Pure demand

After several months of delays, the new foreign buyer numbers are out and we now have a full year of data.

Assuming there isn’t some massive loophole for foreign buyers to avoid detection in this data, two things seem to be clear:

  1. the percentage of foreign buyer involved transactions in Greater Victoria is more or less steady at just under 5% of transactions
  2. the foreign buyers tax in Vancouver continues to be effective, pushing the percentage of foreign buyers below that of Victoria.

There is some evidence that foreign investment dollars in Vancouver went into the pre-sale market instead via assignments, but it seems at the very least the resale market seems to be somewhat back in balance (and the government collected a staggering $131 million in additional property transfer tax from foreign buyers).

Taking a look at the actual numbers of transactions, we can see it’s not huge in Victoria at 45 sales/month and the average price is around $750,000 in most months.

Most of those purchases will be concentrated in the core I imagine, but unfortunately the province doesn’t break it down any more finely than the overall region.

Which leaves our local sources of pure demand to fuel the market:  first time buyers.   They make up about 20% of the market and as of January they’ve been showered with money from the province to fuel the entry level market via the HOME Partnership Program.   In fact 1100 applications have been approved which means an extra $13M or so in capital infused into the market.   That seems to be having an effect on the Vancouver market with the supply of condos at critically low levels amidst a sales surge.

Here, I think it’s difficult to really notice an effect without digging into the land titles themselves (the BC loan is registered as a second mortgage).   Yes condos started selling even faster after January, but that is a normal seasonal effect.   Looking at sales, they were strong until March but unlike last year, that was all the market had in it and April/May/June have been flat.

Despite how monumentally dumb it is to stoke an existing hot market, it’s like throwing fire starter on a bonfire: it just won’t make much of a difference anymore.   As the head of the CMHC said to the BC architects of this nonsense, “You will know we are holding our noses firmly on this and I would not want any other provinces and territories to be misled into thinking this ill-advised program represents good public policy.”    

Let’s hope we’ve seen the end of this kind of pandering politics for a while.

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109 thoughts on “Pure demand

  1. “They all guarantee that a particular human will have some notion of the gravity of life and the true cost of unhinged rhetoric.”

    … which is why a lot of us wise people voted to oust Clark (thank you for acknowledging that all my years experience allows me to recognize shysters), who abandoned any notion of a diversified economy by focusing exclusively on RE and natural resources – to the detriment of everyone’s future.

    There’s a reason why most urban voters had had enough, especially in Vancouver where their kids couldn’t afford homes due to her selling out to the RE industry.

    Anyways, Happy Canada Day!!

  2. Ok, so you meant if one is not x, or y, or z. There is a difference when you add all the nots.

  3. Any one will do.

    They all guarantee that a particular human will have some notion of the gravity of life and the true cost of unhinged rhetoric.

  4. Jerry, to be clear, with all the “or nots”, does not being just one of those things disqualify someone from being a contributing member of society?

  5. So here we are again. Enfranchised collective envy pushes yet another group of splenetic wealth re-distributors into the halls of power. If you think the Canadian variety is bad have a look at the blighted UK and Mr. Corbyn – the word hell-bound is for once totally appropriate.

    What to do?

    Time to dispense with the notion of universal suffrage. If you are not over 35, or not a tax-payer, or not married, or not a parent, or not a veteran you do not get a vote. How is it possible that people who contribute nothing, have no stake in the future and no life experience of any kind can have a say in the running of a society? It is nonsense.

  6. Leo: you are exaggerating; more like three months. You forgot to mention that it looks like major layoffs in the forrestry industry. Should be interesting to watch but on the other hand there should be a increase in both wages and jobs in the public sector. But it is early days so lets see what happens.

  7. Is a perfect storm brewing in BC?

    Next week Horgan becomes Premier.

    The following week Poloz raises interest rates.

    Then the week after, Horgan announces plans to attack foreign property buyers and speculators and landlords and corporations and anyone earning over $50,000/yr…

    And so begins another crashing Provincial economy at the hands of the NDP. By the way; Did anyone else notice the Alberta NDP are in the depths of bankrupting Alberta with a projected $10 BILLION deficit in 12 short months? My guess is the BC NDP will blow the entire budget surplus within 6 months.

  8. A lot of things can happen in BC politics – history is filled with surprises and dramas. They don’t call it Lotusland for nothing 🙂

    Socreds made a new breakthrough in the 50s, then disappeared when the Liberals emerged in the 90s. Given the fact that the Liberals can’t decide what they stand for anymore, they may disappear too.

    The GreeNDP might form a coalition by the next election, or the NDP may sit out some ridings (allows the NDP to take on a more conservative financial positioning under a new name – after all, the BC Libs weren’t the same as the federal Libs)

    Lots of possibilities.

  9. “and where the people are merely units of economic production without proprietorial rights or privileges”
    What a great sentence!

  10. Why this will not last long. Green cannot be associated with the NDP long term. It will hurt their brand. If they associate themselves with the NDP and not attach them than what is the point of voting green. It’s about time and getting a few things done than attaching them like a pit bull. Next election the NDP will go after the green to get a majority. Power hungry people change very quickly.

  11. That sound you hear is just crashing house prices. Carry on.

    Moronic.

    Do you really think they’ll keep it together for four years with a majority balance of one person?

    I bet a few BC Liberal veterans like Rich Coleman, having been stripped of power and relegated to opposition benches, might resign soon. That could change the math.

    Seriously is there any way around them not having a real majority?

    The NDP has a way around the deadlock; read from the bottom up (and see Vaughn Palmer’s Twitter for more info):

    (we need a catchy name for that, maybe Gippers?)

    GreeNDP

  12. @ Totoro:

    ” Might have been better off at UBC, academic freedom and all.”

    You kidding? “Academic freedom” — there’s another oxymoron.

