the generation born before or during WW2, but too young to serve in the war (the so called “Lucky Few”). That generation got cheap education in the late 40s through early 60s, entered a good job market, bought cheap real estate, enjoyed excellent pension plans and ever improving health care. They are or have downsized their RE holdings at high prices. The Boomers (1946-65) have done pretty well on the timing game as well. It’s a bit early to say how the Gen X (1966 – mid 80s), millennial etc. cohorts have done for luck/timing on average. Of course in the big picture being born in Canada in the last century was lucky compared to a lot of things.
Not many successful wealth accumulators ever just let the cash sit there. Cash is for consumption. If you don’t intend on spending it, it is better left invested.
In fact, I doubt many millionaires have any net cash at all. I would think that most hold portfolios and RE with leverage attached where appropriate.
Re: folks in their 40’s winning the timing game, the last year to buy RE before the current run up was 2001. Most folks in their mid 40s would have been in their early 30s then – prime buying age and as a consequence have owned RE for the lowest number of years with the highest YoY returns. Anyone younger than that would have to partially accept the current low interest, low down payment, high YoY increases paradigm.
I’m assuming that’s 1M in the bank in cash? I would guess most of regular Joes have probably pre-tax earned 1M by 32. 2M pretax by 36 is a squeeze. Good success if so.
I know a few. I agree it is unusual. However, the young very wealthy folks I do know did it through their own businesses or RE – usually with parental help. They did not get wealthy via a job working for someone else. Stock options in tech companies might be an exception but I don’t know these people personally.
The ones who “won the timing game” are likely older than early 40s that depending on what you mean by “won”.
“I wouldn’t see any unless I was in Gordon Head, Cadboro Bay or Broadmead.”
I’ve seen Chinese buyers at practically every open house I’ve been to this year (and I’ve been to a lot of open houses). There were more in OB than anywhere else, but I’ve even spotted them at Mayfair/Hillside open houses. Vancouver buyers also seem to be fairly plentiful and I’ve overheard people saying that they just came over on the ferry, etc. I’ve also been shocked by the number of luxury vehicles parked on the street at open houses, which of course might belong to any buyers but that I suspect are coming from Vancouver judging by the license plate frames that list Vancouver dealers. BMWs, Mercedes, Jags, etc. parked in front of modest bungalows. It’s a weird thing to see in formerly not-too-terribly-flashy Victoria.
Oh, you definitely have to work smart (& hard) for yourself. I made my first M by 32, second by about 36. Don’t get me wrong…it takes a lot of effort, intellect and time to escape the rat race. I was a slow-starter. I know several who made the first M in their 20s, but may have had a little help.
“Many white collar jobs that don’t require a lot of critical thinking and creativity will be drastically devalued or become completely obsolete in the near future.”
Economist Paul Krugman’s view of the future (written at the turn of the millennium)
http://web.mit.edu/krugman/www/BACKWRD2.html
“I didn’t do anything special. I saved aggressively and invested intelligently, worked hard and made sure not to chase idiotic get rich quick schemes.”
Same for me. I minimized debt which helped me save for bigger stuff, and now I don’t have any debt. (I’m older though)
I think we’d all agree that it’s important to work SMART while working hard and honestly (prioritize!), and take risks that are appropriate for your long-term plan. Plain diplomatic honesty has gotten me more opportunities than anything else.
Fascinating thoughts, Michael, on how education and working hard are ingredients for “mediocrity and making others wealthy”! Now it’s becoming clear why your charts cherrypick data to draw whatever lines you need to support your ideas 🙂 You bring up a lot of great points, but I could also choose other points in the chart and draw other lines – our accuracy is a matter of luck & timing (& preparing for any scenario)
eg., gathering data “on the ground/talking to people” – with both stocks & real estate – has been more valuable, eg., I bought here at the hockey stick inflection point, but I’ve also weathered huge downturns – gotta prepare for both.
“getting a good education and working hard –
The two ingredients of mediocrity and making others wealthy”
Mike is full of BS on this one. The evidence for increased earning with increased education could not be clearer.
https://library.carleton.ca/sites/default/files/find/data/surveys/pdf_files/Price-of-Knowledge_4th-edition_2009-11_chapter-1_en.pdf
https://www12.statcan.gc.ca/nhs-enm/2011/as-sa/99-014-x/99-014-x2011003_2-eng.cfm
Of course there are folks that made it rich without even finishing high school. Generally those folks made it by working super hard.
As for hard work, most people that have become rich without major inheritance have had to work hard at some point in their lives. The handful of people I know that are really rich (net worth excluding home>$5 Million) as opposed to just well-off work (or worked) really hard and are also very efficient with their time. All of them but one work for themselves. Bottom line, whether your occupation is panhandler or CEO, working diligently is on average going to bring you greater success.
“and might be retired in their 30s as a result.”
This is so rare I do not know a single person in this boat through RE in my age group +/- 5 years. I would expect those in their early to mid forties to have won the timing game here.
That being said I know a half dozen or so who are in high tech, all of whom worked their assess off, some even building digital versions of the rock walls that Marco didn’t think would ever pay off for him.
Most importantly, those jobs will soon (i.e. within 10-20 years) be automated out of existence. I recently stumbled into a temporary job that I’m quite enjoying. It is professional, white collar, and could be at least 70% automated with a fairly dumb software program.
Many white collar jobs that don’t require a lot of critical thinking and creativity will be drastically devalued or become completely obsolete in the near future.
Nan, if your net worth is 1.8 million or so and you are in your 30s and you have not had help you’ve done very well.
I think the point Marko might have been trying to make is that there are people who have earned much less at a job and saved less than you might have yet have as high or higher net worth at your age because they used greater leverage in real estate. The more leverage the more it seems to have paid off over your generation’s buying window – so far.
I have to say that if I had a time machine I would go back fifteen years ago and buy higher value real estate than we did. We were worried a lot about future affordability but those worries are difficult to reconcile with the reality of our career trajectories/income increases and rental income as a buffer.
