The last month of records?

We got a little distracted there with the mortgage rules and the distinct possibility that you will have to pay capital gains tax on your suite, but before the numbers become ancient history let’s take a look at September.

While the VREB is trying to convince regulators there’s nothing to see here with their headline, September was another extremely active month.   September inventory was the lowest ever recorded (since 1996), while sales were second highest on record.

Months of inventory was the lowest ever for September.  Remember, anything below about 4 is a sellers market.

Prices are still taking a breather into the fall, but as we’ve discussed, this can and has happened before in hot markets.    Year over year we are at about +15% for detached homes.

Of course this is all kind of looking in the rear view mirror with the mortgage changes that have hit the market since then.   Looking forward into the next couple weeks, we should see that reflected in the sales rate (currently we are still reporting on sales from before the rules were introduced.

October 2016
Oct
 2015
Wk 1 Wk 2 Wk 3 Wk 4
Unconditional Sales 244
734
New Listings 301
925
Active Listings 1995
3170
Sales to New Listings  81%
79%
Sales Projection 800
Months of Inventory

4.32

On the mortgage rules front, the banks and insurers are quite predictably foaming at the mouth at the new rules.   A little discussed change that the feds are looking at right now is how to shift some of the risk of insured mortgages from the taxpayer to the banks by making lenders and insurers pay a deductible if an insured mortgage goes under.  A little skin in the game to encourage prudent lending.    Naturally the banks are against it and have spun up their lobbyists to say that our mortgages are already so incredibly safe and default rates are so low that it would be pointless.

We don’t understand what a deductible is intended to achieve as a policy outcome.  If it’s supposed to be something to improve the quality of underwriting, well the quality of underwriting is already very strong.

-Darren Hannah, Canadian Bankers Association

Of course, one might ask if there are no defaults, why are the banks so desperate not to be on the hook for them?

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249 thoughts on “The last month of records?

  1. Just the core. Since every bull on this blog purports to live in Oak Bay, few seem to be interested in what is going on in the rest of the world.

  2. Just Jack:

    The next fourteen days will be interesting. But will condo sales be more affected than SFH in the core by the new mortgage rules. By the way, when you report 75 SFH sales are those just in the core or do they include the West Shore.

  3. Bingo, last time I looked Victoria is the second most overpriced city in BC. Do the math when Van is tanking and 50% of new buyers just got cut out of the market as of tomorrow. You sound worried.

    So just gonna talk around it, or are you going to give some objective numbers and a timeline to your prediction?

    What % drop in Victoria and by when? It’s really not hard. You just throw some numbers out there. You must have some numbers in mind.

    At least then we can discuss the likelihood of the timeline, drop and possible drivers of that.

    Garth predicted a 20% drop in Victoria, so there’s a number. You can use that one. He’s willing to stick his neck out and give a number.

    Also, you are mistaking me for a bull. I’m actually bearish (I think Victoria is heading into a flat period), but obviously not bearish enough for your liking.. so I am a “bull”. Realistically, we have such low inventory it will take some time to build. I think we’re at least 2 years out from a buyer’s market.

    As for being worried. I’m not worried about the local housing market. The market could tank and I won’t be under water. It might even make the price difference between my location and more desirable ones contract. As for 50% of new buyers being out of the market.. we’ll see. I suspect they’ll just buy whatever they can afford (i.e. condos). New buyers weren’t buying SFH in my hood. The effect on trade-ups won’t be immediate.

  4. It’s a bit early to post the activity of the first 14 days as there still may be a couple of stranglers who have reported sales. Yet here I go anyway.

    75 house sales in the first fortnight of October. That’s about the same as the first 14 days of September which had 77 but a large decline from the year before when there was 102 house sales in the core in the first 14 days.

    The raw data on condo sales for the same period and areas show 90 sales in the core for the first 14 days which is up from 70 the month before. And substantially up from the year before when the volume was 59.

    Langford and Colwood stand alone houses are at 40 for this period which is up from 33 in September and up from last year for this same period at 21.

    Is it any wonder why fewer houses are selling in the core when the median for the first 14 days is $882,500 and the average at $1,029,000!? Is it any wonder why prospective purchasers have been shifting demand away from houses in the core to condos or houses in the Westshore!?

    Now that we have a baseline for the first 14 days, before the lending guidelines are in place, it will be interesting to compare these with the last 14 days of the month with the new regulations.

    Will house sales in the core break down as another straw is added to the camel’s back?

    This is strange as I thought, as in past corrections, condominiums would be Victoria’s Albatross. Now it seems that the correction may be more Icarus than Ancient Mariner as house prices in the core have flown too high.

  5. The 617 St Charles street sounds a little shaddy. I would be teed off at my realtor. Clients best interest? I recall a few houses like that in the spring that sold and then were listed again but no sale sign outside. Hmmm hopefully the new realtor regulations help?

  6. Marko:

    The numbers seem to me to be holding steady to the week before or am I misreading the figures?
    Thank you for providing the numbers.

    The numbers in the next two weeks should be interesting as a preliminary indicator of whether the new mortgage rules are having any effect.

  7. Mon Oct 17, 2016:

    Oct Oct
    2016 2015
    Net Unconditional Sales: 398 734
    New Listings: 500 925
    Active Listings: 1,990 3,170

    Please Note

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

  8. Dasmo:

    Still considering a couple of investment properties but waiting to see what way the market is running. Very different criteria than when I bought the principal residence. The Caledon horse farm sold so now it is time to figure it all out.

  9. @Numbers Hack:

    We bought our house three years ago and I certainly feel the prices have really gone up in that short period. I bought in Rockland and my square foot price was 208 per sq. ft. Admittedly the house was almost a hundred years old but all the wiring, plumbing and roof had been recently redone in the previous ten years. New furnace, instant hot water heat and new gas fireplaces. The roof was ten years old. The main thing it needed was a external paint job and some new perimeter fence in the back yard.
    Like with any old house there are some compromises; the heat is the old standing radiators and the majority of windows are single glazed. But still I considered it good value since it is sitting on a 26,000 sq foot lot. But in the last year prices seemed to have really spiked here in Victoria. Some of the new builds in Fairfield seem particularly insane. The ten year old house across the street on St. Charles sold for over 2 million or above $500 a square foot on a 10,000 sq foot lot.

    My wife does not miss Holts since she never shopped there to start with which saves me that problem, On the other hand she is from Beverly Hills and Rodeo Drive is a different matter. `One adjusts. I am a Toronto boy and you are absolutely right about neighbourhoods changing. I grew up in a house in the Kingsway long before there was a subway line out there.

    I was never suggesting that there was a flood of buyers from Toronto rather that I have noticed a number of new people from Toronto in the last couple of years. I also have friends that are seriously looking here and two friends that have already bought in Oak Bay. My suspicion is that, on average, the Toronto buyers have fairly deep pockets and that they may be having some impact on the core prices. The same is true of many of the Vancouver transplants (I agree that their numbers are much higher). I just dont believe that the local economy is driving the price increases.

    As for sports cars, well you are right that the millennials seem to be a little put out. But living in a leaky basement apartment that can that can have that effect on a person. I am afraid I am too old to be worrying about what the chattering classes are thinking. I will leave that to others.

    We should have a couple of interesting months ahead as we see what the impact of the new mortgage rules are on the housing market.

    I agree with you that the condo prices seem to be reasonably insane for some projects in the core.
    I rented a condo for a few months before finding the house over in Shutters and it totally convinced me to never live in one. Talk about people hating each other and arguing over the strata rules. I was half expecting UN peace keepers to be patrolling the halls. On the other hand, for a mere half million dollars I could have bought a unit the size of my dining room.

  10. Family…
    Unless you have some, not many people are coming form T.O, some from Vancouver as suspected by others and sales #. BTW Victoria is the only place in Canada that if you have a nice sports car, people look at you funny. It must be a Westcoast thing, oh I am too cool for wealth or I am too environmentally conscious.
    Too the Holt crowd (yes my wife misses it dearly) and people who worked their entire lives to build some wealth, go get the new vette 🙂 or whatever tickles your fancy…just don’t drive it by too many millennials. 🙂
    Finally as an anecdote, when we lived in Toronto 25 years ago, north of the 401 was considered Toronto’s Western Communities…new homes, nice lots, but far from downtown. Now…well you guessed it, great place to live and work and desirable. The takeaway is that as cities grow and land is finite, once undesirable areas will be desirable with an increase in population. So the WC is not a bad choice, all they need is another 2 lanes in each direction!

  11. @ Marko: Dunleavy was a heavy price to pay for a “mansion” 1.15 mill? for a knockdown?
    @ Barrister: 617 St. Charles, now that is a great “flip” for a few weeks worth of work. Wonder if realtor had client’s best interest in mind!
    @ VicInvestor: sell the house if you can lock in $500K in profits! You can rent a mansion for 10 years with the profit.
    @ Hawk/Leo: yup MOI is creeping up @ a much faster rate, the bull ride is over, but IMO prices will steady until we get back up to 5-6 MOI before you see prices really come off. Until then, it will be flat and/or down trending. Long term who knows? We are personally “long real estate” but there is likely a 80% downside risk vs 20% upside risk.

    Finally condos priced anywhere in Victoria @ $450 sq/ft+, that is just goofy from an economic standpoint.

  12. ” CMHC has recently observed spillover effects from Vancouver and Toronto into nearby markets.

    Nice to see that the CMHC learned something from reading this blog.

  13. BTW Mike can you tell us where Victoria isn’t included in the CMHC statement “the Canadian housing market as a whole .” ? Thanks for coming out.

  14. Obviously your chart will be old news next week Mike. CMHC chart data is always a full quarter behind. Did you forget the recent RBC report agreeing with CMHC red warning ? Keep on pumping though, bulls need someone to hold the bag.

  15. Canada already has a “red” warning due to Toronto, Hamilton, Sask, Van and Quebec.

    Victoria & Halifax on the other hand are possibly undervalued with mostly green lights.

  16. CMHC putting out a red alert on housing. If the bulls don’t get it by now that the pump is over, they never will. ICYMI, “Nearby markets” means Victoria. 😉

    Hope all the agents are warning their clients this week before they sign on the dotted line.

    The intended consequences of new housing policies

    EVAN SIDDALL

    Evan Siddall is President and CEO of Canada Mortgage and Housing Corporation

    ” CMHC has recently observed spillover effects from Vancouver and Toronto into nearby markets. These factors will be reflected in our forthcoming Housing Market Assessment on Oct. 26. They will cause us to issue our first “red” warning for the Canadian housing market as a whole.”

    http://www.theglobeandmail.com/report-on-business/rob-commentary/the-intended-consequences-of-new-housing-policies/article32383166/

  17. Barrister , sounds like one for CRA to check out. Sounds shad but why should we think agents here are any different than Vancouver ?

  18. 617 St. Charles which just sold about a week ago, after only a few days on the market, is back on the market for 200k more. The weird thing is that it seemed at the time to sell for cheap but then was sold to a real estate agent whose office is in the same building as the listing agent. The two agents are with different firms but work out of the same building.

    The other strange thing is that while the property is on MLS there is no “For Sale” Sign. Does anyone else find this a bit strange?

  19. Why not a building full of 15 doctors where the health care system staffs the front desk?

    Probably be more expensive to run than a private practice once you add government-paid pensions and benefits.

    The government would also probably have to create more PT/flexible positions for doctors to compete.

    I think it is a pretty good idea for dealing with shortages in theory, but the wait-times endemic in the public system make me wonder if it really would help the problem. Once you add government bureaucracy things slow down. Might be why there is a move to permit private pay hospitals/clinics to address wait-times – it brings for profit efficiency to the system – not that I am in favour of the US model.

  20. Rest are part-time, floating around type stuff. It’s kind of hard to go climb in the Himalayas uploading Instagram photos along the way at the drop of a hat if you are running your own practice. Many are also having families and value a life/work balance, etc., over the dollar.

    Right, so the province should support that. Train more doctors, and facilitate collaborative practices. Why not a building full of 15 doctors where the health care system staffs the front desk? Like a mini family hospital for general practice.

  21. @ Bingo > Hawk

    I’m really not seeing the logic in your demands for a precise forecast.