  13. “I am not sure you would want to see the 2008 US housing crisis here. ”

    Well, pricking a bubble and then reinflating it, as seems to have been the US strategy from 2005 forward, doesn’t make a lot of sense. But your earlier assumption was that there could be other economic drivers. Actually, that is open to debate, and denied by those who say the US (and by implication the Canadian) economy is “washed up.”

    It is true that BC now has an interventionist government that will, presumably, attempt to create alternative economic drivers, although they don’t have the powerful tools to do so as has the Federal Government, and the Trudeau liberals are wedded to a globalist policy that precludes effective economic reconstruction: reconstruction of what, after all, since according to Trudeau, Canada is not a nation, it has no core, and thus is merely a geographic location where global investors and corporations may chose to buy houses, do business or not, and where the people are merely units of economic production without proprietorial rights or privileges.

    The implication is that to see the future of the BC and Canadian economies you have to look to the Third World: most assets to be owned by the very few, and the job market offering openings mainly in low-wage service positions in the healthcare, restaurant and retail sectors. At present, the economy is buoyed by spending of retired people who had well paid jobs and now have good pensions plus savings. But as that accumulated wealth is dissipated, the economy, without massive government intervention, seem set to go downhill.

  14. “Foreign buyers tax seems inevitable here now.

    Except for the pesky pending court challenge.”

    Which can drag on for years and years. Meanwhile the foreigners get goosed at the NDP new money laundering laws and trusts/numbered companies having to disclose who you really are.

    Foreigners with ill intent have a habit of not wanting their identities exposed. New rules are coming that will shake the shit out of this industry. Eby will be leading the way with guns a’blazing.

  15. @Tallguy

    “I read somewhere that developers pay up to $85,000 per housing unit in building permit fees in Vancouver.”
    That statement is probably correct.
    If Municipalities were really serious about creating rental units they should forfeit ALL development fees associated with any rental housing projects. That would totally encourage the building of rental apartment buildings.
    Municipalities everywhere are out of control. Here’s what one stipulated for a small housing project of 4 units. Before the city would release the Development Permit they wanted me to submit a deposit of the full cost of construction (their estimate based on city cost of doing the work which usually runs double the cost any private contractor can do the work for) for two sidewalk curb cuts required for two driveway accesses for a total of $18,000. Plus they wanted another deposit of $18,000 for a utility pole to be moved 10′
    So they wanted $36,000 to sit in the city’s trust fund which wouldn’t be refunded until the work was satisfactory completed two years down the road. The above items would be one of the last things to be completed on a project so as they are not wrecked or damaged during construction. Meanwhile the project contractor has to find the money to do this work while double the amount sits in city coffers. Remember they want this money before you can even apply for the Building Permit! When you apply for the Building Permit then they want a $48,000 deposot for water and sewer hookups. They just think money falls out of the sky!
    Ever wonder why an old house suddenly is demolished on a Friday or over the weekend? Well it’s because the city wanted a $25,000 deposit to ensure proper procedures are followed for the demolition. The contractor can’t afford this money so he chances it over the weekend and by the time bylaw shows up on Monday morning to issue a “Stop Work” order the house is gone. Same again for protecting existing trees. It’s just one big cat and mouse game. But the Municipalities have created this scenario because of their ridiculously high fees.

  16. CS

    I am not sure you would want to see the 2008 US housing crisis here. The CBs get it wrong with tackling an asset bubble. That or worse could happen.

    Add the higher government servicing debt and you have the potential for no growth,deflation, and high deficits. It will not be pretty.

  17. @ Gwac

    “We build an economy that was heavily driven by housing. trying to take that away without some other drivers is going to be difficult.”

    Do we need other economic drivers before we slow down the RE sector, or do we need to slow the RE sector before we can develop other economic drivers?

    Seems that the RE boom is sucking the life out of the rest of the economy as more and more of household income is devoted to servicing mortgages.

  18. @ LF

    Suddenly, after years of ultralow interest rates, central bankers are signalling they’re ready to start hiking borrowing costs.

    According to Paul Craig Roberts, former Deputy Secretary to the US Treasury, holder of multiple professorships in economics, former Wall St. Journal Editor, etc., etc., real interest rates are not rising. Rather nominal rates are rising in line with or perhaps more slowly than inflation.

    Anyone with half an hour to spare, might find Roberts’ assessment of the US Economy (“washed up”) and US foreign policy (continued ME aggression) of interest. How much of what he says is applicable to the economy of Canada, BC, and in particular Victoria is open to question, but with RE supposedly accounting for 43% of BC’s economy, “washed up” may be the applicable term here too.

    Interesting, Barrister, your explanation of how the NDP will get their legislative program implemented. Insofar is that program revs up the BC economy, while the BoC holds back on interest rates due to the depressed state of the energy sector and Ontario, the result could be even greater RE price inflation here.

    In that case we would then have an illustration of the need, that Jane Jacobs held to exist for regional monetary systems, i.e., a BoBC, reviving the BC dollar, maybe at the old exchange rate of 4.866 to the pound sterling. The coins would presumably be of a suitably wacky West coast design, square perhaps with a hole in the middle.

  19. @ Leo S
    Re: price to assessed ratio

    “Any particular region and housing type you would like to see?
    It doesn’t really tell you a lot though. At any given time it will tell you how much house prices have increased since BC Assessment’s estimate of values on July 1 of the previous year.”

    It’s obviously not my place to say how you should present the data. What you do do is nicely done and informative.

    My thought about price to assessed ratio was that it would give a better indication of price trends than the median price when there are month-to-month changes in the number of high-end versus run-of-the-mill house sales. But, as you suggest, it may really make little difference which index one goes by. Moreover the sales:to assessed ratio may vary from one end of the market to the other, so the thing becomes essentially uninterpretable. Yeah, so probably not such a good idea as I thought.