Of course, maybe the day of reckoning is coming for the risk takers – but they sure have had a long run up – and might be retired in their 30s as a result.
“getting a good education and working hard.
The two ingredients of mediocrity and making others wealthy”
More delusional thinking. Didn’t Mike tell us he was born with the silver spoon in his mouth due his wealthy relatives who smuggled their money here ?
Well said nan. I recall him saying he wasn’t a good salesman but was in line for a Tesla salesman job. Go figger.
The two ingredients of mediocrity and making others wealthy.
“Honest hard work and being financially conservative just doesn’t work in our society”
This is complete and utter horseshit, Marco
I think given your proximity to real estate and the warped economy that operates there, you’ve lost the perspective that your father had (and even you had when you were younger and wanted to work in the hospital).
Don’t abuse your position as a person of moderate influence to spread meaningless blather about the superiority of the “get rich quick” economy that is Canadian real estate or other nonsense.
At the end of the day, the majority of value is transferred from person to person because they help one another. If you help a lot of people in a relatively rare and meaningful way, you will do just fine.
If you expect an above average house and an above average retirement because you sat at a desk all day and pushed meaningless papers around or attached part A to Part B or provided otherwise below average value to society for 30 years, well guess what – the economic inefficiency that made middle class lifestyles affordable for folks in those jobs doesn’t exist anymore. Because those jobs aren’t middle class anymore.
That doesn’t mean that you can’t do extremely well by being financially conservative, choosing smart investments, getting a good education and working hard.
I have some debt and invest appropriately for my age and risk tolerance but I would consider myself financially conservative and hard working and my net worth is in the top quintile for the largest urban centers in Canada here:
http://www.moneysense.ca/save/financial-planning/the-all-canadian-wealth-test-2015-charts/
Like you, I’m in my thirties and have received no outside help from parents or otherwise. Less than 30% of my net worth is in my house and over half of that was paid in cash. The rest is from savings & investments accumulated over the last 15 years of diligent saving, investing and hard work.
I may be an extreme case but I didn’t do anything special. I saved aggressively and invested intelligently, worked hard and made sure not to chase idiotic get rich quick schemes.
Maybe the definitions of hard work and financial conservativism have changed a little over the years but saying that you can’t get rich by working hard and being financially conservative is just plain wrong (and frankly makes you sound like every other realtor out there)
“Recipe for huge wage increases, and as the article states 2016’s the tipping point.”
If they are already getting overpaid, they won’t get more overpaid, they will just not build the place. Builders won’t take huge losses when the projects may be on thin margins already. Lenders won’t lend if they see problems with not getting the workers and risk seeing the builder go under.
2008 is still fresh in the lenders minds. Construction is shitty dangerous work and not like you’re going to see some mass surge in workers with trade papers because of a $2 an hour raise.
Sounds like they have known for years and done nothing, typical Harper government. They need 500 auditors not 50 for the amount of suspected tax fraud going on.
Leak reveals secret tax crackdown on foreign-money real estate deals in Vancouver
“A secret strategy briefing for Canada Revenue Agency auditors has revealed plans to crack down on real estate tax cheats in Vancouver, with 50 auditors being assigned to investigate purchases funded by unreported foreign income.”
http://www.scmp.com/news/world/united-states-canada/article/1989586/leak-reveals-secret-tax-crackdown-foreign-money-real?utm_source=&utm_medium=&utm_campaign=SCMPSocialNewsfeed
Recipe for huge wage increases, and as the article states 2016’s the tipping point.
Honest hard work and being financially conservative just doesn’t work in our society.”
Risk is part of life, but you best be prepared for the downside. Most aren’t.
These 2 statement are extremely valuable together.
Speaking of open houses – yes the ones I’ve attended (Saanich East, OB, Fairfield) have had quite a range of people – some from Victoria, some Vancouver (we heard realtors ask), and always some speaking a Chinese language, including a few young kids in sports cars 🙂
Even though the construction & reno market seems busy this summer, for what it’s worth the CMHC is forecasting housing starts (SFH, multi-unit for-sale or rental) to decline in 2017 (2,100 to 2,300 units in 2016, and 1,900 to 2,200 units in 2017). But another thing affecting Victoria will be the skilled jobs shortage, because the # of young workers isn’t enough to replace those retiring:
http://www.theglobeandmail.com/news/british-columbia/skills-training-program-aims-to-curtail-a-coming-jobs-crisis/article19485462/
Teranet June stats out. Vancouver up 23% on the year, Victoria up 12.5%
Regarding renting given the marketplace I think the government needs to step in and get rid of, or make modifications, to the fixed term lease with fixed end date.
We rents going up so rapidly fixed term lease is a great way to easily, without recourse or compensation , get rid of your tenant and re-rent for substantially higher.
And with such high demand it is no issue getting a tenant to sign such a setup.
Foreign buyers would be extremely low, like less than 1%? It’s the 13-14% from Vancouver that are causing the problem in Victoria.
I get maybe one outside of Canada inquiry per month? Usually US in my case (I don’t speak Mandarin so I wouldn’t be receiving inquiries from China).
This would go to one of these 20 REALTORS® – http://www.victoriabbs.com/
Marko,
What is your impression of the % of foreign buyers locally? How many calls, emails do you deal with in this way?
Personally, having been through 200+ open houses this year, I wouldn’t see any unless I was in Gordon Head, Cadboro Bay or Broadmead.
In Gordon Head I would guess every 4th group was speaking Mandarin. Looking back to March 1720 Barrie Rd is a good example. I spent about 35 mins looking through the home and was surprised that my overseas friends were down on their hands and knees in nooks and crannies in places I didn’t care for. It seemed good value but needed some work, but I think whomever bought it has done well as it was well below my avg $/lot value.
Impossible to find trades right now and prices are through the roof. Framing labour is up 30-50% compared to 24 months ago. Would not want to be building right now.
Basically right now I would not want to be buying a house, building a house, or trying to rent a house.