    No one has a crystal ball and we’re all at the mercy of rolling history than can turn the market on its head at any time. As we’ve recently been reminded of.

    I think the primary point that any reasonable ‘bear’ is making is that when a number of key housing indicators are red, as they are now, that the future of the market’s health is precarious.

  22. The lack of professional services is a problem. In my line of work, we have lost 50% of our positions because they went unfilled and in Vancouver, we have 10 positions open which is the most I’ve seen in the last 12 years. Incoming applicants complain about the cost of living, the low wages and the long commutes. When they can move to Calgary and make 30% more, work in a larger community of professionals, and buy a house within the first year or so out of training, it is hard to convince them that the scenery is worth it.

  23. The UK is taking the bull by the horns too. I wonder how many will CRA find in sleepy Victoria who paid hundreds of thousands more mere months later from previous sales ?

    Hundreds of properties could be seized in UK corruption crackdown

    New criminal finances bill will include ‘unexplained wealth order’ forcing suspects to disclose source of their assets

    “Hundreds of British properties suspected of belonging to corrupt politicians, tax evaders and criminals could be seized by enforcement agencies under tough new laws designed to tackle London’s reputation as a haven for dirty money.”

    https://www.theguardian.com/business/2016/oct/13/properties-seized-assets-corrupt-cash-crackdown-criminal-finances-bill-tax-haven

  24. “I just looked at a condo listing over at Songhee and they were asking for about $890 a square foot for a two bedroom condo. Are they out of their mind?”

    They have to be, who would want the annoying drone of float planes flying past your window all day long from early morning til late night. More money than brains by the looks of Mike’s post but someone has to be the bagholder.

  25. Bingo, last time I looked Victoria is the second most overpriced city in BC. Do the math when Van is tanking and 50% of new buyers just got cut out of the market as of tomorrow. You sound worried.

  26. I just looked at a condo listing over at Songhee and they were asking for about $890 a square foot for a two bedroom condo. Are they out of their mind?

    That’s getting up there, then again look at some near downtown 2 bdrms going over this week:
    511-21 Dallas, 1058 ft, ask $699k, sold 750k
    503-999 Burdett, ask $879k, sold $910, no view

    It must have incredible view of the harbour to be asking $890/ft.

  27. This mystifies me. Doctors have the income to live here, there are tons of people desperate to be their patients, and according to many it’s one of the nicest places in Canada to live. Shouldn’t Victoria be teeming with doctors? Why aren’t all those family doctors in Winnipeg packing up and moving out here?

    Plus many physicians don’t work 50 or 60 hours like they did in the 1960s, ’70s and ’80s.

    I also have three friends who are physicians, one in Victoria. Two of the three work part-time.

    I have friends, aquiantances, and clients that are physicians. I would say anecdotally out of the 15 or so that I know that are younger (28 to 40) maybe, maybe 2 are working full out? Rest are part-time, floating around type stuff. It’s kind of hard to go climb in the Himalayas uploading Instagram photos along the way at the drop of a hat if you are running your own practice. Many are also having families and value a life/work balance, etc., over the dollar.

    My personal GP is in her mid-30s I think, works three days a week as part of a collaborative team clinic.

    It’s a bit of a generation thing, I don’t think we’ll see many 50-60 hour family practice physicians seeing patients on a Saturday going forward. Was probably the norm 30 years ago.

  28. the numbers I post out of Vancouver articles

    I asked you to quantify your Victoria prediction since you keep implying the correction here is impeding.

    “Big” isn’t a number, soon isn’t a time. 30% by April 2017?

    The only risk is you’ll be wrong on an anonymous forum.

  29. Maybe the province should buy up a couple office buildings and offer cheap rent to family physicians

    I don’t think rent is generally the main issue. Pharmacies are willing to subsidize rents to have a clinic locate near them and buying an office in a medical building is pretty affordable – there are a number around town you can buy for between $125,000-$500,000.
    http://www.collierscanada.com/18446

    Doctor’s choosing to enter into expensive leases in, say Tuscany Village or Uptown, are not doing this because it is a business decision. With the wait-list it doesn’t matter where you are located – people will come.

    Staffing costs are usually the highest non-adjustable part of overhead. Doctor’s working in walk-ins pay a fixed % of overhead if they don’t own the clinic.

    As far as pay differential goes between provinces, I don’t know much about that. Are there stats showing where BC medical school grads land up?

  30. @VicInvestor
    Are you really going to be that much ahead with a new build?
    Teardown in the core: $800k
    Demolition/prep: $100k
    New build: $800k
    Total: 1.7M

    You’re really not saving that much after transaction fees.

  31. Ryan,
    Finding a new doctor is not easy without a friends or family connection. Know some folks who have been trying for a few years and when they do come up on the college website they are usually out in Langford, or when you check them out on RateMDs.com they don’t have good things to say about them.

    Clinics seem to be the way of the future, which I find better and quicker. They can always refer you to a specialist if needed.

  32. Question for the blog members:

    We bought an expensive home in a desirable core neighbourhood for $1.75 back in Jan, and now I can flip it for $2.3 million. We will pay no capital gain & our profit after all expenses/fees will likely be ~400k. We really wanted to live in this house but find the mortgage & maintenance expenses a little excessive. Thus, we don’t mind downsizing. We are hoping to find a tear down/vacant lot & build a 3,000 sqft house in the core. Having said that, we are scared we won’t find anything good out there or that prices may rise further. I know Vancouver is slowing down & there are new mortgage regulations that may slow the market. However, Victoria inventory is super low & the price appreciation momentum has just started. Any suggestions or advice?

  33. “So certain there hawk. Care to put a number on “serious” and a deadline as to when this correction will happen by?

    Bears always like to talk about the “big” correction coming, but never commit to a number or deadline. If it’s in the works then surely it will happen by next spring, right?”

    Bingo,
    I already have, but you’re too busy slagging me instead of reading my posts and discussing the numbers I post out of Vancouver articles showing the bubble is popping there. As a new homeowner I assume you have been ignoring the Vancouver fallout a mere 20 miles away ?

    If you’ve never experienced a real correction you will soon be able to. Rule changes to borrowing money was designed to bring down prices. If you missed the boat on that one, can’t help you anymore.

    If you know the big money is leaving town then it’s only inevitable what the outcome is.

    Detached Sales 46% Below 10 Year Average

    http://vancitycondoguide.com/detached-sales-46-below-10-year-average/

    Time to Cash Out Vancouver Real Estate Profits

    http://vancitycondoguide.com/cash-out-vancouver-real-estate-profits/

  34. Regarding doctors & other professionals not moving to Victoria, they’re massively dissuaded by the pay difference. Docs in AB & SK make much more $$ than BC. We’re talking 20-50% more!! That is a lot of disposable income, esp. when your cost of living is lower.

  35. I just looked at a condo listing over at Songhee and they were asking for about $890 a square foot for a two bedroom condo. Are they out of their mind? ( and no it was not a penthouse).

  36. Maybe the province should buy up a couple office buildings and offer cheap rent to family physicians wanting to set up shop there with shared overhead (booking/front office/etc).

    Personally I’m happy with walk in clinics. We have a family doctor but for any routine stuff I go to walk in. Show up first thing in the morning and it’s just as fast as an appointment.

  37. How about closing the Law School and Philosophy departments at UVic and turning then into a medical school?

    UVIC has an MD program already in collaboration with UBC, and a dedicated Medical Sciences building plus there is a Clinical Academic Campus at Royal Jubilee Hospital.
    https://imp.uvic.ca/

  38. @Ryan
    When I moved to Victoria I found that doctors accepting new patients weren’t listing that on the college website. It’s helpful to know a few people who have good physicians and then keep calling their offices every few weeks to check if they are accepting new patients.

  39. Why aren’t all those family doctors in Winnipeg packing up and moving out here?

    You may have answered your own question in part.

    I just don’t think weather is that high on the list for most people. Friends and family is what most people value

    We had professional colleagues move back to Winnipeg last year for this reason after trying relocation from there to Victoria – despite buying a house in Fairfield and having good jobs.

    Plus many physicians don’t work 50 or 60 hours like they did in the 1960s, ’70s and ’80s. My own doctor is part-time with regular sabbaticals, but the other doctors in the practice fill in. She works about 20 hours a week when she is not on sabbatical.

    I also have three friends who are physicians, one in Victoria. Two of the three work part-time. One volunteers overseas regularly and fills in at a walk-in clinic when in town, and the other travels with his family extensively and does locum work otherwise – generally in remote communities. The FT physician, former ER doc, bought a walk-in clinic with other doctors so he is not a family physician anyway – a better choice financially and time wise for his family. Being a FT family doctor with the overhead and responsibilities seems to be not that attractive to a lot of doctors from my gen x generation. The salary is not the problem, it is actually high enough that part-time is enough to make a living.

    I don’t know what the answer is except maybe BC should have physician assistants and perhaps walk-in clinics should be forced to expand their role in times of shortages. Plus some targeted programs to fill the 16 current vacancies in Victoria.

    As for how to get a family doctor, ours was through a friend’s referral and many others have that experience. You will be reliant on a walk-in clinics to start probably, and will have to start the hunt for a family doctor and get on some wait lists. If you are persistent you will likely find a doctor eventually.

  40. Leo:

    How about closing the Law School and Philosophy departments at UVic and turning then into a medical school?

  41. the apparent difficulty of finding a family physician where none are listed as accepting new patients

    This mystifies me. Doctors have the income to live here, there are tons of people desperate to be their patients, and according to many it’s one of the nicest places in Canada to live. Shouldn’t Victoria be teeming with doctors? Why aren’t all those family doctors in Winnipeg packing up and moving out here?

  42. Leo:

    Gee, I moved here with no family connections. It has taken a bit of effort but I have found some wonderful friends and neighbours here. Actually I found Victoria much more friendly and accepting than I found LA or for that matter Toronto.

  43. I think have made some very convincing arguments why the vast majority of retires will not move to Victoria. A couple of the arguments are a bit of a stretch such as the one about luxury cars; trying counting the number of Mercedes and BMW’s at the Fairfield Plaza or the Oak Bay Library parking lots.Anyway I did think that people made some excellent points about family and friends.

    Still I think it would be valuable to have some better system of knowing who is buying in Victoria and in what areas they are actually buying. Frankly I dont think that weather alone would be the big temptation for Torontonians to move to Victoria; rather the booming real estate market might be the big driver. Being able to sell your house in Toronto and buy an equivalent house here while putting a couple of million in the bank must be tempting more than a couple of 55 years to dump that stupid job and retire early. Once the temptation to cash out on the booming real estate market takes hold what better place to move to than Victoria?

  44. One of the biggest problems at the moment for some, including myself and wife contemplating a move a move to Victoria in a year, is the apparent difficulty of finding a family physician where none are listed as accepting new patients. Any suggestions? Clinics as an alternative? Which ones?

  45. I’m trying to think of a retiree that moved here without family connections. Can’t think of anyone that I know. One uncle moved out of Ontario to the island, but they bought in Comox.

    I just don’t think weather is that high on the list for most people. Friends and family is what most people value and that is tough to start from scratch on at 65 across the country

  46. Most well off retirees won’t pick Victoria, unless their only grandchild is here, or they are from the island. This place is too boring for them, not flashy enough for them. No Holt to pick up a handbags, nice cars feel out of place here, we are somewhat too down to earth. Super rich may have a house here or Vancouver or Okanagan or Gulf island. Victoria isn’t that unique to them.

  47. Correct me if I am wrong (and I am sure that you will) but i vaguely remember Markos numbers but they were from a five old general survey and for a quarter of the people they had no place of origin

    Different data. Marko’s numbers are for each sale, you are thinking of the realtor survey which also asks different things like who are the first time buyers.

    The buyer origin covers every sale, although buyers are not forced to answer. About 4% claim PIPA and don’t give their city of origin.

    You also seem to jump to the conclusion that being close to the kids is everybody’s first priority

    Not for everyone, but clearly the numbers from Toronto are small so far so for whatever reason those 250,000 Toronto seniors aren’t showing up here. My best guess is family.
    Yes they may increase, but we’ve been hearing for 10 years how those rich Torontonians are going to flood in. Hasn’t happened yet. The big impact has been Vancouver because they are close enough to see Victoria as an alternative.