  20. Creating more affordable housing:

    Perhaps the province could create legislation that would limit the time period for building permit processing and variances. They could enact penalties, such as the municipality forfeiting a portion of the building permit fees, if they exceed that timeframe

    Additionally, they should limit the cost of the fees unless that municipality can reasonably show that they are justified (ie. through independent audits). I read somewhere that developers pay up to $85,000 per housing unit in building permit fees in Vancouver. Without knowing staffing levels, etc, that sounds like blatant feeding at the trough to me.

  21. I think this interview with David Eby gives a pretty good idea about what the NDP will do on housing. Sounds like they’re ready and have the guts to end the housing fraud created by 16 years of liberal govt. Foreign buyers tax seems inevitable here now. http://leafs.net/david-eby-interview

  22. “The speaker will vote for them only on confidence motions. ”

    I don’t believe that is correct. The speaker can vote on any tie. It’s just convention that they maintain the “status quo”. It was also convention that the LG accepts the ex-prem’s advice (and didn’t).

  23. Barrister- having to rush off to work right now but I’ll get back to what I think they could do about creating more affordable housing later. Question really is: what do they end up doing? If, they can even get anything done at all. Hopefully they’ll be looking at what other jurisdictions are doing creatively to address housing/ homeless/ addiction issues similar to ours. We see examples down in Seattle and Portland about what they did about their homeless problem. We see numerous examples in various European countries about what they can do. Time will tell what they actually do…

  24. It will depend on what browser you’re using. Virtually all will have an options to disable on specific sites or pages. Determine which one you’re using, then just look it up. 🙂

    Leo, it should be done site specifically, not globally.

  25. Settings -> Safari -> Advanced (at bottom) -> turn of JavaScript.

    Will break many webpages though so not particularly practical.

  26. Leo

    Agree but hitting that hard will cause a lot of collateral damage. Which quickly could lead to deflation and than the CB are fucked. We build an economy that was heavily driven by housing. trying to take that away without some other drivers is going to be difficult.

    This is what happen when CB do not let the economy perform in a natural way. Artificially propping it up only delays the enivatible.

  27. Janney – that didn’t work for me, at least not on the iphone app. Bummer.

    disable Java on the web page, and the article will show without resistance

  28. Thanks, LF.

    Janney – that didn’t work for me, at least not on the iphone app. Bummer.

  29. My personal view without inflation this is a very delicate dangerous thing to do.

    Guess it depends on whether you can claim no inflation with housing prices through the roof

  30. New article by Ian McGugan – ‘The unspoken reason central bankers are suddenly keen to hike interest rates’. Care to post a few paragraphs?

    Suddenly, after years of ultralow interest rates, central bankers are signalling they’re ready to start hiking borrowing costs.

    Bank of Canada Governor Stephen Poloz surprised markets this week by hinting at higher rates ahead. Nearly simultaneously, European Central Bank chief Mario Draghi, Bank of England boss Mark Carney and Federal Reserve chair Janet Yellen spouted similar, hawkish sentiments in what could be interpreted as a co-ordinated global effort to reshape expectations.

    The tough new tone among central bankers is an important shift and markets reacted violently. But bankers’ fresh willingness to contemplate higher rates is also, by conventional reckoning, a mystery.

    Central banks normally boost rates to put a lid on rising inflation. These days, however, you have to squint awfully hard to detect any signs of price pressure in developed economies. In Canada, the consumer price index is inching upward at a mere 1.3 per cent a year, while comparable figures in the United States and the euro zone are below 2 per cent.

    Given this near-complete lack of any inflationary excess, what could be prompting central bankers to abruptly rediscover that there’s an “up” button on the interest-rate control panel?

    It may well be concern about sky-high asset prices.

    Canadian home prices, U.S. stock prices and European bond prices have all ascended to stratospheric altitudes in recent years, breeding social inequality and creating the risk of disruption if anything goes wrong. A measured dose of higher interest rates could help restrain those elevated asset prices and slowly return them to more sensible levels.

    To be sure, central bankers are unlikely to explain the process quite so bluntly. It would be considered uncouth – and politically explosive – for the custodians of the financial system to announce they intend to start putting pressure on the value of people’s investments. But one unavoidable side effect of raising rates is just that – a downward drag on asset prices.

    Monetary policy works in large part by influencing the value of assets such as stocks, bonds and real estate. When times turn tough, for instance, central banks respond by cutting interest rates. As rates fall, it takes more cash on hand to guarantee a given amount of payout down the road, so the value of any future payout goes up in terms of what it is worth today.

    This means that the present value of stocks, bonds or real estate also go up, because they generate those future payouts. Higher asset prices then spur economic growth by making people feel wealthier and by giving folks more reason to go to work and create more of all the things that are rising in value.

    Yes, it’s a complicated process. But you’ll recall that this sequence – low rates, rising asset prices, economic stimulus – is exactly what occurred after central banks slashed rates following the financial crisis. As the economy begins to return to normality, it’s natural for the process to go into reverse, in order to remove unneeded stimulus.

    There’s nothing particularly controversial about any of this – unless, that is, you happen to be heavily invested in the assets that are most affected. Back in the fall of 2011, in its Quarterly Bulletin, the Bank of England published a handy guide to quantitative easing, much of which applies to any easy-money program. It includes a helpful graph that shows real asset prices surging during the first phase of loose money – and then quickly plunging back to earth as policy tightens.

    What has been surprising this time around is how long the easy money has lasted. Back in 2013, Harvard economist Jeremy Stein, then a governor of the U.S. Federal Reserve, cautioned that a prolonged patch of low interest rates creates worrisome incentives for people to take on greater risk in a reach for yield. But four years later low rates are still with us.

    Judging by central bankers’ new tone in recent days, that may be about to change. A move to higher rates can be interpreted as good news, a declaration that the global economy has recovered to the point where more normal rates are appropriate. But it can also be taken as a sign of worry over potential bubbles in asset prices.