I don’t buy the decline in construction work. Been talking to a bunch of guys in the industry and it’s busy as hell.
“at that point I was like there is no way I am going to do honest work in life.”
Now there’s an honest statement on your industry.
“Honest hard work and being financially conservative just doesn’t work in our society.”
Risk is part of life, but you best be prepared for the downside. Most aren’t.
Marko,
Thanks for the post. While you were gone there was one less cool head that prevails…
“Interesting articles because they say 2 different things on construction. The TC article said, “There were 3,500 fewer people working in construction in the capital region last month, down to 11,000 from 14,500 in June 2015.”
Yes Vicbot, means construction guys have better paying and/or cheaper places to work. 3500 is a lot of manpower, and been down for a few months now. Always a tell tale sign of a market top. Feast or famine in that line of work.
So, from my perspective, renters really got burned over the last 15 years. I realize that mortgage interest, maintenance and repairs, yardwork, etc. all have a cost, so I wouldn’t really be $500K ahead, but still much farther ahead than I am now. The truth is that many people have made more from their house appreciation than they would earn from years at their jobs, so focussing on work doesn’t always pay off.
When I was in my teens my father had a stone masonry business and I worked weekends/summers for him. I think at 15-16 years old I realized there was no reward in hard work. I remember once we had a job in the Uplands and we had to carry all this rock behind the house as it was too steep for a wheel-barrow and I think we had negotiated something like $8 per square foot. Invoiced the owner at 2100 sq/ft of rock wall after months of working on it, often in shitty weather, and the douch bag millionaire comes back saying he measured it out at 2,092 sq/ft. lol, at that point I was like there is no way I am going to do honest work in life. That same millionaire paid over 70k in real estate commission to sell his place but had to grind us down for $64 for super hard work.
Then after that I went to university and saw my friends pay of their student loans asap while the government through a series of BS programs randomly took $8,000 of my student loans over the course of 3 years. At that point I was like, hmmm, maybe calculated debt isn’t such a bad thing.
Honest hard work and being financially conservative just doesn’t work in our society.
“The demand for skilled workers is so great, construction companies are starting to look outside B.C.’s borders, specifically targeting Alberta’s laid-off oil patch workers. But it’s not always a perfect fit.”
Same thing happened in 2007, you could write your own ticket. A year later the city was littered with empty holes and many excuses why they couldn’t get the financing or mysterious Germans were coming into the deal, then not. When the cranes are everywhere, be worried.
They also promised 800 shipyard jobs last spring, never happened. Lots of hype at market tops.
There’s nothing like calling the property manager when something goes wrong!
I was a tenant at the Bayview for a few years and my landlord was in Vancouver. Whenever something needed to be addressed, for example garburator died, he would have me organize the repairs and send him the invoice. Was kind of annoying.
Marko and VicRenter just posted how crazy the rental market is now.
I am totally shocked. I increased the price knowing the rental market was crazy not anticipating a flood of perspective tenants which really has me scratching my head as to how high I could have pushed the rent. Also, I would rent to 80% of the applicants so far; really great applications.
Last year I had a lot of applications for the same unit too at the lower price but only would have rented to maybe 40-50% of the applicants.
In 2012 when I was renting a unit at 834 Johnson and I had 5 people take a look at it in 5 days and lucky the 5th guy wanted it, but he was the only one. He has been there for last 4+ years.
Interesting articles because they say 2 different things on construction. The TC article said, “There were 3,500 fewer people working in construction in the capital region last month, down to 11,000 from 14,500 in June 2015.”
Yet the Global article said construction was “booming” – without data – and there was a shortage of skilled workers. So I guess construction work is down, but skilled workers needed. Funny how the Global article represented it as if construction was growing – it seems to be down. (So what’s next is anyone’s guess!)
Crazy how hot our labour market is. Nice to see the techies gaining the most jobs (21000 jobs last month!!)
http://www.timescolonist.com/news/local/greater-victoria-unemployment-rate-drops-as-tourists-season-begins-1.2297992
The capital region has one of the lowest unemployment rates in the country, trailing only Quebec City, at 4.1 per cent… The largest increase in employment is in the professional, scientific and technical sector which saw jobs rise by 5,000 to 21,000 last month.
http://globalnews.ca/news/2820810/we-need-more-workers-victoria-construction-boom-leads-to-labour-shortage/
The demand for skilled workers is so great, construction companies are starting to look outside B.C.’s borders, specifically targeting Alberta’s laid-off oil patch workers. But it’s not always a perfect fit.
That’s a big part of the reason we rented in big rental buildings rather than condos. Professionally managed buildings are just that: professional. Amateur landlords in general also as their name implies.
“You have no control as a renter; you could be forced to move at any time and the increase in rents is unpredictable.”
Very true. And as I’ve stated on this blog before, I’ve had to move because of owners deciding to move into the condo themselves. It isn’t a good time. On the other hand, despite the lack of security I have to say that being a renter is wonderful if you don’t want to have any house-related responsibilities. There’s nothing like calling the property manager when something goes wrong!
I too could/should have bought years ago. But then I wouldn’t have been able to travel and do all kinds of other things that my disposable income and time allowed.
This is the type of rental market that people pull up stakes and leave town for greener pastures like every other past market peak and also turns off renters from moving here.
Why would you want to move to a town with over priced houses and gouging landlords ? It was only back in 2012 landlords were giving away free rent all over town. It’s a cycle that will repeat itself once again.
There are all kinds of reasons for renting vs. owing, but if one has a large downpayment and a buffer for an interest rate increase, I think an owner has more security. Marko and VicRenter just posted how crazy the rental market is now. You have no control as a renter; you could be forced to move at any time and the increase in rents is unpredictable.
When I moved to Victoria 15 years ago, I was paying $600/month rent for a 1 bdm. At the time, I probably could have swung purchasing a house in Gordon Head with a suite for $250K (that’s all they cost). Instead, I decided it would be more prudent to stay in the apartment because the monthly cost was less. I moved out for other reasons, but soon after, the building sold, renovations were done, old tenants had to move, and now the rents are over $1000 a month. In the meantime, the house in Gordon Head tripled in value.