  48. Newcomer:

    You do make some very valid points. Certainly you are correct that nobody knows for sure where the market will go. The situation is also complicated by the lack of hard facts about the Victoria market itself. For example, we have no solid number for how many houses are owned by speculators right now. Are there more now than a couple of years ago. What percentage of the SFH are the principle residents of people. What are the age ranges of people buying SFH in Victoria and what is the breakdown for each area. Where are the buyers from. Are local buyers downsizing or upsizing and in what numbers and to what areas?

    Basically one can make any argument that takes your fancy and I find that people do exactly that.
    As the old saying goes most people are much more married to their ideas than their spouses.

  49. Leo:

    Correct me if I am wrong (and I am sure that you will) but i vaguely remember Markos numbers but they were from a five old general survey and for a quarter of the people they had no place of origin. No idea how many agents even responded to the survey.

    You also seem to jump to the conclusion that being close to the kids is everybody’s first priority; it isn’t more often than one would imagine. For example why are living on the island instead of with the rest of your family on the mainland? In a lot of cases you are right and families are the first priority for many people but you can grant me the fact that this is far from universal. Young people also tend to change cities fairly often so are you supposed to move every time they do.

  50. Nobody can say what will happen, Victoria prices could go up or down, by a little or a lot.

    That said, I think Barrister and AG may be leaving a few things out of their calculations. The first is sentiment. If Canadian RE corrects, people will be less likely to buy or sell houses anywhere. They will start to see it as risky. They are more likely to sit where they are than they would be in a rising market. That’s a downward pressure. Also, if there is a strong correction, even if it is limited to Vancouver, speculators and the tightly stretched in Victoria will be forced to sell. That’s a downward pressure. For those reasons, I could see Victoria prices dropping as steeply as prices in other Canadian cities.

    Over the long term, of course, prices in the core, or anywhere for that matter will, of course, go up. When that long term trend will bring them higher than they are now is anyone’s guess, but the boomer bulge will certainly add upward pressure, though I’m not sure most boomers will be looking for places in the core.

  51. when a serious correction is in the works

    So certain there hawk. Care to put a number on “serious” and a deadline as to when this correction will happen by?

    Bears always like to talk about the “big” correction coming, but never commit to a number or deadline. If it’s in the works then surely it will happen by next spring, right?

  52. I would be interested to know how you get the number of 55 for the last year.

    Marko’s numbers from a couple posts back. That is from the VREB’s “buyer origin” that is reported for each sale. Realtor probably asks the client where they are from I assume.

    On top of which I know a lot of people whose kids no longer live in Toronto; families are scattered everywhere; New York; London; California; Seattle. It is not the way it used to be.

    So why would the parents move to Victoria and not one of those places to be near at least a couple of the kids? At least Toronto has a good airport you can fly direct to those places. We have a bit of wind and suddenly the island is cut off from the rest of the world.

  53. Funny too how the bulls get most defensive when big changes are happening that will effect their leverage and future plans that prices go up forever. Typical to use “next phase of life” lines when a serious correction is in the works.

  54. Leo S.

    I would be interested to know how you get the number of 55 for the last year. Exactly were is this tracked and by whom. When you say Toronto is this just the city or is it the GTA. I know five people from Oakville who have bought here in the last six months.

    On top of which I know a lot of people whose kids no longer live in Toronto; families are scattered everywhere; New York; London; California; Seattle. It is not the way it used to be.

    But mostly I would be interested in knowing how the tracking of purchasers is done.

  55. AG, Vancouverites have been moving here for decades but no one makes it front page news but the local media who is paid by the industry to pump a new story trying to justify 10% price pop. It’s part of the mania.

    Why doesn’t the local media write up the new mortgage rules ? Or how about the drop in Vancouver sales,price slashes and foreigners leaving ? Bulls never have an answer for how the rest of the world operates.

  56. There are about 140,000 more between 60 and 65 in Vancouver alone. So in the GTA and Vancouver it is about 400K. That’s not including all the rest of the country. Maybe only 5% end up moving here.

    Why 5%? Why not 50%? Why not 0.05%?
    It’s all numbers pulled out of thin air.

    In the last year we had 55 buyers from Toronto. So in one year, we had 0.022% of the GTA elderly population arrive here. At that rate it would take 227 years to add up to your guess of 5%.

    I’m sure Vancouver buyers do and will affect us in the future, but Toronto is a non-factor.
    If you live in Vancouver you can move to the island and be only a short jaunt away from your family (although why not live in Parksville instead?) Not so coming from Toronto. How many people prefer weather over family?

  57. Hawk:

    I appreciate that your very extended family has no interest in moving to Victoria. But lets examine that argument a bit more. Certainly I will grant you the majority of people will not want to retire in Victoria. Lets take it a step further, in fact a whole lot of steps further,lets assume that only 10% of people consider Victoria as a retirement spot. In Toronto alone there are over 140,000 people between the age of 60 and 65 and about 250,000 in the GTA. There are about 140,000 more between 60 and 65 in Vancouver alone. So in the GTA and Vancouver it is about 400K. That’s not including all the rest of the country. Maybe only 5% end up moving here. That is still an awful lot of people. I focused on Toronto and Vancouver because the average house there is selling for as much or more than the average similar house in the core. T o alot of these people houses in Victoria are affordable.

    My point is that you are absolutely right that the majority of people are not interested in retiring in Victoria. But a small percentage are interested and that number is large by Victoria standards.

  58. Les Leyne: My earthquake insurance has a headshaking $47,400 deductible

    I wouldn’t be at all surprised if earthquake insurance rates keep increasing at a rapid rate. If science ever comes up with a better prediction of when the earthquake will occur they will just stop offering the insurance.

  59. Hawk are you denying that Vancouver families and retirees have been moving here?

    My point was that:
    1. They have been moving here.
    2. They will continue to move here, even if YVR prices drop sharply.

  60. I think the bears mistaken home owners are bull cheerleaders. In this up market, we gain paper wealth, may able to leverage. In down market, we can trade “up”, move to bigger/better houses/location.

    /The number of regulars here that bought in the last couple years shows you are wrong.

    Those regulars aren’t the bear who won’t change no matter what. They are actually looking for houses to buy. They purchased their homes, stop timing the market, move on to next phase of life.

    The sky is falling this evening, the bears should enjoy the show!

  61. plumwine sounds like they are in the bizz and are petrified

    The usual bear sentiment. Disagrees with me, must be a realtor or in the industry. Come on.

    At some point the market will swing in favour of buyers. It always does, but you won’t be able to time the bottom. In hindsight 2012 was a great time to buy. Enough inventory for a fair market, but bears were waiting it out for better prices. “Don’t catch a falling knife” and all that.

    Will a “deep” correction happen again? Sure. Maybe not in your lifetime. Maybe it will only appear “deep” in hindsight. Definitely impossible to predict.

    If I were in the market to buy I’d definitely be waiting for a fairer market. Reality is, even in a buyer’s market, certain areas will be out of reach for most. I doubt ob will ever be affordable for a family making median (or ever again.. I’m too young to know a time when ob was affordable). If it got cheap for families making twice median I think you’d find places being snatched up quickly.

    Just saw an advertisement for Lyra residences. Low 500s for a 2 bed condo in Saanich east?! Is that what condos are going for now? No wonder people are buying hardiplank boxes on microlots in Langford.

  62. ” In other words, Vancouver families are still going to be very strongly pushed to move here.”

    According to who ? The media and the real estate marketing industry ? Like I said before my large extended family in Van and Alberta never moved to Victoria upon retirement and they had more opportunity then anyone sitting on their valuable real estate. They like where they live, with friends and family close by. Victoria is nice in our eyes, but to others it’s not Mecca, just a nice place to visit.

  63. Barrister,
    I believe you and others are over estimating the appeal of the core long term from outside demand. If you got big bucks like all your friends seem to have, you’ll buy in your hood or the Uplands etc. Most retirees are in cash conservation mode, not looking pay a million for a Fairfield stucco 40’s/50’s box with some new hardwood and granite. The average retiree is downsizing, not up-sizing.

    Steve Saretsky has an interesting video out on how processed versus sold sales are determined. 25% are carryovers from the month before due to REB’s slow process system. In this type of market where prices are dropping huge in Van that could be interesting to see why VREB is still not releasing September numbers.

    https://www.youtube.com/watch?v=31EpU_s4Va4

  64. Barrister:

    Vancouver homes are far more expensive than that, relative to Victoria. It’s all about the land value.

    Compare Point Grey and South Oak Bay. An old house on a 6000 lot in South Oak Bay goes for probably $900k. In Point Grey, an old house on a 5000sf lot goes for something like $3.5m.

    I would estimate that land prices in YVR are approx 4x higher than here, using comparable areas.

    If prices in YVR drop by 30% (which is totally possible), they will still be roughly 3x higher than Victoria. In other words, Vancouver families are still going to be very strongly pushed to move here.

  65. Hawk:

    You might be right on a number of points but I suspect that there will be a much smaller impact on the Victoria core prices. Even if Vancouver SFH prices drop by thirty per cent that still means that a comparable house in Vancouver is twice as much as in the core in Victoria. While the lower Vancouver prices will reduce the number of early retirees, I think we will still get a steady stream of boomers looking at the core properties. It is easy to forget that for the top ten percent of boomers that their principal residences represent less than fifty percent of their net worth.

  66. “The bears are dancing for apocalypse, they are wrong in the past 2 years. Got priced out (’til the next cycle??), got much lesser homes, keep getting asswhip by their landlords. Yet they never admit their mistakes.”

    plumwine sounds like they are in the bizz and are petrified. The lottery gains the last year built on hype can be wiped out in a month as we are now seeing in Vancouver with price cuts of $300K to $700K all over the place, translating into sales tanking as well.

    If you are going to be ignorant to the purpose of the new government laws then keep on buying, fool. The broken clock thing is as lame as “if I had a dollar for every time” etc.

    The market is changing, the bull is over, and the banks, realtors (with a conscience), and investment advisors are even telling you that. Denial is a funny thing when bull markets end.

  67. The bears have reasons not to buy in up market, down market, hot market, slow market. If you aren’t buying no matter what, why bother for house hunting here in Victoria.

    The number of regulars here that bought in the last couple years shows you are wrong.

  68. This blog is called house hunt victoria. The bears have reasons not to buy in up market, down market, hot market, slow market. If you aren’t buying no matter what, why bother for house hunting here in Victoria.

  69. The bears are dancing for apocalypse, they are wrong in the past 2 years. Got priced out (’til the next cycle??), got much lesser homes, keep getting asswhip by their landlords. Yet they never admit their mistakes.

    The market of course will cool off, the price will drop (real/nominal??). Even a broken clock is right twice a day. If the bears yell long enough, they will right eventually. (WW3 is around the corner…)

    However, will bears buy a home in a falling market? Even if the price is “fair” for them then? Waiting is their specialty , they will just waiting for better house to show up, sitting on sidelines forever.

  70. Cashing in at market tops as an investor is called intelligence. Those who think the party will never end because 10 million boomers want to live here wind up bankrupt.

  71. Michael – Over 65 means over 65 not 65 to 69.

    Sure, but it’s the ~10 million boomers (Canada alone) that will drive our market that you want to focus on.

    How many houses have you purchased to cash in on this mountain?

    Not many, but I suppose have exposure other ways. Cashing in isn’t such a noble achievement, that is after your financial needs are met. Like most here, I drop in for the education, camaraderie and fun of trying to figure out where the market’s headed. Thanks so much for authoring & maintaining the site.

  72. “And that was at a time when we overlapped with the US buying frenzy. Now it’s the opposite, they’re starting to sell US for more than double what they paid once currency is considered, and looking back to their original plans of retiring in Victoria with the mountain of younger boomers behind them.”

    So that phenomena only applies only to Victoria bound retirees and not the rest of BC? weak

  73. Hawk:

    Well, I guess I am one of the “fools” in Victoria but I actually bought the house to live in. As to where the market is going I am simply not smart enough to figure that one out.

  74. “Real Estate isn’t backed by home owners it’s backed by speculators. Anything can happen.”