    For investors, the one sure prediction is that volatility will increase. Despite the Bank of England graph, it’s not absolutely necessary for asset prices to plunge as easy money policies turn tighter. It all depends on exactly how fast rates go up and how the real economy responds.

    People have every right to be nervous about how central banks will manage this process. Unwinding years of ultralow interest rates is a precarious balancing act. If you thought Thursday was a wild day in the markets, brace yourself. The fun has just begun.

  31. @ Entomologist – I get access to “subscriber only” Globe articles on the Globe iPad app – for free.

    Don’t know if this a weird glitch or would work for everyone.

  32. Read it last night. I will look again. Basically all about hitting the asset bubbles. Housing, bonds, and equities around the world.

    My personal view without inflation this is a very delicate dangerous thing to do.

  33. Is anyone a Globe and Mail subscriber? New article by Ian McGugan – ‘The unspoken reason central bankers are suddenly keen to hike interest rates’. Care to post a few paragraphs?

  34. Leo:

    They will probably just come up with large omnibus bills that include some budgetry items and therefore will be treated as if they a confidence vote. Basically you bundle up forty pieces of legislation into one and it becomes all or nothing.

  35. Luke:

    Can you be a bit more specific when you talk about more options in housing for everyone? I am curious as to what you are actually referring to along those lines. I am a bit confused as to what you are talking about in specific terms? You make it sound interesting but can you fill in the details?

  36. I still don’t see how they will get anything done. The speaker will vote for them only on confidence motions. Everything else it’s a deadlock 43:43. The Libs will justify voting against proposals they just said they would support by saying the NDP/Greens (we need a catchy name for that, maybe Gippers?) also voted against their own policies.

    Seriously is there any way around them not having a real majority?

  37. Tell all the foreign buyers to come here to Alberta. We need em. If you are an investor you should want to buy at the bottom of a market, not the top. Encourage all foreign buyers to buy here and help solve your crisis and ours. There won’t be too many questions asked here, but you won’t be able to dodge capital gains. No foreign buyers tax, no vacant home tax, no transfer title fees.

  38. Re. 1218 St. David St in South OB.

    I noticed it is on a 100ft wide lot – therefore that means it is sub-dividable, I think – that’s rare in OB. That could help explain the bully bid. However, the house was in good shape so that means they’re likely to move it somewhere else if they want to subdivide.

    That area is very desirable so that might explain what happened there w/ the $300k over asking.. is that the highest over asking we’ve ever seen in these parts?

  39. Gwac I think you’re right. Horgan will spend to buoy up his base in preparation of a looming re-election which will happen definitely within 18 months.

  40. There definitely is reason to celebrate tonight now that Chursty has been given the well deserved boot! 🙂 Good riddance you corrupt phoney… (I leave the expletive up to the reader 😉

    I’m hopeful the new Gov’t can work together to start work on many of the good things they talked about doing. For one thing, it’s going to be good for the island to have two ‘island boy’s’ in there. Chrusty never gave a crap about the island…

    However, if I was you I wouldn’t automatically come to the conclusion that the NDP/Green’s alliance means that house prices will decline. Their ten page platform states very little about what they’ve agreed to do about high housing prices, other than seeking ways to curb fraud and speculation (good things). This is all it says: ” d. Make housing more affordable by increasing supply of affordable housing and take action to deal with the speculation and fraud that is driving up prices.” Source: http://bcndpcaucus.ca/wp-content/uploads/sites/5/2017/05/BC-Green-BC-NDP-Agreement_vf-May-29th-2017.pdf

    It doesn’t say they’ve come to any agreement on a province wide foreign tax of 30% (that was a Green platform, not NDP). In fact, it says very little about housing at all, so I think we will need to wait and see… Even if they did implement the foreign tax province wide and double it, I doubt that would make much difference. The Greens/NDP are actually talking more about more investments in social housing and addressing the causes of homelessness (and it’s subsequent huge cost to society).
    https://www.theglobeandmail.com/news/british-columbia/ndp-greens-seek-ways-to-cool-british-columbias-housing-market/article35185394/

    Other factors coming from outside the province are what’s going to be required for large SFH price declines in Victoria, if one is hoping for that. I’m talking about a large scale global economic collapse, worse than 2008, or a large rise in interest rates (two things that may not necessarily happen any time soon).

    If you are on the sidelines, and are hoping the new fragile government will harpoon itself in the eyes of the provinces 70% of people who are homeowners. I’d take pause to re-think weather or not they are that stupid… If they increase supply of affordable housing, and there are many ways to do that – then that’s a good thing. It doesn’t mean a custom house in a desirable leafy suburb gets more affordable. It does mean that perhaps more people may have more options than they do right now, and that’s better for everyone.

  41. “Watch property values crash for the next four years, starting tomorrow”
    Nope, I don’t think so. There’s always a lag time for these things to occur. (That’s what happened when the NEP (National Energy Program) was imposed and there was a lag before it took hold and brought on the RE crisis in Alberta in 1982. If it does, it will start six months out, but by then everything wil be overshadowed by a looming new election.

  42. LeoM

    Not going to happen. Guy is going to spend and spend and spend. He is going to stimulate an over stimulated Victoria economy already.

  43. From the news report photos showing Horgan just becoming Premier, he looks like “the cat that just ate the canary”…..and Christy looks like she was the owner of the canary!

  44. Do you really think they’ll keep it together for four years with a majority balance of one person?

  45. If most of those purchases are in the core, wouldn’t the levels in the core then start to compare to what Langley and Richmond were at before the foreign tax?

    No. Metro Vancouver percentage was up to 15%. That meant rates in places like Richmond were much higher (I believe more like 25%). But if our average is 5%, then rates in the core are likely higher, but nowhere near 25%.

  46. I also wonder if non-foreign out of town buyers are relatively flat month to month. Theory being that if someone has relocated here they’ll just deal with the limited selection and buy.