So, from my perspective, renters really got burned over the last 15 years. I realize that mortgage interest, maintenance and repairs, yardwork, etc. all have a cost, so I wouldn’t really be $500K ahead, but still much farther ahead than I am now. The truth is that many people have made more from their house appreciation than they would earn from years at their jobs, so focussing on work doesn’t always pay off.
Thanks for the encouragement, all. Hindsight is always 20-20, etc.
“I listed it for rent yesterday and over 40 emails in 24 hours.”: My friends who just advertised the basement suite in their new house had the same level of response and couldn’t believe it. They deliberately didn’t put the rent atrociously high so that they’d have a shot at being able to choose a good tenant from many applicants, but they asked for more than they had initially planned. They said that it felt like they could have asked a few hundred dollars more a month and still had takers.
If Vancouver goes I just cannot picture Victoria surviving unscathed. Consumer confidence alone affects prices and this will take a hit, never mind the drying of the Vancouver buyer pipeline.
You’re right, but our chart doesn’t look nearly so parabolic. Who knows what the effect will be on us when Vancouver goes..
I was thinking about selling one of my rentals but decided not to; primary reason being capital gains tax.
https://www.youtube.com/watch?v=XcopxBCcmss
Therefore, I listed it for rent yesterday and over 40 emails in 24 hours, already double the rental applications that I had 12 months ago. I increased the rent about 15% from what I rented it out for last time. I’ll be increasing my positive cash flow per month by 40% with the new tenant.
It’s absolutely nuts.
Hang in there VicRenter, parabolic bubbles always pop, and this one has never been this close to imploding upon itself.
http://www.news1130.com/wp-content/blogs.dir/sites/9/2016/02/02/rebgv.jpg
It is going to work out okay VicRenter.
There was always a better time to buy if you look back. People thought we were nuts to buy in 2012 because the market was going to crash. If only we had bought six years earlier…
My perspective is there is only now. Past is gone, future is unknown. If you can afford to buy and the timing is right for you that is the timing you should pay attention to – not what the market has done or will do.
Hold onto the home long enough and the next generation of buyers will be thinking how lucky you were to buy when you did.
I agree that renters aren’t deadbeats, etc. I’m half of a high dual-income, professional household and we’ve been renting happily for the last 6 years. We owned a condo which we sold in 2010 because we felt that the market was in for a downturn and we knew that we didn’t want to get stuck in the condo for the long term. It turned out that that was a good move since that condo did indeed drop in value. We then waited and waited, hoping for an obvious good time to buy a house. Work was busy and life was busy and we kept saying that we’d start looking soon but that there was no rush because prices were pretty flat. But then this year happened and prices jumped up more than we’d ever expected they could. I didn’t even really realize what had happened until March, when it was too late. When the news reports about Vancouver buyers coming to Victoria first came out we laughed and thought it was ridiculous. Now it seems all too real. As I said, we’re happy renting where we are and we can save quite a bit of money compared to what we’d like to buy. But we do want to have a house and are feeling very discouraged by the developments in the market since we’re now looking at a much more expensive purchase than we were planning. We felt like we were being so smart by selling in 2010 and waiting for a good time to buy, but we obviously missed what turned out to be the bottom. I’m kicking myself for thinking that I was being smart and responsible by waiting on the sidelines. I can fully understand how many people are buying in this market because they’re worried that prices will climb even higher and they’ll be priced out. When you’re staring that possibility in the face it’s pretty scary.
Doesn’t look good, all the bad signs of the bubble popping are in your face. China money flow slowing, reports via Bloomberg of jailing people in China for money wires, sales declining, parabolic blow off behavior.
Keep your blinders on bulls, this won’t be pretty. You could always ring up Mike, he’s got lots of rose colored glasses for sale.
Why Vancouver housing may have hit its dot-com bubble peak
“There’s a good chance Vancouver’s hot housing market has hit its peak, following a similar pattern to that of crashes in oil, gold prices and the dot-com bubble, according to LePoidevin Group’s senior vice-president and portfolio manager.
David LePoidevin told BNN that Vancouver’s runaway housing prices echo the last, big “bubbly” moves seen before other price crashes.
“The last move in any market that gets bubbly is the biggest,” he said. “Look at oil going to $147 in the last few years before it crashed … at the Nasdaq, where yours truly started selling short tech shares in January 2000 when the Nasdaq was at 4,000. By April it was at 5,000 – it had gained 25 per cent in four months.”
When prices level off, that’s when danger really begins to set in for investors, LePoidevin said.
He warns that one of the main drivers of Vancouver’s run-up in housing prices – foreign capital flows – could be slowing, as China looks to ramp up efforts to halt capital outflows and Ottawa makes its own assessments.”
http://www.bnn.ca/News/2016/7/11/Why-Vancouver-housing-may-have-hit-its-dot-com-bubble-peak.aspx
Well Mike, we know you’re pissed you couldn’t afford Vancouver and missed out on the big gains but Victoria ain’t Van. The affordability limits are past the peak.
The bodies will be stacked deep when this pig blows. The New Paradigm takes no prisoners.
http://2.bp.blogspot.com/-ZWsQNhB12M4/Tf161ZP8iFI/AAAAAAAAAu4/iEFXxNao1KU/s1600/800px-Stages_of_a_bubble.png
Re: rates
We’re about to shatter that #1 myth around here.
As we go from ‘recovery’ to ‘upswing’ (see below), everyone will finally witness how Vic RE prices are about to rise (alot) alongside slowly rising interest rates (bond yields & short rates) over the coming years.
http://www.stockideas.org/wp-content/uploads/2014/03/sector-rotation-and-the-business-cycle.jpg
Hawk
Yep he is going to raise rates tomorrow. 🙂 getting desperate Hawk.
The only gig that is up is yours. Rates are not going anywhere for 2 to 3 years.