    It’s amazing of those in the business and/or heavily leveraged will pump out everything to deflect what is going to happen and ignore the facts of what drove this market for a decade.

    You can’t stop the Vancouver tsunami by pulling up 3 year old articles there Mike. The game has changed like never before, and you perma-pumpers will get slaughtered over the next 6 months to a year. Speculators have left Vancouver and only the fools remain in Victoria.

    Population numbers and retirees can’t stop a bubble from popping, but ex-economists won’t get the obvious.

  75. The top twenty percent of the middle class has been doing really well

    And as the population of the CRD grows the core becomes a small and smaller percentage of available housing.

  76. 2012 and 2013 were not strong buyers market. You just haven’t been an agent long enough to know what a strong buyers market is like.

    And that’s not a duress or foreclosure market either. In that market half the real estate agents are on the brink of bankruptcy.

    Eventually this argument starts getting to be a bit dated. Yes, there was a strong buyers’ market in 1984.

    It’s like saying oil prices will hit $145 a barrel because it happened before completely ignoring some massive structural factors such as many countries committing to go all electric for personal vehicles by 2030, US is almost oil independent, etc, etc.

    Not saying either won’t happen, but things are a bit different than they were before. Doubt government springs interest rates to 5% overnight, let alone 10%.

  77. Michael – why has the over 65 age group been growing faster in BC than Victoria?

    It hasn’t. From your link, the number of eldest boomers (65-69 group) increased more in Victoria than the rest of BC between 2010 and 2015. I’m not sure where you got your numbers.

    Age_______2010____2015__
    65-69 BC_ 202998_ 270487__ +33.2%
    65-69 Vic___9791___13829___ +41.2%

    And that was at a time when we overlapped with the US buying frenzy. Now it’s the opposite, they’re starting to sell US for more than double what they paid once currency is considered, and looking back to their original plans of retiring in Victoria with the mountain of younger boomers behind them.

  78. You sort of have to add one more major factor into the baby boomer retirement mix. The top twenty percent of the middle class has been doing really well financially and a lot of them are able to retire fairly early. The bottom three quarters of the middle class have been doing increasingly worse over the last couple of decades and are retiring later than ever.That accounts for why the retirement age is pushing upwards over the last while. There is an increasing gap between the very top and the rest of the population.

    I wonder what the average age of purchasers of SFH in the core is right now. If a disproportionate number of houses have been sold to people in their fifties in the last three years then there is a good chance that inventory might remain low. What I have noticed is that a handful of agents seem to have over half the listings. Maybe I am imagining it.

  79. Easy-peasy to make a tax-free fortune in Vic. Simply buy now what the ‘millionaire mountain’ will be buying 10 years from now

    How many houses have you purchased to cash in on this mountain?

  80. A buyers market would be more than 7 months of inventory, New listings being added at more than 2.5 to every one that sold and the average days on market over 90.

    2012 and 2013 were not strong buyers market. You just haven’t been an agent long enough to know what a strong buyers market is like.

    And that’s not a duress or foreclosure market either. In that market half the real estate agents are on the brink of bankruptcy. Half of your investment properties are vacant and rents are falling. When that happened to Vancouver it shed 40 percent of its market value in four months.

    Preliminary info I’m getting from Vancouver is that average prices fell close to 20 percent in September but the board has yet to release its data.

    So could it happen again? Of course. Real Estate is a commodity today and because it is being treated as such by so many people its value could plummet like an IT stock. Real Estate isn’t backed by home owners it’s backed by speculators. Anything can happen.

  81. One of the principles of economics is that all markets return to equilibrium. One day in the future the market in Oak Bay will once again be balanced between buyers and sellers. Why? Because it always has.

    In the next 30 years for sure there will be a time when the Oak Bay market is heavily weighted towards buyers, list to sales ratio is less than 50%, DOMs is over 90 days, etc. Average price might be $2 million, but we will have a buyer’s market soon or later, there is no arguing that.

    2012 and 2013 were strong buyer markets in Victoria, but that doesn’t mean prices were lower than 2005 (very strong sellers’ market).

  82. Michael – why has the over 65 age group been growing faster in BC than Victoria?

    Boomers started hitting 65 in 2011 and Barrister says they are retiring even earlier.

  83. POP’N of over 65 growth from 2010 to 1015:

    That number is about to go ballistic. Easy-peasy to make a tax-free fortune in Vic. Simply buy now what the ‘millionaire mountain’ will be buying 10 years from now as the peak turns 65:

  84. Simple solution; buy a decent house in Saanich; wait twenty years and by then you will be in the core without having to even move. My first house was pretty much on the outskirts of Toronto when I bought it. Actually was not even in Toronto at the time. By the time I sold it it was considered part of the core and bordering on the unaffordable. Fortunately I had paid off my $53,000 mortgage years before.

  85. Bman:

    And by the way, you’re not entitled to own a house in the core.

    We were definitely guilty of that, and I think that’s a big driver of prices.

    Both our sets of parents bought SFH on a single income. We are both educated and bring in at least twice what our parents brought in, we should be able to afford a SFH. No we deserve a house in core. We worked hard for it!

    While we never stated it explicitly, I’m pretty certain that is what was running through our heads as professionals in our late 20s. Of course we were able to buy something liveable for about 4x our annual income. With the same income in this market our place would be closer to 6x our annual income. No way we’d do it if we were fresh in this market, or so we claim. But we’ve aged and mellowed and know there is a lot more to life than “owning” a house.

    If we were still in our 20s making “good money” for our age, who knows.

    Obviously people are buying. The prices in Gordon Head are mind blowing to me. Pay 750-800K for a junky 70s house with no charm that needs at least 100K in updates? I really don’t get it. Spend the same money out on the Peninsula and it’d go a lot further. If that’s too far out, Saanich West has some good areas that, again, the money would go a lot further.

  86. Change and pain are headed for Canada’s housing market

    Only for those who believe what they read in Maclean’s 🙂

  87. The reverse mortgage is not a scam in that what they say is truthful.

    I gotta agree. It’s more of a case of buyer beware and saving fools from themselves. Pay day loans tell you exactly what the costs will be. Yeah there are some scammier ones (some were charging total fees above what is allowable), but pay day loans in general aren’t scammy, they are just an extremely expensive short term loan.

    How many people do you know that read insurance wordings? How about their entire mortgage contract? Most people have no clue what their repayment allowances are or penalty on early termination. That’s stuff you should know before signing on the dotted line.

    Your average person is pretty lazy and uses every chance and excuse to simply not think. If they plan, it’s for the present not the inevitable. Can I currently afford the monthly car payment this sales guy is writing down? Yep. Ok buy the car. Completely ignore that the term is longer than the drive-train warranty, completely ignore the interest rate and total cost of the loan. Only the immediate monthly payment is of concern.

    Look at how many Canadians are living paycheque to paycheque. My wager is most people in that situation could have a healthy buffer, but simply lack the resolve to implement changes in their lifestyle required to better their situation.

    How many people are paying crazy credit card interest that could simply shift that to a much lower rate on their LOC? It’s mind blowing how financially inept people are.

  88. Hope most of you don’t work in real estate related businesses. They will be taking a massive hit this time around.

    Change and pain are headed for Canada’s housing market

    Home buyers in Vancouver, Toronto, Victoria, Calgary and Edmonton are at the head of this class of risky borrowers. The slowdown in new money from this second source of buying power will have a large impact, especially on new home builders in those centres.

    Both initiatives are potentially devastating to one of the most important industries in Canada. Along with energy and manufacturing, residential real estate is a key growth factor in the Canadian economy. Home builders, construction workers, realtors, renovators, architects, banks, non-bank lenders, shadow bank lenders, lawyers, notaries, building product suppliers, furniture stores, electricians, plumbers, land speculators, carpenters, high-rise condo developers, advertiser-dependent media, provincial governments, municipalities and many others count on housing-related activity to keep the cash register ringing.

    http://www.macleans.ca/economy/economicanalysis/change-and-pain-are-headed-for-canadas-housing-market/

  89. Barrister – “I have taken that into account.” – you neglected to mention it but as you have taken it into “account” show me the math (for Victoria) or is it just a feeling.

    “Houses in the core will increase faster than properties in the west shore.” – if that were true then over time the difference would approach infinity.

  90. @Barrister
    Never said it was, but it might be smarter than a 5% compounding loan that you never pay back.

    As the baby boomers say to everyone under 40: Stop trying to live beyond your means, lower your expectations, and get used to your declining standard of living. (And by the way, you’re not entitled to own a house in the core.)

  91. “It’s always different. Give me a call when a home in Oak Bay becomes affordable again.”

    It’s never been affordable since the mid 70’s but you weren’t around then when very poor lower middle class people lived all through parts of Oak Bay. 70% of folks were average to below average incomes and their homes showed it. Now it takes two very high income to buy the cheapest place.

    Call some place paradise, kiss it good bye as the Eagles once sang.

  92. If you live too long and have to go into a home you probably will have to worry more about dribbling your breakfast pablum than what’s in your bank account.

    A life expectancy of 86 doesn’t mean you’ll live till then. The baby boomer born in 1955 has only a 50 percent chance of making it to 86. The best gauge if you will make it or not is if all sets of grandparents lived to 86. If you wanted to live longer then you should have chosen your parents more carefully and been born in a small village in Italy or France.

    For some reading this blog it means only one out of every two will see their 86th birthday. The last decade for some will be spent in a care facility.

  93. Marko, the home in Oak Bay is affordable – just not to you.

    If the home was not affordable then the price would decline to where it is affordable again. Where supply and demand meet sets the market price.

    But are the prices in Oak Bay reasonable relative to the surrounding neighborhoods and general market conditions? And if you’re saying house prices in Oak Bay are inflated then I would definitely agree with you. If you’re buying in Oak Bay today you are going to take a big loss if you have to sell in a balanced or declining market. A half million, a million maybe more for some properties.

    One of the principles of economics is that all markets return to equilibrium. One day in the future the market in Oak Bay will once again be balanced between buyers and sellers. Why? Because it always has.

  94. Bman:-

    How is selling the house at this point a better strategy? All of us have to worry about out living our money. (Bill Gates not so much).

  95. Marko

    Dunleavy really looks like what I always imagined a million dollar mansion would look like.
    Where the hell is all the money coming from?

    By the way, again I think you gave some very solid advice to that lady; was rather impressed.

  96. Oh look a Vancouver Realtor telling you to sell your home. I’ll bet you’ve heard that one before? Except this time it’s different and it’s very real.

    It’s always different. Give me a call when a home in Oak Bay becomes affordable again.

  97. If house appreciation does not appreciate then the equity in your home will be swallowed up if you happen to live too long.

    Can they ever foreclose on you? If you have no kids who cares if the equity is gone. It’s certainly useless in the house.

  98. The reverse mortgage is not a scam in that what they say is truthful. And it does help some retirees. They are an equity loan where you don’t have to make payments for as long as you live in the home. They will lend you increasingly more money the older you are as they are betting on your remaining life. Principle and Interest on the loan will compound and will be paid out of your estate or when you sell.

    However, some of their assumptions require steady growth of home prices at around 5% a year or so. Because of our robust home appreciation those assumptions have shown that the reverse mortgage as meeting all of their claims.

    If house appreciation does not appreciate then the equity in your home will be swallowed up if you happen to live too long.

    There are many other options besides reverse mortgages depending on your personal circumstances. You might even want to explore a “Life Estate”. Talk to your banker.

  99. If you’re in it for the money, I would be dumping ASAP here too. Limited time offer til the last of the greater fools are all sucked clean. Dumb money eventually wakes up.

    Time to Cash Out Vancouver Real Estate Profits

    “Oh look a Vancouver Realtor telling you to sell your home. I’ll bet you’ve heard that one before? Except this time it’s different and it’s very real. If you were ever thinking about cashing out of Vancouver real estate now is the time.”

    http://vancitycondoguide.com/cash-out-vancouver-real-estate-profits/

  100. Janney,
    Ross Kay on Twitter was saying awhile back to avoid reverse mortgages, that they have a scam element that can cost you your place. I would tread carefully.