    The VREB now releases this data quarterly. Expect the Q2 numbers in July.

    What happened in October? A few rich foreigners bought some really expensive properties? At least a few multi-million dollar places must have sold.

    I bet there was one very expensive property that sold and brought the average up. Note median was $895k that month. Hard to locate that property in the system though since it would have gone pending in an earlier month (the BC stats are when the new title is registered)

    Totally possibly I guess, but you need a Canadian to collude with you to evade the tax and if you get caught it’s a 200K fine.

    If any foreigners are reading and would like to fund LeoCorp to buy up some uplands properties drop me a line. No guarantees I’m giving the control of the properties back to you though.. 🙂

  47. And I do think that a useful addition would be a chart showing the trend of sale price over BC assessment Agency valuations.

    Sure. Any particular region and housing type you would like to see?
    It doesn’t really tell you a lot though. At any given time it will tell you how much house prices have increased since BC Assessment’s estimate of values on July 1 of the previous year.

  48. I cant believe that 1218 St. david in Oak Bay just sold for 1.885 mil; 300k over asking.

    The definition of a bully bid.

    Just looked at the new listing on Nottingham, priced at only 1% over assessment.

    Not to worry though, on average Oak Bay properties are selling 20% over assessment.

    Oak Bay in its infinite accommodation to crap developers has allowed what appears to be an envelope home in the midst of a group of lovely 1930’s semi-bungalows.

    I don’t think the sentence “Oak Bay in it’s infinite accommodation to crap developers” has ever been uttered.

    These articles have been posted before so here are a few of them, but sorry I don’t have a lot of time this morning to summarize them all – there are a huge number

    Thank you very much, I’ll go through them in more detail.

  49. C’mon you have to acknowledge that everyone has an inherent bias based on their position and what they have to gain and lose. Perfectly reasonable to question it.

    Not sure LeoS. I’d say there are hidden and overt influences. When we pander to overt influence with a view to profit to the detriment of balance that is something I don’t respect. At its worst it is like Goop, promoting magic stickers based on lies.

  50. some of my best friends are business school professors

    Pretty much validates my view that “business school professor” is an oxymoron.

    False and oxymoronic. You haven’t actually looked at the educational backgrounds of the Sauder or Beedy business school profs have you – despite the fact that their CVs and publications are available online on the pages I posted? You don’t know much about your best friends – many have advanced degrees in mathematics and economics.

  51. If that is how you spent several decades that is really too bad

    C’mon you have to acknowledge that everyone has an inherent bias based on their position and what they have to gain and lose. Perfectly reasonable to question it.

  52. I never lied, but I sure never presented inconvenient facts or negative views.

    If that is how you spent several decades that is really too bad. Might have been better off at UBC, academic freedom and all.

  53. “Negative comments about the industry as a whole are OK thankfully”

    That’s good. Stick it to ’em, especially those foreign hucksters moving in on our territory.

  54. “…academic snobbery is alive and well.”

    Can’t accuse me of that RF, I ceased to be an academic exactly 30 years ago. And, in fact, some of my best friends are business school professors.

  55. Let me add, that in stating that Leo was writing like a RE agent, I had absolutely no thought of, or therefore intention to suggest, dishonesty. It is the case however, that whatever anyone writes is likely to be colored by their own interests. This I well know from having run a business for several decades during which rarely a day passed that I did not write some kind of promo or PR. I never lied, but I sure never presented inconvenient facts or negative views.

    I hear you CS. However I would posit that the difference is that I have no financial incentive one way or the other. If I downplay the effect of foreign buyers, or overplay it, doesn’t make a lick of difference to me financially.

    Being licensed has changed what I can say though. I can no longer comment negatively on any particular listings or agents. Negative comments about the industry as a whole are OK thankfully 🙂

  56. Tom Davidoff and Tsur are active, as are the grad students at the at UBC Research Centre for Urban Economics and Real Estate and Andrey Pavlov at the SFU Beedie School of Business (Specialization and Research Interests Real estate market modeling for the purpose of MBS pricing and risk management, mortgage prepayment and default analysis, impact of mortgage lending on real estate property markets) and the students working under his supervision.

    They’re just a bunch of symposium papers, unpublished ephemera.

    The list I posted was – not the links. I assume you don’t have trouble reading so maybe you were too tired to click them?

    Ex.

    Andrey Pavlov and Tsur Somerville
    Immigration and Real Estate Returns
    February 2016

  57. Bingo, no need to be snarky. Go talk to lawyers in the industry — it’s eye opening. It most definitely is happening in Victoria, just like it’s happening worldwide.

  58. “Exactly what you’d expect from a bunch of business school profs, to use an oxymoron.”

    …academic snobbery is alive and well.

  59. Tsur isn’t very active these days. The only economist doing serious research in housing is Tom Davidoff http://blogs.ubc.ca/davidoff/
    He works with Steve Saretsky on Vancouver issues, I’ll see if I can recruit him to turn some attention to the island as well 🙂

  60. “I don’t see why Victoria would have a draw as far as a place to dump money. ”

    LOL, just had a call from a business school professor in Miami who mentioned he’d read about our RE bubble in the WSJ.

    In Sleepy Victoria, Canada, a Housing Market Wakes Up

    And the fact that most iconic names in overpriced fantasy goods Sotheby’s (Oh and here’s another good example of the crap art these folks sell — it really does look like a dish of dog shit) and Christie’s have opened big offices to pimp our property to the world, obviously has nothing to do with the state of Victoria’s RE market.

  61. Oh come’n Totoro. They’re just a bunch of symposium papers, unpublished ephemera. And no real economic analysis, just investment advice, etc. Exactly what you’d expect from a bunch of business school profs, to use an oxymoron.