I’m sure the rest of them will follow caveat. Poloz is calling for a correction so the bankers know when the jig is up. They didn’t get to be CEO’s by buying at the top like so many here have. Maybe he will hike rates like Carney once threatened and catch everyone off guard.
“the CEO’s of all the big 5 Canadian banks are selling their mansions right now. ”
Hawk – the article you linked to mentioned only two out of five. Do you have references for the others or was that hyperbole?
Brian Porter (Scotia) is selling his townhouse for a projected profit of 400,000. Sounds pretty juicy until you realize that this fellow takes home over 10 million per year. I highly doubt he is motivated by the puny 400K profit. He probably makes an extra 400K per year by sitting on boards of other companies. It is more likely he is moving to a different place for personal reasons. Quite likely upsizing. Of course I could be wrong. Perhaps he is going to couch-surf for a few years to wait out the Big Crash 🙂
2816 Burdick is assessed at $904k, with over $800k in land value. That doesn’t seem that outrageous to me.
I had to post my ultra long-term again, as we’ve convincingly broke thru last Spring’s highs.
http://i.imgur.com/PSK5lAm.png
Thanks for that update JJ. This is a pretty big increase over the 7% from 2015. Vancouver buyers are definitely having a big impact here.
Sure there are other ways to impose taxes, but until the provincial and federal governments introduce other new taxes (property, capital gains, speculation, etc), then at least the vacancy tax is an attempt in that direction.
They should cross-reference utility bills – electricity, water, gas – to verify, like Washington DC does. Hawaii also seems to find a way to tax vacation rental properties at a higher rate than residential.
“Haha that’ll work real well. Who in their right mind would volunteer to pay more taxes? This would be completely impossible to prove so there is essentially no incentive to tell them your home has been vacant.”
All you have to do is check the water bill and ask the garbageman. Fines for not complying should be double the tax.
They can hire guys like LeoM who already ride around the neighborhood all day for free checking out for any lights on or off and if people are moving about.
Imagine how many homeless guys could be employed cheap with a quota system. Sounds like a great new work program at low cost.
Nah, they’re just trading up.
It is not exactly “volunteering”, you have to swear you are telling the truth and sign the form and submit it. I wouldn’t be comfortable lying about this myself as when I sign a statement that something is true it is to the best of my belief. I think there are enough alternate legal ways around it to potentially make it ineffective though.
Haha that’ll work real well. Who in their right mind would volunteer to pay more taxes? This would be completely impossible to prove so there is essentially no incentive to tell them your home has been vacant.
Chance of a positive ROI on this new tax is zero.
Marko
That seems expensive. 🙂
Still hot out there I guess. Any signs of a slowdown?
“2816 Burdick Ave just went for $1,251,000 and it was bought three months ago for $970,000? What da.”
Now that has to be a foreigner, or they should have their head examined and their agent investigated for incompetence.
“Whether such a scenario will play out, who knows? But if by November Donald Trump has sold off most of his RE holdings (during his campaign he has often boasted of how much his apartments in NY are selling for), watch out.”
Forget Trump, the CEO’s of all the big 5 Canadian banks are selling their mansions right now. If that isn’t the biggest red flag to sell I don’t know what is.
http://www.huffingtonpost.ca/2016/06/16/bank-execs-put-homes-on-sale_n_10508922.html
Totoro
That is like swiss cheese. Full of holes.. Political bullshit to say they are doing something.
2816 Burdick Ave just went for $1,251,000 and it was bought three months ago for $970,000? What da.
“Stereotyping renters as financial deadbeats is total bullshit.”
Presumably that was just bearkilla trying to wind you up. As totoro stated renters in Canada are on average lower income and less wealthy than homeowners which isn’t all that surprising. Of course the causality flows from high income to home ownership not the other way around (i.e. for the vast majority there is nothing about owning a home that helps them have high income). For the net worth causality runs both ways. High net worth lets you buy a home, but buying a home also builds net worth (at least historically). At the very least most homeowners are on a forced savings plan (aka mortgage repayment) so they are less likely to piss their $$ away on the “finer things in life”.
That said I know quite a few well-off people that rent. Renting is a very liberating choice. The time that homeowners spend looking after their house and property, or organizing and paying people to do it for them is significant and cuts in to time that could be spent doing more interesting stuff.
@Numbers hack
All other things being equal, ever cheaper money means ever more debt, of which much will flow into assets, mainly RE and stocks. Under these circumstances, RE might implode due to overbuilding, which, in Victoria, happened once before with condos. With stocks, the sky’s the limit as long as the yield is higher than on the alternative — mainly bonds which in many cases now have negative yields.
So what could cause interest rates to rise? Western central banks are surely in no hurry to repeat Alan Greenspan’s pre-2008 exercise of 17 successive rate increases, and automation and globalization of production continue driving inflation lower. But Donald Trump has a plan, to build two walls. A tariff wall to keep out cheap Chinese stuff, a prefabricated concrete wall to keep out cheap labor. The result, if this plan is implemented: a return to good old 1960’s style inflation, which will mean rising interest rates, which will mean houses back to two to four times family income.
Whether such a scenario will play out, who knows? But if by November Donald Trump has sold off most of his RE holdings (during his campaign he has often boasted of how much his apartments in NY are selling for), watch out.
They are planning to do it through BC Assessment as part of the sworn declaration on the form you need to fill in when you pay your taxes. BC Assessment will levy the additional tax for Vancouver.
That part is pretty simple; however, letting a house sitter live in the home part of the year in exchange for free rent and the home will no longer be deemed vacant. Lots of workarounds and for those who can let a home sit I’m not sure how much an additional tax is going to be a deterrence.
Having a vehicle is a necessity for most (not all) of us to commute to and from employment.
The costs of owning each vehicle are typically $600/mo (Gas/Maintenance/Depreciation) plus the cost of a loan (if any). Leasing a vehicle can make sense, as totoro said, but you’d have to look carefully at the numbers. You’re bound to the same maintenance terms etc and there’s overage charges for Kms. Each lease is unique.