  101. Hey, everyone, really appreciate the advice given! Looks unanimous that I should stay too & that makes me happy.

    I have another query from the discussion regarding reverse mortgages. As far as I understand there is only the Home Equity’s Bank’s CHIP reverse mortgage in Canada. Doesn’t seem to be variables in how that is administered so what are the scams? Are other products from different lenders being referred to?

    Thanks,

    Janney Claire

  102. Marko:

    What do you as a real estate agent think of the “professional” advise being given to Jeanne by her real estate agent? Just thought I would put you on the spot.

    Without knowing many details absolutely stay is my opinion. It’s simple common sense. Jeanne is only 61 so her life expectancy is not 82 anymore. Assuming she is in okay health and already made it to 61 her life expectancy is pushing 90 yrs old at this point or almost three decades left. Long term planning is required. (for those that don’t understand what I am talking about, for example, at 90 yrs old someone has a life expectancy of 1.7 years left or 91.7 yrs old, I guess i did learn something from my masters in health admin at UBC).

    If her home is a 2 bed, 1 bath it is probably worth around $600k in this market. $500k land, $100k improvements. If she buys a $400k townhome in Langford it will be 80k land and 320k improvements (will depreciate big time over 10 to 15 years). Plus the transaction costs of selling and buying are just insane, best to avoid those.

    Stay and defer property taxes (will be offset by appreciation), maybe take out 100k LOC for health emergencies. Assuming favorable health downsize in mid to late 70s.

  103. Bman:

    They are designed to consume equity but this is not necessarily a bad thing in some cases. It allows many older people to stay in their homes and enjoy their equity. If you are seventy five having a million in your house but not enough money for dental is not the right way to go. They can be a good tool in just the right circumstance but should be used with caution and after carefully weighing the alternatives. Good legal advise is strongly indicated.

  104. Marko:

    What do you as a real estate agent think of the “professional” advise being given to Jeanne by her real estate agent? Just thought I would put you on the spot.

  105. Jeanne:

    I agree with the advise already given that you have to be very careful with a reverse mortgage; they can be great but only if all the terms are right. There are a lot of scams with reverse mortgages. Let your lawyer guide you through the details. He will charge you a very small fee and in return you will get peace of mind knowing that he actually is on your side of things. Just remember that lawyers charge by the minute so dont start telling him your whole life story; do up a written summary in point form of what you think is important and give it to him at the beginning of the meeting. He will appreciate this and it will save you money. Good lawyers are very busy and they will not want to take more time than necessary to do an absolutely good job.

  106. Janney Claire Alexi:
    If you sell your cozy carefree cottage you might be trading it for anxiety, angst, and a townhouse complex filled with roudy noisy clods.

    If you decide to sell your cottage, you don’t need a realtor… You might be able to sell it at a slight discount to an investor, then lease it back for 5 years at a discounted monthly rent. But my recommendation is that you do not sell; instead keep your place and defer property taxes. Be cautious of reverse mortgages, unless you have a good lawyer who protects you from rapidly escalating mortgage interest rate changes… there are reverse mortgage scams, so be cautious.

  107. In case people did not know, you can ALSO defer your taxes if you have kids. The interest rate is slightly less appealing at 2.7%

    Still low though. Anyone do this? Theoretically you should be able to earn a lot more than 2.7% by investing the money instead.

  108. The city would rake in a lot more money if they eliminated this deferring of taxes as soon as someone hits 55…

    The province actually pays the city on your behalf.

  109. you are allowed to defer your city tax payments till after you sell your house eventually. The city charges you about 1% interest on the debt. If you have not yet done so you should

    Thanks for pointing this out Barrister. I know people that take advantage of this even though they have no need for it. What’s that saying, 1 in the hand is worth 2 in the bush? So it’s not dependent on “need”. It’s a little strange, really. The city would rake in a lot more money if they eliminated this deferring of taxes as soon as someone hits 55…

    In case people did not know, you can ALSO defer your taxes if you have kids. The interest rate is slightly less appealing at 2.7%
    http://www2.gov.bc.ca/gov/content/taxes/property-taxes/annual-property-tax/pay/defer-taxes/families-children-program#financially-support

    And you can defer your taxes if you are a person with disabilities, or your the surviving spouse of any age if your spouse was 55. Sheesh, is there anyone that needs to actually pay their property taxes?? 😉

  110. Janney, if the garden is providing you enjoyment and you are fit enough to live in your house, then stay. If you need the money, sell, but downsize to something in the core. The core will always be the better investment. (Why would anyone move out to the Westshore if they didn’t have to?)

  111. Dear Janney:

    I am not a real estate agent but I am a lawyer. Single family homes have historically also appreciated more than townhouses. They also offer a much greater quality of life. Houses in the core will increase faster than properties in the west shore. In short, I would strongly urge you to remain as long as possible in your home.

    The real estate agents make money by selling your house; the investment planners make money by handling your cash. In short I would not trust their advise. I am retired and dont have any interest in what you do. I suggest that if you have a good lawyer who trust to ask his advice since he wont profit by your decision.

    Two other minor points: you are allowed to defer your city tax payments till after you sell your house eventually. The city charges you about 1% interest on the debt. If you have not yet done so you should
    (Bank of Nova Scotia will pay you 1.5 right now so if you bank the money instead of giving it to the city you are ahead of the game) This will free up more cash flow for you.

    Secondly, should an emergency arise you can reverse mortgage your house. Simply put you get to borrow money against the house but you dont have to pay anything back until you decide to sell the house. You need to look at the details of this very carefully before doing it but it is comforting to know that you can rely on some of the equity in your house.

    My advise is to never take advise from people whose plan for you makes them money. Nobody can predict the future but the safe bet in my opinion is that houses in the core will hold their value much more than any townhouse. So enjoy your garden.

  112. Janney
    I’d stay if I were you. Sounds like you like your current arrangement. North Jubilee is a nice convenient central location. Also a good area to grow old. Close to shops and Hillside Mall. Close to the hospital. At the point where you no longer want to look after a garden and home you could probably sell and find a condo in the same neighbourhood.

    And yes I think you are correct. Small SFH in the core is likely the better investment than a townhouse in the Westshore. Realtors aren’t neutral advice here. They want your commission.

    All that said if you REALLY need the money now would be a profitable time to sell a house in the core.

  113. @Dasmo “the tax is simple. Trying to avoid it is complicated… your suite is not part of your primary residence so it’s subject to capital gains. How complicated is that?”

    If it was that simple this blog would not have needed to dedicate the last ~week on the topic, reviewing obscure court cases etc. Ask 10 accountants/ tax lawyers and you’ll hear a range of responses. The exception from your statement is where CCA isn’t charged, structural changes aren’t made, and the suite is “small” or “ancillary” to the house. Lots of room for interpretation on the latter two yet very little guidance/direction from CRA.

  114. When LePage says Vancouver is going down in the “final hurrah” I find it laughable an agent can predict the market will only flatline when you remove 50% of new buyers.

    Mike , you better rent a bus to start luring all those Vancouver retirees who are losing hundreds of thousands daily.

    Janney I would stay. Why move to a townhouse complex full of kids and potential gang bangers. The realtors want the sale,not your best interest.

  115. @Janney Claire Alexi
    I just spoke to my financial advisor about this very situation and his take was sell give me the money to invest and you will have more to play with for the next 30 years. I asked him how much better off I would be and the difference was not as big as I thought it would be. By the time I pay condo fees or large assessment amounts I would not be that much better off and I would not have as good a property to sell if I did need extra money to pay for health bills etc. If the price of houses go down then I assume town houses (that don’t usually appreciate as fast as SFD) will also go down. So if your happy in you current life style think very seriously before getting mixed up in condo associations etc.

  116. Victoria appeal for retiring boomers will remain constant while supply should remain fairly limited here.

    Victoria’s boomer demand will actually accelerate as the number of boomers reaching retirement age each year continues to grow for another ~15 years.

  117. I own a house in North Jubilee Neighbourhood. No Mortgage. It is small, old, cosy with a fabulous garden. I am 61, no kids so ideally I will use up my equity in my lifetime (I know that’s not really a plan that will necessarily work out).

    The realtors I talked to are trying to convince me to sell and move into a townhouse in the Western Communities. Their reasoning is that I could then cash in on the appreciation before prices fall and live nicer on the banked money.

    I get by with a very small income which won’t increase until my pension kicks in @ 65 – also the pension will be very small. I have zero mortgage payments. Life is good, I have everything I need. I also could move without breaking my heart too much but will miss my garden.

    My thinking is wibbly on this but I have a hard time really believing that owning in my present location is not a way better investment than a townhouse in the Western Communities no matter the changes that will affect the market.

    At any rate it seems to me that this would definitely be the moment in time to make this decision.

    I would appreciate any thoughts on this.

  118. Reason First:

    I have taken that into account. Baby boomers are often retiring earlier and living longer. Basically there are simply more baby boomers then there are the silent generation. +Put another way there are more coming then there ones going so to speak.

  119. Barrister – you are missing the fact that Victoria already has an old demographic and as a result, people are on their way to the great gig in the sky at a higher rate than average. New retirees are offset by old ones.

  120. I commented many months ago that when we bought three agos we found that the prices in Victoria seemed very reasonable, almost cheap. There has been a pretty strong increase since. My own feeling is that prices will start to level out over the next year. On the other hand, my ability to read the market, judging by past experience, has never been that great.

    For what it is worth, I dont see any decline of prices in the core any time soon. Even if prices in Vancouver for SFH drop twenty percent the difference between Vancouver and Victoria is still almost double for SFH. Victoria appeal for retiring boomers will remain constant while supply should remain fairly limited here.

    The Westshore is a different matter. Sales there are more reliant on first time buyers and the new mortgage rules will have an impact on the market. The market there might well adjust.

    Finally, my suspicion is that the Peninsula might see the greatest increase in the long run. It depends on how wisely it is developed. The Peninsula has a marked advantage over the west shore because of superior commutes to the city as well as easy access to both the airport and the ferries.

    My crystal ball has just burst.

  121. My prediction is the market flattens out, but we will have to wait and see. Fundamentally I think the problem is still the actual interest rates. On one of my condos downtown I am paying $7.40 a day in interest, that is just insane.

    In my opinion it’s the reason the market wasn’t budging much 2011-2014. Massive (5000+) inventory, low sales, but no/very little price movement. Motivation to sell is low as carrying costs are incredibly cheap and vacancy for rentals is at levels never seen before.

    and we are a long way from 5000 inventory. If we had zero sales in the next 4 months we would barely cross 5000 inventory.

  122. Marko, please tell us us when has the government intervened in the real estate market in the last 9 years other than to pump the market up versus down ?

    As the shitty salesman you say you are I shouldn’t be surprised you use that lame old an analogy of “its never happened so it never will”, meanwhile Vancouver is getting hammered. Sounding more like some serious denial of what’s coming when lending is cut by 25% and rates are hiked 2%.Very bizarre.

    Mike,there are way more union folks getting zero to 2% than non-union big raises in municipal offices.

  123. @ Hawk – I’m not advocating that the bottom is falling out – i’m moreso thinking that the market will take a moderate breather for about 18 months while these changes settle things down. Salaries are on the rise constantly, and we are short of supply, so those two factors will mitigate the losses.

    Interesting fact – I saw a document outlining the pay raises of exempt staff in a local municipality – on average between 12-17% year over year difference. It always amazes me when people get upset at the unions for pay raises of 2%/yr, when non-union staff are being given the royal treatment.

    Upper level administrators were in the $170-$190K range.

  124. @ Marko

    Yes – I just used a random $50K for downpayment across the board – which would make all those purchases high ratio. Not super scientific, as it doesn’t take into account people moving up in the market, and having access to larger downpayments, but it’s a big enough change I can’t see it not affecting pricing

  125. The bull era is toast, only a few fools left. Justin just sent you the message in spades, and the market is reacting a short flight away.

    If I only had a dollar for every time this has been said on the blog in the last 9 years.

  126. Here’s a quick anecdotal comparison of price affordability in Victoria as a function of continual mortgage rule tightening over the years.

    Is this only for high-ratio mortgages?

  127. “Now it’s $45k over ask trying to outbid a bunch of other people.”