  62. “I don’t see why Victoria would have a draw as far as a place to dump money. ”

    Looks like there’s another one who just fell off the turnip truck. The lack of awareness is mind blowing.

  63. Again, it is going to be an unusual situation to purchase through a corporation.

    There would be the PTT on the initial purchase, no capital gains tax exemption and about 50% income tax on profits (as considered passive business income) and most corporate sales of real estate assets are not share purchases but asset purchases so the property transfer tax will be paid again upon sale.

  64. “Why would any foreigner bother with a corp for Victoria? ”

    Because they’d want to hide their source of funds (or cover their bases in case of new surprise taxes). There are other ways though.

    From that TC article about Canadian RE laundering loopholes: “where did you get the $20 million, how did you get it to Canada,’ he does become, I think, the nice word would be ‘circumlocutory.’ ”
    “various B.C. shell companies either incorporated or owned by Guo were used to invest the funds in various land and resource deals, according to legal filings. ”

    btw, in case you wanted to know, good article about Tsur Somerville from UBC:
    https://thetyee.ca/News/2015/03/18/Tsur-Somerville-Observer-Or-Player/
    Is Tsur Somerville an Observer or a Player? No peer-reviewed research from academic on Vancouver’s extreme unaffordability.

    (he’s changed his tune a bit from 2015)

  65. Generally not advisable to use a corporation as you eliminate the ability to access the primary residence tax exemption.

    by discovering one economist who has written three papers

    For someone who used to be a UBC prof you don’t google too good.

    Many published papers and profs lecturing on this in BC and Canada. In addition, a recent academic panel/round table on “Global Real Estate Investment: The Vancouver-China Nexus” and a summer academic panel on:

    Brahim Boualam, UQAM, “Cities in motion: Gentrification and local businesses”, joint with Kristian Behrens and Julien Martin and Florian Mayneris.
    Lu Han, U. of Toronto, “Do Financial Constraints Cool a Housing Boom?” joint with Chandler Lutz, Ben Sand & Derek Stacey.
    David Williams, Bank of Canada, “Credit conditions and consumption, house prices and debt: What makes Canada different?” joint with John Muellbauer and Pierre St-Amant.
    Jack Favilukis, UBC Sauder, “Out-of-town Home Buyers and City Welfare” joint with Stijn Van Nieuwerburgh.
    Yongheng Deng, NUS, “Estimating the Unofficial Income of Officials: The Case of China” joint with Shang-Jin Wei and Jing Wu.
    Jason Allen, Bank of Canada, “Macroprudential Housing Policies and Borrowing Constraints” joint with Robert Clark and Jean-Francois Houde.

    http://www.sauder.ubc.ca/Faculty/Research_Centres/Centre_for_Urban_Economics_and_Real_Estate/News_and_Events/ULE_Summer_Symposium
    http://www.sauder.ubc.ca/Faculty/Research_Centres/Centre_for_Urban_Economics_and_Real_Estate/Research
    http://www.sauder.ubc.ca/Faculty/Research_Centres/Centre_for_Urban_Economics_and_Real_Estate/Research
    http://www.sauder.ubc.ca/Faculty/Research_Centres/Centre_for_Urban_Economics_and_Real_Estate/News_and_Events/2016_Forum_Event
    http://www.sauder.ubc.ca/Faculty/Research_Centres/Centre_for_Urban_Economics_and_Real_Estate/News_and_Events/2016_Forum_Event

  66. If most of those purchases are in the core, wouldn’t the levels in the core then start to compare to what Langley and Richmond were at before the foreign tax?

  67. Victoria isn’t immune to money laundering – it happens here too. The examples don’t get covered as much in the press because Victoria is a smaller town – smaller readership, so reporters focus on big cities. Bigger problem in Vancouver though.

    Money gets laundered through RE all over BC. eg., this month:
    http://www.interior-news.com/news/nine-arrested-in-b-c-in-gambling-and-money-laundering-scheme/
    “Police departments in Abbotsford, Central Saanich, Delta, New Westminster, Port Moody, Saanich, Vancouver, Victoria and West Vancouver, as well as the Canadian Border Security Agency, were involved.”

    If you get to know some local tradespeople (yes from highly reputable companies) – they’ll describe some amazing jobs they’ve worked on because the work can be so outrageous. eg., one example of a guy with luxury estate – multiple pools, fountains, decks, bars, outdoor kitchens, etc etc – and he ended up in jail in the US. Other examples of homes being made into lavish wedding presents.

    More:
    http://www.timescolonist.com/news/b-c/battle-over-lawyers-money-laundering-loophole-shapes-up-in-b-c-1.10494796

  68. Unfortunately, I just don’t trust these foreign buyer stats. I don’t think they take into account foreigners buying properties via companies

    Possible. Although these things come with a cost so if someone doesn’t have to purchase via a company it’s unlikely they would. I do think that the province should expand the stats they collect and publish how many residential sales are to corporations rather than individuals

  69. I do believe it’s happening in Victoria as well

    Good for you? The stuff Vicbot posted is in regards to Vancouver. I understand Vancouver being attractive to invest in, I don’t see why Victoria would have a draw as far as a place to dump money. If it were I would have expected an uptick after the foreign tax (rush for other places to invest). It didn’t happen. In fact nominal numbers dropped in Victoria after the tax.

    I also find it funny how people always say, “Oh they use corporations.” With no info on the mechanics. It’s hand waving and “corporations”.

  70. Bingo — There’s so much foreign/dirty money in real estate and so many ways to hide where the money is coming from; it’s happening constantly in Vancouver, and I do believe it’s happening in Victoria as well. Vicbot posted a bunch of good links below for further info.

  71. Andy7

    I don’t think they take into account foreigners buying properties via companies?… which I believe is happening much more than people realize.

    Foreign controlled companies and foreign companies have to pay the 15% tax in Vancouver. In order to skirt the tax it’d have to be a Canadian controlled corp being funded by a foreigner. Totally possibly I guess, but you need a Canadian to collude with you to evade the tax and if you get caught it’s a 200K fine.