Generally speaking, those renting with a timeline that could still facilitate buying a home, are saving up a down payment to do so. There is a large contingent of renters that are waiting for a correction, which given market cycles will occur at some point, to which degree? There are frivolous buyers and frivolous renters. I think anyone who hasn’t worked out a budget is unwise.
Probably the best advise I was given was to not take on any additional debt in the first 5 years of a mortgage, if possible, and to establish a good emergency fund, and invest that money wisely in a TSFA (lots of options under that umbrella). When your term is up, you have plenty of extra $ to pay down or continue saving, and use Dividends and Increased value to pay for vacations, etc.
Publically acceptable to tax based on vacancy, that is why this is gone through. I am also a believer in small government. I do not see how this is going to work without creating a massive bureaucracy. Tax too much and someone will just create a service to look like someone is home. Computers can turn on lights and water.
I will admit I may be missing something but how the hell are they going to do this. Big brother all over it.
I need enlightenment on how this can possible work cheaply,
Let me state I am all for the concept of taxing foreigners. At the end of the day there needs to be more revenue than the cost of administration.
Agree that renting vs owning is very much a personal choice. A very successful businessperson I know (owns his own business) travels a lot and doesn’t want the responsibility of home ownership so he rents for himself and his family in whatever location makes sense during that particular year – to cut back on commuting times. He also leases hybrid cars like Priuses to be environmentally responsible.
His focus is on his business and other investments, not real estate. We all make different choices.
TripleA, Gregor doesn’t have huge fans for other reasons, but Vivian Krause – that article’s author – doesn’t have much credibility: she admits that 90% of her income is from the mining, oil, and gas industries.
So she tends to go on witchhunts against environmental groups, while ignoring the larger amount of foreign capital influencing Canada’s energy sectors.
Tides Canada Foundation President Ross McMillan responded to Krause’s allegations in a letter published in the Financial Post: “Her repeated focus on the Tides Foundation and its grantees is reminiscent of the special attention that former Fox News host Glenn Beck paid to the Tides Foundation on his TV show”
In response to Krause’s theories that charitable groups are pawns in an American economy conspiracy, critics have pointed to the larger foreign capital influencing Canada’s resource sector. (CAPP stats show that $20 B of foreign money was invested in the Alberta oilsands between 2007 and 2010 alone.)
Other colleagues she cites include Rob Scagel, a well-known climate change denier. Her opinion pieces are written from a right-wing neo-con point of view, eg., Ezra Levant has often cited her work on TV (He was found by the Law Society of Alberta to have violated codes of professional misconduct).
So her articles tend to be very unbalanced and make mountains out of molehills without any effort to uncover the bigger picture, ie., a PR pawn.
Columnist Peter O’Neill wrote in the Vancouver Sun, that he “struggled to understand” Krause’s theory.
I’d agree there is nothing wrong with renting and that is a really unfair stereotype – but he’s probably just trying to get you going…
What you call “polarizing” seems to just be math and data analysis to me. Easy to make false conclusions without it.
Not knocking renters but the fact is that the net worth of a homeowner in Canada is much higher on average than those who rent and, as you’d expect, incomes are too. Not to say high income or net worth individuals don’t rent: it is just an uncommon choice in a country with 70%ownership.
As long as you are happy with your choice who cares. Not sure why the conversation has devolved to picking on renters or home owners. Personal choice is what it is.
Who cares about the implications of leases or not, again you polarize the conversation as Jack has stated many times. The point being made was many renters make big bucks and are not some crackhead in bearkilla’s basement. One neighbor of mine makes $150K a year and has lived here for years. Stereotyping renters as financial deadbeats is total bullshit.
The math on “writing off the lease cost” still makes leasing more expensive than owning and you have to keep a detailed log of personal use which is a PITA. A business write-off is still a loss, just a pre-tax loss. You still pay for it. And if you buy a used car and use it for business purposes you can get a per km. compensation for this that includes wear and tear.
In order to really understand this you need to do a total cost per year and per km comparison. When you do the math you’ll find leasing is like buying a new car, having it stolen after years of payments and then you get a bill for the wear and tear.
Extra “cash flow” put into a depreciating asset makes little sense imo unless you are financially independent and you really want to do it. From an economic point of view it is best to drive a slightly older paid-off vehicle most of the time.
Homeowners can take out HELOCs if they have 65% equity in their appreciating asset. That is a whole lot of equity. And you can use a HELOC to invest and write off the interest. If you use it to buy that used car you’ll still be financially ahead of the person renting and using “extra cash flow” to lease a luxury vehicle.
I guess it depends on your priorities. If you are judging how well someone is doing by a leased vehicle that is one way to go. Doesn’t make sense to me, but neither do a lot of consumer purchases. Neither does looking at spending your disposable income as a measure of your wealth but different strokes.
“Renters in my hood can clearly afford the finer things in life and work at professional jobs that pay higher than average Victoria incomes.”
I thought the finer things in life was Health, Family and Friends. Different strokes I suppose.”
Once again you miss the point Triple, as your buddy bearkilla was saying renters are all financial losers and I was explaining how he couldn’t be more wrong. You turn it into some ass backwards direction that makes no sense, as usual.
Homeowners can take out HELOC’s, so what ? Leases aren’t cheap on high end cars, renters have the extra cash to afford it. They still have to come up with $3000 to $5000K down as well. If you’re a business person or contractor like many in my building are they can write off the lease cost.
Renters can lease cars.
“…I was saying it 3 months ago while he was still calling for the slow melt, but nice to see he’s finally seen the light. Must read my posts.”
Tell me what it’s like to be so humble, yet refined. Note: there was also a super cool emoticon at the end. How very Victoriaesque passive agressive of you. Go on…
“…There’s more high end quality cars in my place than I’ve seen in years.”
Awesome. Tell me more about depreciating assets…
“Renters in my hood can clearly afford the finer things in life and work at professional jobs that pay higher than average Victoria incomes.”