    There you go again pumping the non-average house sale as the norm due to low inventory. Once reality sets in and the flippers and lottery winners get that prices are heading down (as Mike Grace just pointed out), the listings and price reductions will climb like Vancouver is today. Bidding wars will soon be history.

    The bull era is toast, only a few fools left. Justin just sent you the message in spades, and the market is reacting a short flight away.

    “John M. Green ‏@bclegal 5 hours ago
    @SteveSaretsky I have some Delta prices off at least $300,000 from May. The lawsuits for failing to complete are starting to roll in.”

  128. Here’s a quick anecdotal comparison of price affordability in Victoria as a function of continual mortgage rule tightening over the years.

    2008 –
    -35 Year Amortizations Available
    -80% Offsets available for rental suites (Using $1000/month Rental Income)
    -Estimated salary of $70K/yr for gov’t employed professional
    -Mortgage Interest Rates of 3.79%
    -$50K available for Downpayment
    -$400/month estimate for property taxes + heat
    Translates into a Max Purchase Price of $648K

    2016 Prior to Mortgage Changes:
    -25 Year Amortizations
    -100% Addbacks of Suite Income (Using $1200/month)
    -Estimated Salary of $90K/yr for gov’t employees professional
    -Mortgage Interest Rates of 2.39%
    -$50K Available for Downpayment
    -$550/month estimate for property taxes and heat
    Translates into a Maximum Purchase Price of $661K

    2016 Post Mortgage Changes:
    -25 Year Amortizations
    -100% Addbacks of Suite Income (Using $1200/month)
    -Estimated Salary of $90K/yr for gov’t employees professional
    -Qualifying Interest rate of 4.64% (Stress test)
    -$50K Available for Downpayment
    -$550/month estimate for property taxes and heat
    Translates into a Maximum Purchase Price of $533K

    Prediction:

    Price drops are coming. Typically our market has been somewhat based in the reality of affordability. With the foreign influence leaving Vancouver, our pricing should come back to earth. We may see the gains made in the last 12 months erode over the next 18 months.

  129. @Ash the tax is simple. Trying to avoid it is complicated… your suite is not part of your primary residence so it’s subject to capital gains. How complicated is that?

  130. This early in the month I can only look at the overall market in the core, Saanich Peninsula and the Western Communities. And this month is showing prices for houses in these combined areas moderating lower than the month before.

    Even if prices moderate the damage has been done.

    2658 Avebury Ave just went in a bidding war for $840,000.

    In 2011 this house was on the market for 52 days at $625,000 with no takers, listing cancelled. It’s not only the price but the circumstances and pressure you have to buy under these days. Two years ago you could have seen the home, taken a week or two to think about it, have offered approx. $600k with 14 days for conditions and gone from there.

    Now it’s $45k over ask trying to outbid a bunch of other people.

  131. However, condominiums are doing well and so far this month appear to be having a price increase.

    Yea don’t know what’s happening lately with condos but condos I personally wouldn’t touch with a 10-foot pole are flying off the shelf.

    Are the new mortgage regulations/increase in SFH prices pushing more buyers into condos?

  132. Well Micheal

    This early in the month I can only look at the overall market in the core, Saanich Peninsula and the Western Communities. And this month is showing prices for houses in these combined areas moderating lower than the month before.

    However, condominiums are doing well and so far this month appear to be having a price increase.

    This early in the month there just isn’t enough data to break out the separate areas. Intuitively I suspect that prices for houses in the core will rise this month as people try to beat the deadline. I also suspect that might be the reverse in the Western Communities as builders fill the low inventory with unrecorded private sales.

    As for the Peninsula – toss a coin.

  133. Phil Soper goes on to say…

    As for new mortgage rules introduced by Ottawa earlier this month, Soper says fears associated with those changes have been exaggerated.
    He predicts that prices in Ontario and many other parts of the country
    will continue to rise, in spite of new measures including a requirement that lenders apply stress tests to all mortgage borrowers.

    I agree that Victoria, Toronto & others will continue rising while Vancouver grinds sideways for a while with its new 15% tax.

  134. And we do have a company like Zillow. Rudy Nielson has a company in Vancouver called Landcor Data Corporation.

    Google them and you can have timely data. But you have to pay for it. And that shows that the board does not have a monopoly on the data. Anyone can get the data, if they pay for it.

  135. One of the things that the new real estate board should do is force the disclosure of actual recent sale prices along with the listing

    As you probably heard the competition board ruled that the TREB had to allow publishing of sales prices. TREB immediately appealed citing privacy so the issue is still open however they will certainly lose. Then it’s just a matter of time before it spreads here.

    Although I do wonder if Zillow really has so much value to the consumer. Their business model still relies on feeding leads to realtors as far as I know.
    Despite all these tools people still overwhelmingly use realtors
    “87% of buyers purchased their home through a real estate agent or broker—a share that has steadily increased from 69 percent in 2001.”
    http://www.realtor.org/field-guides/field-guide-to-quick-real-estate-statistics

  136. If you want full access to the data then you would have to pay what other contractors pay.

    And that’s about $3,500 a year per person with access to the data. A company like Zillow would have to pay a lot more since more people in their company would have access. You would also have to sign a contract that would restrict the uses to which you would use the data. No mass solicitations or mass data mining.

    The real estate board doesn’t cook the data or try to hide anything. This data is costly to obtain so they are protecting their investment.

    As a lawyer or a property manager you can sign a contract with the board and get access to the data but you have to pay for it. After all the board is a private company there to make a profit not a government agency.

  137. @Barrister

    I get the feeling that they are not so much trying to hide something as trying to maintain a monopoly on it. Basically, it’s something valuable that they prefer to be able to sell. If we had Zillow etc., we would need realtors less so you would see more price reduction pressure on real estate services.

  138. Cook

    If the Government deems this as a business you will not be able to claim a capital gains and 100% of the profit is taxable.

  139. Looks like Mike better dump that Vancouver real estate he just bought, LePage says it’s going down for the count. When the real estate companies start to finally admit it, you know the game is over.

    TORONTO — Royal LePage CEO Phil Soper says house prices in Greater Vancouver grew 30.6 per cent year-over-year in the third quarter of the year, marking what may have been the real estate market’s “final hurrah.”

    Soper says he expects that price growth in Vancouver will slow or even reverse in the months ahead as the effects of recent federal and provincial government rule changes begin to be felt.”

  140. If people bought a houses for the purpose to flip…couldn’t this be considered business income? The new report of declaring your house sale on tax returns should help capture this?

  141. One of the things that the new real estate board should do is force the disclosure of actual recent sale prices along with the listing. The sale price is a matter of public record so there are no privacy issues. Real estate agents have access to them so why not the public.

    These are totally available in the United States with companies such as Zillow and make for a much better informed consumer. It leads one to the question of what is the real estate board trying to hide?

    Just for clarity actual sale prices are available online from the local municipality tax rolls but you have to plug in each address individually. So this information is not a secret and is a matter of public record so dont even try to raise the privacy issue.

  142. “I am fine with the tax staying as is thank you. It’s simple. ”

    I’m not sure what you mean by this. What’s “as is”? I think it’s been established that the application of the tax is anything but simple!

    “The tax isn’t going to wipe out any gains earned by renting a suite.”

    It’s not detrimental in the long term but it’s a factor. In my case where I only intend to rent out the suite for a few years, if it’s determined that the tax applies to my suite (and I think that’s a big if), it would most certainly wipe out a couple years of net rental income. This is somewhat reduced by the deferment of payment until I sell.

    But yeah, crocodile tears for those who’ve seen their places rise rapidly in value! I’d have zero sympathy if I was still looking to buy.

  143. Great to see real scenes from the trenches out of Vancouver from Steve Saretsky and what will be happening here soon. Keep the faith bears, won’t be long now.

    Question is will the agents here have the balls to report the price reductions or just keep pumping the rare over ask sale to keep their potential buyer clients from running the other way ?

    “@SteveSaretsky 13 hours ago
    #VanRE Speculators slashing prices and unloading houses that were bought earlier this year. Wow

    @SteveSaretsky 10 hours ago
    21 price reductions today in Surrey detached market… #VanRE

    @SteveSaretsky 12 hours ago
    @greg_ticknor seeing massive unloading in N delta. Which of course was up 46% at one point

    ‏@SteveSaretsky Oct 11
    More Realtor complaints regarding my tweets and blogs. Sigh, when will we start focusing on the real issues at hand? #VanRE “

  144. I am fine with the tax staying as is thank you. It’s simple. The tax isn’t going to wipe out any gains earned by renting a suite… maybe Leo needs to give some math lessons too.
    Just don’t use a Realter when you sell and poof problem solved. All you need is a lawyer and an internet connection. Selling your house will only cost you $1500.

  145. “If that is the case, why worry about capital gains? If all you are looking at is a gain in line with inflation and being taxed on the rental part of that gain, it can’t come to very much. Surely, the amount would be negligible in comparison with the rent collected over those years.”

    Marko demonstrated earlier that the capital gains tax on the suite portion would wipe out a good chunk of the rental income – it’s definitely material in a market like Victoria where prices have risen 4% on average.

    It’s probably worth reminding ourselves that despite all the banter on this topic for days now, we still have no idea if a typical suite in Victoria will be taxed or not. It wasn’t clear to me back when I started renting out my suite, and it’s no more clear now.

  146. Marko:

    So if you had bought a house in Fairfield 15 years ago and then raised your family in it under your 250,00 only exemption you would then be paying a huge tax bill today when you sold it. The fact of the matter is that you decided to go into the business of being a landlord. It is really no different than had you bought a small condo and decided to use it as a rental suite.

    Without the principal residence exemption the average Canadian would find it next to impossible to ever move up from one house to another. Just dont forget that someone out there will say that you are rich because you own a home and why should you get any exemption. You make your living selling houses mostly to people who live in them so why are you arguing that one of the main reasons people to buy a house should now be taxed to death. Trust me that if ever the discussion of limiting the principal residence exemption comes seriously into play then there will be enormous pressure to remove it or to limit it to a much smaller amount than you want.

  147. The whole CG anxiety thing only makes sense if one is an extremely optimistic speculator.

    The CG suite doesn’t cause anxiety for me (only 22% of my house square footage, don’t need the money from the suite, I am clever enough with my planning that I would sell the house in a year where my taxes are favorable, etc.). What drives me nuts is people flipping luxury homes (without suites) will continue to make off paying zero CG tax.

    I would be happy and satisfied with the CG on suites is if the government brought in a $250,000 to $500,000 max exemption for everyone.

  148. One curious thing I note is that everyone here claims to buy their principal residence for shelter and denies that they are speculating in the hope of a greater fool coming along down the line. If that is the case, why worry about capital gains? If all you are looking at is a gain in line with inflation and being taxed on the rental part of that gain, it can’t come to very much. Surely, the amount would be negligible in comparison with the rent collected over those years.

    The whole CG anxiety thing only makes sense if one is an extremely optimistic speculator.

  149. Leo & Newcomer, I enjoyed your Economics examples !

    I stupidly watched all my online-economics classes in university in a mad-panic 24 hours before each exam & then exhilaratingly pondered which bubble to choose for each answer. Figured out most of the answers – but definitely does NOT mean I understand economics.

    Appreciate your efforts!

  150. Marko:

    Not so easy to get rid of the tenant from hell in a SFH either. You might be right about some rental units being pulled off the market; on the other hand if we had ten thousand less people crammed into Victoria would that necessarily be such a bad thing. Might even find parking at your favourite coffee shop.

  151. Eviction rules have nothing to do with the lack of purpose-built rental buildings in past decades.

    What about the cap on max YOY rent increases? Seems like it would be a crap situation in terms of an investment to have an apartment building right now only being able to raise the rent 2.8% per year. Unlike a SFH very difficult to get rid of tenants in a purpose built building.

  152. What we need to see is CLEAR rules from the CRA.

    I think what would cause a complete disaster for the rental market is if the CRA introduced rules where the number of years you rented versus the numbers of years you didn’t rent factored into the calculations for CGs. At that point I see at least 10 to 15% of landlords pulling their suites off the market and a huge increase in monthly rents.

    If the CRA comes out and says as a suite owner you are screwed either way, whether your rent it or not, then I can’t see many landlords pulling it off the market, and rents probably won’t go up as much.