    Why would any foreigner bother with a corp for Victoria? There’s no tax to evade. Can’t get principal residence capital gains exception with a corp.

  72. Unfortunately, I just don’t trust these foreign buyer stats. I don’t think they take into account foreigners buying properties via companies?… which I believe is happening much more than people realize.

  73. Thanks for the well presented data Leo.

    I find it interesting the number of foreign buyers is essentially flat (regardless of supply). We saw total sales drop with supply dropping. So who holds off on purchases due to low supply? People moving up or downsizing?

    I also wonder if non-foreign out of town buyers are relatively flat month to month. Theory being that if someone has relocated here they’ll just deal with the limited selection and buy.

    Only people I know from outside Vic that have bought here are from the US or Ontario. I think most found a place to buy before moving.

    What happened in October? A few rich foreigners bought some really expensive properties? At least a few multi-million dollar places must have sold.

  74. @ Vicbot:

    “Like governments in Europe, situations like this are often resolved by 2 parties combining forces to hold the majority of seats.”

    I doubt whether the Greens have much of a future in BC politics since the Liberals decided to adopt the NDP platform. What credibility do they now have? Why would anyone support them? Maybe Christie’s devious plan was simply to give the Liberals who will be defeated in the new election time to sell their Victoria property before the NDP have a chance to prick the bubble.

  75. there are no academic RE economists

    Except for all the academics, many with economics degrees, working and studying here, for example: http://www.sauder.ubc.ca/Faculty/Research_Centres/Centre_for_Urban_Economics_and_Real_Estate

    I have little patience for generalized conspiracy theories myself. Generally obscures the less dramatic need for facts.

    Ha! Well done Toto, you busted a loonie conspiracy theory by discovering one economist who has written three papers more or less relating to RE in the last 15 years, namely, Tsur Somerville, at UBC’s Sauder Business School.

    But you know, when I was a full professor at UBC, I felt there was some qualitative difference between what I viewed as real subjects, such as economics or physics, and the rather less academic, not to say dopey subjects like Home Ec. and Commerce or whatever they used to call book-keeping and accountancy before was rolled over into a big name, globally competitive “Business School.” But I guess the name change proves that those Commerce guys weren’t such dopes when it came to PR.

  76. “Liberals won the popular vote (by a tiny margin).”

    The Liberals received 796,672 votes, or 40.36%; the NDP, 795,106, or 40.28%; the Greens, 332,387. Majority of voters rejected Liberals. We’re not a US 2-party system.

    It was a 3-way split. Like governments in Europe, situations like this are often resolved by 2 parties combining forces to hold the majority of seats. This is allowed in Canada too.

  77. @ Numbers Hacker:

    Looking for an economist to extrapolate the over abundance of statistics for RE for our silly place, so that someone such as yourself has someone to blame or raise grievances – will that make you feel better?

    Thanks for confirming what I said, that there are no academic RE economists even though RE accounts for 43% of the BC economy.

    From the sourness of your comment one might suppose that you have more than a passing interest in the RE industry.

    BTW, the facts/graphs/arguments on this board rank highly in terms quality and depth of discussion.

    BTW, I can make my own judgment of the depth of discussion here. Your depth of judgment duly noted.

    But, yes, Leo S’s graphs and charts are very nicely done. And I do think that a useful addition would be a chart showing the trend of sale price over BC assessment Agency valuations.

    Let me add, that in stating that Leo was writing like a RE agent, I had absolutely no thought of, or therefore intention to suggest, dishonesty. It is the case however, that whatever anyone writes is likely to be colored by their own interests. This I well know from having run a business for several decades during which rarely a day passed that I did not write some kind of promo or PR. I never lied, but I sure never presented inconvenient facts or negative views.

  78. Vicbot

    “the 1,127,493 British Columbians who voted for the NDP and the Green party—as compared to the 796,772 who voted for the B.C. Liberals.”

    Funny you chose to quote that. When I read the article I thought to myself ‘now who’s playing a petty game’. Not a single person voted for the NDP and the Green party. The Liberals won the popular vote (by a tiny margin).

  79. Well I wouldn’t count on greed driving them – more like anger, eg.,
    http://www.straight.com/news/931042/martyn-brown-christy-clark-bcs-worst-ever-premier
    “the 1,127,493 British Columbians who voted for the NDP and the Green party—as compared to the 796,772 who voted for the B.C. Liberals.”

    “It is actually my intention to try to pressure the Queen’s representative to do my dirty work, by forcing a snap election that I am doing my despicable best to achieve without wearing it,” the premier is saying without saying it.

    “I’ve got to be duplicitous—because everyone understands that’s just who I am—you would not be wrong to conclude that in offering my non-advice, I will essentially be taking Judith Guichon for a fool.”

  80. Vicbot don’t count on it. People can be bought in this province while still preserving fiscal responsibility that her core 35 to 40% want. The gofundme generation will just go to ever gives them more.

  81. Clark is going to screw the Liberals royally if an election is called – everyone can see the petty game she’s playing by stealing the other parties’ platforms (who in their right mind would trust her now).

  82. @ CS
    Looking for an economist to extrapolate the over abundance of statistics for RE for our silly place, so that someone such as yourself has someone to blame or raise grievances – will that make you feel better?

    BTW, the facts/graphs/arguments on this board rank highly in terms quality and depth of discussion. There is nothing remotely close to it in terms of transparency or clarity for the Canadian marketplace.

  83. Did the 2 amigos get played. Is there going to be an election call tonight? If there is, and there is a majority government after, Green screwed themselves royally. No official party status and no power.