I thought the finer things in life was Health, Family and Friends. Different strokes I suppose.
bearkilla,
Which only proves you are a slumlord of some bug infested dump. There’s more high end quality cars in my place than I’ve seen in years. Renters in my hood can clearly afford the finer things in life and work at professional jobs that pay higher than average Victoria incomes.
Numbers,
You obviously didn’t take time to watch that excellent video I posted on world debt explaining the current credit bubble. The catalysts can come from so many directions of debt bloated countries that you need me to tell you ?
For a numbers guy i’m surprised you’re not more aware of how the last financial crisis happened and the repercussions for not dealing with it by kicking the can down the road. Google is a great tool to educate yourself on how credit markets blow up. Try it some time.
The new debt created is multiples of trillions of the previous debt thus record personal and household debt will have to be repaid when the next recession hits which is not far away. You can’t stay in denial forever numbers.
Interesting to see Garth saying to take the money and run and get out now. I was saying it 3 months ago while he was still calling for the slow melt, but nice to see he’s finally seen the light. Must read my posts. 😉
There is no doubt that house sales in Victoria City and Oak Bay are skewing the house data.
So forget about Victoria City and Oak Bay and let’s look at the remaining hoods. And what I see is that the mode has clearly increased by $100,000 since last year from $600,000 to $700,000. And that is supported by similar increases in the median and average.
However, the month over month trend seems to have peaked. Last month marked the first time this year that both the average and the median declined together, as new and active listings increased and sales decreased.
Now before some of you start wetting yourselves. The change isn’t much just enough to conclude that the market prices are mostly stable with some slight decrease.
Think of it as being at the apex of a roller coaster ride.
https://youtu.be/IbUIuOVydc0
Until Quebec closes or limits their foreign investor program (read: never -condition of Meech Lake Accord) housing is going to continue on its meteoric rise in BC.
This vacancy tax is a smoke and mirrors approach.
A better proposed system brought up during NDP town hall was suggesting Significantly higher Property Tax, and Significantly reduced income tax.
But this doesn’t have a chance in hell.
Even if a method comes out to charge vacant housing, a smarter method will prevail to outwit it.
Hydro? Have auto timers up to the included threshold. Or, rent the units out using a corporation based overseas.
Gregor is no saint. Please don’t shed him in any positive light.
http://fairquestions.typepad.com/rethink_campaigns/2011/10/tides-usa-hanks-beach-treedom-gregor-robertson.html
@Hawk
You are a smart guy and with a worldly slant and an informed opinion.
1/ other than googling credit bubble, who is going to pop the credit bubble and start “recalling” the credit? The USA? The Europeans? The Chinese? The entire developed world is printing money in a low growth and low inflation environment, doesn’t mean a bubble doesn’t exist, but what is going to cause it to “pop”? Why accelerate your economy into recession/or even depression?
and yes, my friend stands on a corner all day long asking how long they have been there. Next time you go to Toronto, I’ll tell you which corner.
Time to take a look back over the last 500 house sales in the core that occurred since May 17, 2016.
67.6 percent indicated they were from Victoria.
4.6 percent didn’t answer the question.
13.3% said Vancouver
2.2% said Calgary
1.8% said Edmonton
0.2% said Toronto
0.4% said Duncan
0.2% said Sidney
House prices ranged from a low of $235,000 for a floating home in the harbor to a high of $3,700,000 for a 4,000 square foot house on 2.37 acres of waterfront in Saanich East. The median price at $739,500 or $344 per finished square foot. Median exposure 9 days on the market.
Top 10 highest prices paid were by people from…
5 from Victoria
1 from China
1 from Prince George
1 from Edmonton
1 not shown
1 from Vancouver
By the way the person from China paid less than asking price and didn’t pay the highest price either.
In my experience forenters are broke ass losers.
“Personally I think forenters should be taxed to the hilt. Granted not much you can get out of a forenters.”
Spoken like the true uneducated anal slumlord, who doesn’t know a forenter has the economic means to buy a house but chooses not to. In this market it is the smart thing to do.
When the market tanks, your current forenters will buy up the major deals, your new forenters in Langford will come from the lower echelon that may be on welfare and you’ll be begging them to rent your dump at discount rates.
Watch Victoria and everyone else in BC apply the same tax so your theory is useless.
Real estate is a safe haven until everyone starts selling and it goes down ,just like the bond market and every other so called safe investment. Hate to break it to you but nothing is safe haven in a credit bubble.
Does your friend stand on the street asking people if they just moved there? Not like we didn’t know Toronto is a huge city of all nationalities just like Vancouver.
You’ve got it the wrong way comrad. Soon you will have to prove you live in your home full-time or be subject to an excise tax. Personally I think forenters should be taxed to the hilt. Granted not much you can get out of a forenters.
… except that the politicians and Bank of Canada all said it was a regional problem – Vancouver and Toronto and adjacent areas in particular. Poloz said:
“In these two areas [Toronto and Vancouver] we see a rate of price increase that would be very difficult to match up with any definition of fundamentals that you could point to.”
Also Josh Gordon’s SFU study:
https://www.sfu.ca/content/dam/sfu/mpp/pdfs/Vancouver%27s%20Housing%20Affordability%20Crisis%20Report%202016%20Final%20Version.pdf
This is perfect. Tax Vancouver Empty Homes, and guest what? Watch Richmond, PoCo, Surrey…etc… perhaps even Vic RE go up higher. You need a national policy for everyone, not only the Chinese buyers in Vancouver.
Spoke to a friend in Toronto and he says it is everyone from around the world going there. Canadian RE is a safe haven for everyone with some means. Look up the Brampton, 600,000 suburb of Toronto, prices doubled or tripled last 12 years:
1.5% Chinese and 39% South Asian… What? blame the Chinese that a normal shack @ $200K 10 years ago is now $600K?
https://en.wikipedia.org/wiki/Brampton
This is a national issue, not a regional one.
What about holding companies owning properties? held by residents or non residents.