    Either way some suites will be lost for sure and it will encourage constructions of really small suites going forward too.

  153. I’m not an economist either but from the few Econ courses I took I can’t recall learning about a market where the supply side has zero influence on price. The link might just be less direct…for example if landlords are hit with higher taxes or other unfavourables, many would choose to take their suites off the market, thus lowering the vacancy rate which leads to higher prices.

    At the end of the day you need to have both willing buyers and sellers to find a price point.

  154. But if all landlords have to increase rents due to an added tax burden than the relative advantages stay the same.

    But renters still have alternatives, which is the difference between rentals and your gas example. They can buy, they can move out of town or out of country, they can rent in a dedicated rental building that doesn’t have additional costs, etc.
    Yes because there is a cost to moving you can push the envelope a bit with above-market rents, but not for long, and not when you have to re-rent the place.

  155. Leo:

    You will just add to his frustration by using logic.But in fairness what I believe he is arguing, with some merit, is that since all landlords have this common expense they will all be forced to raise rents equally, The reason he cant raise rents is that there are competitive alternatives for a tenant like renting in Sooke. But if all landlords have to increase rents due to an added tax burden than the relative advantages stay the same.

    Simple example, gasoline is selling at a $1.00 per lite, the reason you cant raise the price to a $1.20 is because the station across the street is selling it for a dollar. But if the government adds 20 cents to the tax all stations will raise the price with only a marginal loss of customers.

    So he is not totally wrong.

  156. Deryk:

    Eviction rules have nothing to do with the lack of purpose-built rental buildings in past decades. Property developers who build rentals pay more income tax and have far fewer write-offs and deductions than developers who built condos. The federal government created incentives to build condos and disincentives to build rentals, although in the Victoria market purpose-built rentals can still produce good returns over time.

  157. It’s so frustrating listening to the nut bars on this forum. Imagine saying that rents will not be effected by costs. If it takes ten billion dollars to build a house then you can be sure that the rents will be higher. Why???? Because it costs so much to build the building.

    Given you don’t understand economics, perhaps a way to reduce your frustration is to learn it? There are many classes online. As for your example, Newcomer has already sufficiently debunked it.
    However here’s a simple one:
    Two identical houses worth $300,000 each. They both rent an identical suite for $1000/month which reflects market rent for that suite.
    Now one house has some flooding and they need to redo all the gutters, part of a wall, and redo all the drains. It costs them $50,000 to do all this work.
    Can they rent their suite for $1300/month now to cover the cost? Obviously not since the renter can just leave and rent somewhere else (forget rent control at the moment). Yes they might be able to get away with charging $1050 because the renter doesn’t want to bother moving, but fundamentally as soon as you go much higher than market norms your renters will leave or you won’t get new ones.

    As a landlord, I’ve found your comments to be untrue in practice. When I encounter new expenses…..such as higher interest rates, higher costs of labour to fix items, higher electric bills, higher taxes, etc etc…..I have never found raising the rents to cover those costs an issue.

    All you’re saying is that you were charging less than market rent.
    Here’s a question: If you have no problem raising rents, why not just raise them even if your costs don’t increase? That would be pure profit for you.

    All my friends who are landlords are saying that they will be raising the rents to cover this added cost.

    Yes, you can raise rents. You just have the reason wrong. You can raise rents because the rental market is extremely competitive and that forces rents up.
    Let’s say your costs actually went down. You can raise rents just as much and just as easily. It is completely independent.

  158. Why wouldn’t you want to sell your home with a suite to get partial principal residence exemption then hoarding another home have having to pay CG on the whole home?

    Also how would it play out if you had a suite and rented it out in your home. Then a few years later removed the suite. Would you pay CG on just when there was a suite? Or CG when sell home?

  159. Curious Cat:

    My suspicion is that a lot of people will not be really informed about the changes until they sell their principal residence. It could make for some interesting screams in the middle of the night.

  160. Deryk:

    My experience is that there is little excuse for bad manners. They tend to create justly deserved contempt. I understand that you are telling us that you are frustrated but would not the logical
    solution be for you to simply not be on this blog?

  161. Deryk:

    I am curious what percentage rent increase are you thinking about. I imagine that you are going to have to play a bit of catch up if you are renting in a suite in you principle home. The tax, as you know, will be calculated from the year you first started renting the suite. Houses have really increased a lot in the past few years and you may have some making up to do.

  162. Ha Ha……I think “Reasonfirst” needs to come out of hiding and use their full name, before giving people advice about communication skills.
    But I admit my frustration gets the better of me sometimes. It is just that it is difficult to listen to the same silly advice that is so clearly wrong because it goes against all the experiences I have witnessed over and over again for the past forty five years. Not textbook ideas. It’s what I have done and what has worked for me over and over again.

  163. Marko:

    If I had to hinder a guess, I suspect that twenty years from now the Peninsula will be the most desirable part of the city. The politicians seem determined to let the developers turn Victoria into just one more American high rise city. Enjoy your home, put down roots, plant your garden.

  164. Thank you “Newcomer” for your thoughtful response. Unfortunately it doesn’t work in exceptionally tight rental markets where one has next to no choice. And those are the markets that I am talking about. As a landlord, I’ve found your comments to be untrue in practice. When I encounter new expenses…..such as higher interest rates, higher costs of labour to fix items, higher electric bills, higher taxes, etc etc…..I have never found raising the rents to cover those costs an issue. There is always a string of people who show up at the door begging to let them have the suite. So you might be able to understand why I just don’t see what you are saying as true. Of course I can’t just ask a million dollars for the suite. But when everyone else is facing the same percentage of rising costs…then I can assure you there is no problem raising the rents. These changes to the capital gains tax will mean “everyone” will be raising their rents and they will get it in tight markets like Vancouver and Victoria. All my friends who are landlords are saying that they will be raising the rents to cover this added cost.

  165. I am hoping that you get lucky. In twenty years from now when you are ready tosell the real esate market totally crashes and your house is worth less than you paid for it. That way there is no CG.

    That would be an ideal scenario. That would be my chance in terms of getting back into a desirable area in the core. Right now the spread between prime core areas and peninsula is growing in terms of the absolute numbers.

  166. Barrister – I think it is still Vancouver money that lags from the activity in Vancouver. The amount of money people were making was ridiculous. IF Vancouver continues to slow, so will Victoria…eventually

    CC – I agree – some knowledgeable people I know in Victoria have no idea what has gone on. I had to inform my RBC banker about the new qualifying rate on >20% downs.

    Double whammy in spring!!! 🙂

  167. Makes you wonder who all these people are who are buying homes for a million plus. Where is this flood of money coming from?

  168. Marko:

    I am hoping that you get lucky. In twenty years from now when you are ready tosell the real esate market totally crashes and your house is worth less than you paid for it. That way there is no CG.

    Besides even if you move out then I assume you would rent the house. I tis not like it will stand empty.
    The sympathy levels might be a little low here because it is not like they passed a new law. You assumed that you could get away with not reporting the CG because other people had got away by cheating.

    practically, figure out all the tax implications at this point and decide if it is worthwhile continuing to rent. That decesion will also depend on how much housing keeps appreciating.

  169. @Deryk Houston

    I sense your frustration at dealing with a counterintuitive point in market economics, and that is that prices are set by buyers, not sellers. In a particular transaction that takes place, the buyer sets the price (they have ownership, after all) but in an overall market, the buyers set the price because it is the buyer who decides whether or not the transaction takes place at all. Increased costs for the seller do not enter into the buyer’s decision-making.

    You mentioned a house that cost ten billion dollars and said that you would be sure rents would be higher but, in fact, you never see people renting suites in very expensive houses because no renter is willing to pay a rent that would make a difference to the owner of such an expensive house. It is priced out of the market.

    One of the things that makes house prices more elastic than rents is that buyers can get leverage, and can bring investment capital in expectation of a return, but renters cannot.

    When thinking about the decision as to whether or not to rent a place at a given price, keep in mind that renters are inherently mobile. If rents are too high for them, they move further away or to different places altogether. They also share places, stay with parents, and live in smaller places. Notice how a well-to-do New Yorker lives in a much smaller place that a comfortable Victorian. People rent what they can afford.

    People also buy what they can afford. This same issue seems to have thrown you a bit in terms of the cause and effect when it comes to suites and house prices. You said that suites exist because prices are high, but remembering that it is the buyer who sets the price, we can see that what is actually happening is that prices have been allowed to go higher because of the availability of suites. To understand how this works, say I go to the bank and get approved for 1M. It is impossible for me to buy a 1.2 M house. So even if someone prices their house at 1.2 M, a person with my income can’t buy it. (Here, please imagine there are only a limited number of people with incomes qualifying them for more than a million.) That means the house is unlikely to sell at that price, and the price gets lowered. But if the house has a suite, and the bank will consider the rental income, I can buy the house. Now, there is no need to lower the price. The price has been made possible by the suite.

    Both renters and buyers buy what they can afford, but there are multiple factors impacting purchasing affordability, while rental affordability is set by income alone.

    Of course, issues of supply and demand have their impact too, but that doesn’t change the fundamental rules of who ultimately decides the price.

  170. Marko:

    Stop suggesting new or higher taxes to the government. They have a tendency to implement the new changes without getting rid of the old.

  171. I had a question for the knowledgeable people on this forum thanks to the talk about “tear-downs”.

    Is it true that if you want to buy a tear-down, you need to use cash? I thought I read somewhere that you couldn’t get a mortgage on a property, then turn around and demolish the house.

    I know someone that has purchased a cheap house in Sidney and plan on tearing it down and building new, and I’m just curious on how something like that is financed.

    I’ve seen teardowns financed and then before you start construction you switch it to a construction mortgage. Realistically you kind of need 40% value of land in cash plus enough to get the house to lock-up (maybe another $150,000 – $250,000).

    It’s going to be hellish doing an owner builder going forward though. The new exam is difficult and the HPO is not providing a study guide.

    Pretty much the government is trying to eliminate the owner builder which will drive up new home construction even more when everyone is forced to use a licenced builder.

  172. But that was your choice. The fact that you didn’t understand the tax implications and are crying foul now is a little disingenuous.

    That was not my line of thought. My thought was if I have lower motivation to sell due to taxes it introduces more hoarding into the marketplace restricting supply theoretically increasing prices.

    If I hold my BMO shares forever who cares, if in 20 years I come up with some sort of setup to keep my principal residence and move onto something else because I don’t want to have the outlay of cash for CGs than potentially a younger family looking to get into the market suffers as I am hoarding.

    I think a better way to not encourage hoarding would be no CGs but jack up the yearly property taxes on properties in general and having properties with suites pay extra property tax too.

  173. I think a lot of people are still clueless about all the changes announced. There were a couple days of reporting in the newspapers, but most people I’ve brought it up with in casual conversation had no idea what I was referring to. (I wasn’t able to find anything in the TC, but I’m not a subscriber so maybe I missed it.) Unless the media prints a ton more articles, it’s going to take a while for Joe Average to hear about it through word-of-mouth.

    Therefore, I don’t think we will see much change until at least next spring.

  174. “Yea but buying and holding BMO shares because you don’t want to pay CGs is a little different than buying and holding a house.”

    But that was your choice. The fact that you didn’t understand the tax implications and are crying foul now is a little disingenuous.

  175. I had a question for the knowledgeable people on this forum thanks to the talk about “tear-downs”.

    Is it true that if you want to buy a tear-down, you need to use cash? I thought I read somewhere that you couldn’t get a mortgage on a property, then turn around and demolish the house.

    I know someone that has purchased a cheap house in Sidney and plan on tearing it down and building new, and I’m just curious on how something like that is financed.

  176. You mean like every other kind of investment.

    Yea but buying and holding BMO shares because you don’t want to pay CGs is a little different than buying and holding a house.

  177. Surely 400k+ over asking is some kind of record? Even for Oak Bay.

    Also – it sold for under 1.5m two years ago when it was a brand new house!! Crazy..

  178. “I think it had more to do with an insane rental market and huge upward pressure on rental prices especially for quality non-suite type product.”

    Supply and demand working as it should.