I recall a realtor telling that many vacant upland homes where owned by foreigners. For investment or to gain citizenship. As if have bank, property or family ties easier to gain citizen. Though not sure where he got his info from.
Gregor says the tax is for those who are away 12 months of the year.
“If people are wealthy enough to hold these houses empty 12 months a year, they should be paying a tax” says @MayorGregor”
I agree that the study needs to be longer term to be reliable. Nineteen days is not enough.
My hypothesis based on the data that I do have is that foreign buyer percentages in the ranges given accord with what I would have expected and are likely similar to what they will be over the longer term when we have data. I could be wrong, but it appears likely that foreign buyers are a minority, although overrepresented in the luxury market in Vancouver, while permanent residents buying is a far more attractive investment proposition. The capital gains tax is a pretty big incentive and residency programs through student visas seem not overly onerous to obtain.
If I was in China and looking to expand opportunities and stabilize assets I’d probably be sending my kids to school in a place like Canada and buying a house with them through a foreign income backed mortgage when they turn 19. Then when they are working permanent residents they could sponsor me to come to Canada as a family member.
“I don’t think so. They seem likely to be fairly accurate for foreign buying imo.”
You previously agreed a 19 day study was an incomplete study. How is it fairly accurate now ?
” Perhaps there should be rules against permitting foreign income to count for Canadian mortgages.”
As per yesterdays post, Australia has new foreign income mortgage lending rules that could implemented over night here.
http://www.9news.com.au/national/2016/07/09/19/42/chinese-property-buyers-forced-to-sell
Not quite, and the check on the rental income or capital gains exemption is a CRA audit or investigation.
I would certainly not take the risk given that all your bank transactions can be audited, there can be an on-site visit, and neighbours can be interviewed. Plus your tenants likely filed taxes using the rental suite as their address. And places like Airbnb have had to turn over their rental information to CRA already.
I remember when ebay sellers were audited en masse by CRA. Likely going to happen for the sharing economy too. Not to mention that there is an anonymous tip line for CRA and a disgruntled tenant might be motivated to make some disclosure.
https://www.canadiantaxamnesty.ca/article/internet-income-is-taxable/
I don’t think so. They seem likely to be fairly accurate for foreign buying imo.
What is missing is an accurate analysis of the impact the permanent resident program has had on the market or any reasonable assessment of the cost:benefit given the impact on affordability. These purchasers are not counted as foreign buyers and it would be okay if there was a significant tax windfall to Canada from payments on worldwide income, but the program does not appear to be working like intended and creates legal incentive not to pay taxes in Canada while benefitting from Canadian ownership. Perhaps there should be rules against permitting foreign income to count for Canadian mortgages.
If Canada really wants to deal with this they should be employing bilingual folks to analyze the posts on juwai.com
Yes agree could use sin numbers as permanent residents have a certain start number. Lots of loop holes still. Non resident students etc.
It’s like how do you prove someone has a vacation rental or rents out part of there house and claims the rental income on tax return? Or common law partners are filing as a couple and not separate so don’t have a capital exemption when sell one or there properties
Honestly I guess.
Vicbot
I heard that UBC prof on CBC this morning. Made a lot of sense. Mentioned that you would look whether purchase price made sense relative to reported Canadian income. Would need to control for those who have lots of assets but little income (eg Canadian citizens/residents that have saved up or inherited a lot of money – often older folks). Bottom line is that nearly anyone with any credibility thinks De Jongs numbers are a joke and a smokescreen for a government that wants to do as little as possible.
Someone posted DOM stats just wondering where they got the data/info from? Also if DOM are from date accepted the offer or sold.
Cause pending sales depend on when conditions where dropped. Although in a hot market there would be very little lag between those days usually.
Wholeheartedly agree. This is the permanent resident loophole that makes it legal for one spouse or child to become a permanent resident, be supported by the non-resident spouse making loads of money in a foreign country and not paying tax on it in Canada. Then the resident family members own super expensive real estate here through a mortgage co-signed by the non-resident family member based on their foreign income. The resident family members have almost no income to speak of as they are gifted money or bring it with them and they get the capital gains tax exemption on the sale of the home and qualify for low income assistance programs and schooling.
That needs to be addressed imo and this situation appears to me far more likely than the super rich corrupt Chinese money. I think these buyers are really impacting the housing market in Vancouver to the detriment of Canadians overall – low or no taxes and access to subsidized services? Why should this be permitted?
There already is a test for whether you are resident in Canada. Not that difficult imo. http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/tmprry-eng.html
They might use BC Hydro data to decide on vacancy. They didn’t include snowbird-like occupancy as a vacany (eg 6 months per year) when they first looked at the numbers. They can probably get more detailed data on high/low energy use with smart meters.
How do u prove someone is not living there? If I vacation for 5 months of the year. Am I living there. If I have blinds am I living there. This is going to administrative cluster fuck to deal with.
Good news about the new tax. Also – another person (besides AREAA & juwaii.com’s VP) questioning the accuracy of BC’s recent real estate stats – Professor Davidoff of UBC ….
(This isn’t to say that foreign investors are the only speculators impacting the market, but it’s important to recognize weaknesses in the BC government’s data collection process before immediately believing whatever they announce as an “official stat” … there seems to be whole peer review process lacking there)
B.C.’s citizenship reporting requirement still has loopholes, experts say
http://vancouversun.com/news/local-news/b-c-s-citizenship-reporting-requirement-still-has-loopholes-experts-say
“Davidoff also argues that the newly collected data doesn’t measure how big an effect Canadian permanent residents who arrived as immigrant investors, but still earn their living outside of the country, are having on the market …Davidoff said, the province should collate information on whether buyers have filed income tax returns. ‘You’d get the right answer, to me, to the question (of) what is the role of outside money in driving up prices,’” Davidoff said.
BC approves Vancouver’s vacancy tax. Victoria better hop on board ASAP.
http://www.theglobeandmail.com/real-estate/vancouver/bc-announces-changes-to-real-estate-market/article30852588/