  179. 2281 Woodlawn Crescent – listed for $1.995m and sold for $2.411m. Anyone know what happened here?

    Not sure what you mean? It had multiple offers like every other attractive house in the core.

  180. They are now starting to build more rental units today….why? ….because there are positive signs that the government is starting to look at changes that will favour the landlord a bit better. ….things like making it easier to evict a bad tenant.

    In Victoria it really started with one building, the Hudson Mews. At the time of completion of the Hudson Mews I don’t think anyone had a big rental building lined up? The Mews was completely rented out in 30 days at some hefty prices.

    Next thing you know Chard announces he is doing a massive rental project on Yates followed by a bunch of other very large rental projects ((Cook/Pandora corner, Bosa on Pandora, subsequent Hudson Tower (almost completely rented out before it was even finished), etc., etc)). Chard just announced another huge project on Yates but this time he is splitting the project into one rental towner and one condo towner. I am thinking developers might be getting a tad worried about rental tower saturation.

    I don’t know how much it had to do with government and the tenancy act. I think it had more to do with an insane rental market and huge upward pressure on rental prices especially for quality non-suite type product.

  181. It was the introduction of heavy handed rent controls that stopped investments in rental housing. Not suites in peoples homes.

    I guess this answers my question as to why very little dedicated rental housing was built between 1980-2000.

  182. On the plus side CG’s are allowing your tenants to have a more stable rental situation. Maybe not so bad.

    Problem becomes though in 20 years when my principal residence is mortgage free and I am reluctant to sell it because of CGs since I rented a suite. I just re-mortgage it, rent it out, and buy my next principal residence rather than have the immediate outflow of cash with the CGs. More real estate hoarding, well at least until death.

    Fundamentally the problem with all of this is interest rates. It’s just so cheap to finance that there is very low pressure to sell and even lower pressure to sell with unfavorable tax implications.

    All of these hoarding problems would be solved with interest rates above 5%.

  183. my point was that any increased costs will be added to the renter.

    Maybe over the course of 5 to 15 years but not immediately.

    It’s kind of like if the cost to build a home skyrockets it doesn’t mean the price of a new home will skyrocket if the market cannot support it. You could simply have a period of 5 to 10 years were no one is building new homes as a result (not profitable).

  184. It’s so frustrating listening to the nut bars on this forum. Imagine saying that rents will not be effected by costs. If it takes ten billion dollars to build a house then you can be sure that the rents will be higher. Why???? Because it costs so much to build the building.

  185. 100% agree with this. CGs encourage hoarding though. As I’ve said before at this point with the run up only reason I am not selling my investment properties is CGs

    On the plus side CG’s are allowing your tenants to have a more stable rental situation. Maybe not so bad.

  186. Why would you say that? It does not make sense. No wonder Trump is popular …lot’s of idiots out there. If you would read my comment, you would see that I said that the capital gains is not that big of a burden because of the percentage you use for capital gains. It doesn’t matter whether we have just had a big jump recently or not…..my point was that any increased costs will be added to the renter. (Where the rental markets are tight like Victoria and Vancouver….exactly where the markets need the most help from the governments.

  187. We’re a dozen days into the month so that would have allowed some of the stragglers to post sales for the first week of stand alone houses in the core.

    First week of the month and we had:

    47 house sales in the core compared to the same time last year when it was 50.
    60 new listings compared to 66 last year.
    Average days on market at 24 down from 39 the year before.

    The New Listings to Sales ratio is quite similar to last year at 1.2 new listings to every home that sold. The big difference is the average days to sell and that’s why most call this a hot market.

    We are clearly still in a sellers market with low months of inventory, low NLS ratio and low DOM.

    In a balanced re-sale market that has stable prices the months of inventory is usually between 5 to 7 and the average days on market between 30 to 90. At an NLS at 1.2:1 and an average DOM of 24 we are well below what most would consider a balanced market. And historically, sellers markets have caused prices to increase.

    Has the announcement of changes to suites had an effect on the market? Yeah, I think it has but not significantly. Some of the fence sitters may have decided to purchase before the change but the low inventory and high prices have limited what can be purchased especially in the under $700,000 price range. So I expect this month’s median and average prices to be skewed to the higher end and more of an anomaly for the year. The same with the volume of house sales in the core which have been given a push with the new changes to the suites.

  188. it means that the rents are going to go up in order to cover these changes.

    Rents are going up because vacancy rates are low. Not because of increased costs for homeowners.

  189. Wow…talk about having things all backwards Just Jack. I guess it never occurred to you that the reason people have suites is because properties are so expensive. You have the cause and effect all backwards.
    Also: It was the introduction of heavy handed rent controls that stopped investments in rental housing. Not suites in peoples homes. Investors stopped building rental units the day that the governments made it next to impossible to get rid of bad tenants. That has been well established. Suites in homes still endured because families desperately needed extra income to simply survive and pay their mortgages and were willing to gamble on a tenant. But investors simply invested their money on other things. The rental market made no sense because it meant major concessions to the renter. I am sure you will disagree with me… even in light of history proving me right…. investors stopped building rental units exactly when the government brought in rent controls. They are now starting to build more rental units today….why? ….because there are positive signs that the government is starting to look at changes that will favour the landlord a bit better. ….things like making it easier to evict a bad tenant.

  190. Today it has become a business model to accumulate wealth and to hoard real estate.

    100% agree with this. CGs encourage hoarding though. As I’ve said before at this point with the run up only reason I am not selling my investment properties is CGs. If I could sell for $300,000 and walk away with $285,000 and re-invest that I would sell. But when I have to sell for $300,000 and walk away with $260,000ish (after transaction costs, CGs) I would need a much better % return on my $260,000 than what I am currently getting on $300,000 asset. Might as well keep the asset, it’s cash flow positive and doesn’t weigh on me from month to month.

    And because so many houses have basement suites it has made it unprofitable for most of the last four decades to build rental housing.

    Why were so few rental buildings built between 1980 and 2000 before the proliferation of basement suites?

    Rents are already unaffordable, but the way I read your theory is eliminate suites to drive up the rents much higher so that building rental buildings can be profitable.

  191. Deryk – you are suffering from the recency affect where capital gains are enormous and vacancy rates are low. This may be the case now but it will change.

  192. Yes…rents are tempered by supply and demand. In very tight rental markets like Victoria and Vancouver for example….. it means that the rents are going to go up in order to cover these changes. Any market where it is low vacancy rate. Exactly the markets that the governments are struggling to find a solution and they go and cause more damage. It does not make sense.

  193. Rents are set by market demand. It doesn’t matter what your costs are they don’t influence what you can get in rent.

    Understood, but you can set a bottom line as the landlord. My line of thought for next year was I throw up my suite at some unreasonable amount. If I can’t find a good tenant at an unreasonable amount I get my electrician to pull a permit to take out the stove breaker out of my suite sub-panel so I have documentation that I’ve converted my suite kitchen to a bar for my games room.

    Just like it is underestimated how many people pay cash or use a conventional mortgage (not high-leverage) I think you would be surprised how many people rent suites that don’t need the monthly cash flow to cover costs associated with their home.

    I know people that have been mortgage free for 10+ years that continue to rent their suite.

    Even if 2-3% of people stopped renting their suite it would have a noticeable impact. There are over 9,000 suites in Saanich alone.

  194. Especially if you increase the rents to cover the added cost.

    Rents are set by market demand. It doesn’t matter what your costs are they don’t influence what you can get in rent.

  195. 30 years ago, it wasn’t a big deal to have a mortgage helper. Basement suites were seen more of a way for home owners to keep their home and pay their bills. Today it has become a business model to accumulate wealth and to hoard real estate. And to make real estate more costly. The cities that have the highest percentage of rented basement suites also have the highest real estate prices.

    The rents from a basement suite likely average an additional $15,000 a year in Victoria, Saanich East and Oak Bay. And because so many houses have basement suites it has made it unprofitable for most of the last four decades to build rental housing. So now we have a shortage of purpose built apartment buildings. Which means the band aid solution seen by short term minded politicians and city planners is to allow even more basement suites or detached garden houses in the back yard. And that’s not solving the problem it is just deferring the problem so that in twenty years from now we will be back where we are today.

    If we could do it all over again, I would say suites should not be allowed for rental purposes between non related persons. And suites should be heavily fined by the city if the home owner violated that condition. That would make it profitable to build purpose built apartment buildings and keep house prices reasonable. Our streets would not then be cluttered with parked cars and that would help alleviate our traffic problems.

    But we can’t go back. Decades of poor city management, city planners and city counselors easily swayed by special interest groups have been our problem and have put us on this destructive path to the eroding of the city’s livability and environment. We are just following the American model of city growth.

  196. It’s quite true that they didn’t “ADD” the tax. It was always there as you say, but now they are going to enforce it. This is a real change.
    My advice still stands as before on the issue of declaring your suite income. No one should try and cheat because it would be too easy for the government to catch you…and it is simply the wrong thing to do. If you are caught, the government will fine you big time. We should all pay taxes that are due. Think about it. You are required by law to have a rental agreement. You would likely have to advertise the suite at some point. Disgruntled tenants could report you just to get back at you. Neighbours could report your suite because they are tired of noisy or messy tenants, the list goes on and so it just isn’t worth being caught. If you declare the suite the income does outstrip the tax obligation at the end. Especially if you increase the rents to cover the added cost. But that is my point….. the tenants always carry the burden of increased costs. And that is why these changes will be damaging to those renting.

  197. @Deryk, they didn’t add this tax. They simply added the requirement to report the sale of your house. You can still cheat on your taxes if you want, It’s just more risky.

  198. I think this is more going to motivate renting them then not. Might as well make some money if you are going to pay the CG. I’m glad I don’t have to design out a suite in my house plans….

  199. And I have no problem with some home owners saying “the hell to having a suite”.

    But many home owners build into their house plans a suite or the allowance for a suite. They have been told that having a suite or a potential of having a suite will add value to their home on re-sale.

    You may be taxed on that suite but you will also get more for your home too. Then add in 25 years of rental income versus being taxed 50 percent of the gain at your retirement tax rate.

    Boo effing Hoo

  200. I must say that the capital gains tax on ones principle residence (with a suite is involved) caught my attention. It simply has to have an impact on the rental market in some way. Some have argued that the amount would not be that much because technically you only have to pay 50% of the gain on the portion of the suite. For example: If your principle residence goes up one hundred thousand dollars and your suite is one quarter of the square footage of the principle residence, then you take the $25,000.00 allocated to the suite …..and then take 50% of that $25,000.00 ….which is $12,500.00 You then Add that $12,500.00 to your income as capital gains. That’s how I had it explained to me. That cost will be incorporated into the rents to cover a possible sale in the future. Also: Not every landlord increases the rent every year, but now that landlords feel punished for providing a rental suite, I believe that many will say to hell with that idea. Some people who don’t need the money from the rental of a suite might very well just say to hell with it as a protest against a government that does not recognize the service small homeowners are providing and seems intent to inflict punishment on them. It is a stupid idea in my opinion and will only cause a lot of bitterness.
    The one thing is that anyone involved in a suite should obey the letter of the law. Declare your income. Declare the suite when selling the house. It just isn’t worth trying to cheat when it comes to taxes. Too much to lose and too little to gain.

  201. I suspect that we might have tp wait until the end of November to actually be able to gauge the effect of
    both the 15% surcharge on Vancouver and also the new mortgage rules.

    But it is always fun to look into the crystal ball. So what does everyone think?

  202. Dear Bitterbear:

    You should probably ignore me since I am a little cynical when it comes to both marriage and the housing market.

  203. “I hope that in your postdoc if absorbed the fundamental rule of modern economics:– marry rich, it may not make for a perfect or happy marriage but if you persevere then I can guarantee you a wonderful divorce.”

    Barrister,
    I think I missed that lecture but evidently my husband attended it in high school.

  204. Landlords have been hit hard with both the more stringent reporting, and the crackdown on financing for rentals. Could very well add more stock to the market.

  205. I suspect the high prices over the last year drew out more listings than normal from the SFH group.
    I could be imagining it but when we were garage saling there seemed to be a far number of houses sold that had been rentals. I wonder how many people decided that it was a good time to get out of the landlord business?

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