  84. These articles have been posted before so here are a few of them, but sorry I don’t have a lot of time this morning to summarize them all – there are a huge number 🙂

    (“why did 211 foreign buyers pay the tax?” Because there’s always a % that do it legally or without loopholes. You might want to contact Christine Duhaime)

    https://www.theglobeandmail.com/real-estate/vancouver/out-of-the-shadows/article31802994/
    Kathy Tomlinson reveals how loopholes and lax oversight are making it easy for a network of local and foreign speculators to play the system, and, in the process, fuel the steep rise in Vancouver home prices

    http://www.vancouversun.com/news/alleges+Metro+Vancouver+homes+were+part+scheme+launder+money+embezzled+China/10926774/story.html
    U.S. alleges Metro Vancouver homes were part of scheme to launder money embezzled in China

    http://vancouversun.com/news/local-news/landmark-ruling-for-chinese-bank-in-b-c-cant-be-collected-against-vancouver-luxury-homes
    “Based on … routine anti-money laundering due diligence, CITIC Bank believes that Mr. Yan and (his wife) Ms. Gao disappeared from China,” legal filings from the bank say.

    https://www.thestar.com/news/canada/2017/02/15/watchdogs-refusal-to-name-canadian-bank-fined-12m-called-unconscionable.html
    FINTRAC

    https://twitter.com/cduhaime?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor
    Christine Duhaime Twitter (money laundering, fake student IDs)

    http://www.theprovince.com/technology/unlicensed+metro+vancouver+immigration+consultants+faces/11366025/story.html
    Immigration fraud
    • Canada and China are among just five G20 countries that don’t require professionals such as lawyers, real estate agents and dealers in luxury goods to determine who is the actual “beneficial owner” of the product or service being purchased.

    • B.C. is among the majority of Canadian provinces where corporate registry information is “insufficient to support the identification of the beneficial owner.”

    • Canada has one of the worst records for domestic cooperation, since a court order is required by authorities other than Fintrac, Canada’s financial intelligence unit, to get “basic ownership information” of assets.

  85. It’s interesting that there is no academic RE economists commenting on this blog. But then although RE accounts for 43% of BC’s economy there are no academic RE economists. How so? Perhaps because our selfless elites in Victoria and Ottawa are reluctant to have penniless professors poking their noses into the largest industry in Canada and the industry to which most of Canada’s noveau riche owe their fortunes. Better to leave analysis to the industries own beneficiaries.

  86. “Seems to me they (foreign buyers) just aren’t coming in great numbers unless they’re doing it in a way that is not shown in the data.”

    Yes, sounding more an more like a real estate broker (didn’t say you were one, not active, anyhow).

    The statistics show almost 5% of transactions to foreign buyers. That’s about 20% of new entrants (i.e., foreign buyers plus (local) first time buyers. And the foreign buyers are a largely new element in the market and thus really add to the hydraulics under the cheap-money-fired Trudeau property boom.

    Just looked at the new listing on Nottingham, priced at only 1% over assessment. See why now. Oak Bay in its infinite accommodation to crap developers has allowed what appears to be an envelope home in the midst of a group of lovely 1930’s semi-bungalows.

    Meantime, as the new home, (which will tower over its neighbors so as its owners can enjoy the view while blocking that of others) is being constructed, the neighbors are no doubt enjoying the sounds of construction, including the playing of radios all day long in contravention of the anti-noise bylaw, a bylaw contravened on most construction sites in Oak Bay.

  87. “Add in the fluctuations in demand from out-of-town Canadian buyers and you have a seemingly very unstable housing market in Victoria, prone to booms such as we’ve just witnessed and liable to busts, as experienced in the 80’s: not a happy place for first-time buyers. Indeed not a happy place for those many Victorian home-owners who had hoped to trade up from their condo or starter SFH.”

    Those denying an 80’s style bust are using the old “it’s never happened for decades” excuse are just sticking their head in the sand. It’s worse debt loads than 1980 when HELOC’s never existed.

    People have never borrowed their ass off like they have the last 7 years. They learned nothing from 2008 about how fast markets can get ugly now and Canada is a world debt leader and shadow bank lending.

    Interest rates heading up even marginally is a major deal and watershed moment in the investment world and what people do with their money. No wonder the Uplands is languishing, the rich guys are saving their cash not spending it in Victoria. Developers use other people’s money, like yours.

    Speaking of Uplands, another mansion taking at major hit. 2990 Beach Drive slashed $400K.

  88. “And why did 211 foreign buyers in May pay the extra tax in Vancouver if it is easy to get around?”

    Same Reason only a few people took out permits to reno their basement into a basement suite when it’s so easy to get around…

  89. I cant believe that 1218 St. david in Oak Bay just sold for 1.885 mil; 300k over asking. Have people lost their minds?

  90. There actually are massive loopholes in the system that are discussed almost daily by lawyers in Vancouver, professors at UBC & SFU, BC Supreme Court cases, California court cases involving Vancouver & US laundering, OSFI, OECD, and other researchers.

    Can you point me at some resources here? I have read some articles talking about possible ways to get around it, but I haven’t seen anything really conclusive. Also I find it difficult to believe that this would be happening in regions without the tax. And why did 211 foreign buyers in May pay the extra tax in Vancouver if it is easy to get around?

  91. “Assuming there isn’t some massive loophole for foreign buyers to avoid detection in this data, two things seem to be clear …”

    Great analysis Leo. I think that that statement says a lot though.

    There actually are massive loopholes in the system that are discussed almost daily by lawyers in Vancouver, professors at UBC & SFU, BC Supreme Court cases, California court cases involving Vancouver & US laundering, OSFI, OECD, and other researchers.

    With all those unbiased authorities stating their concerns, it’s very likely that the foreign buyer stats aren’t accurate, so there’s no reliable conclusions we can draw from them.

    eg., then we can’t say for sure that the foreign buyer tax had an impact on prices. (In fact, Hong Kong had to raise it to 30% to affect prices)

    I also agree that out-of-town buyers have a major influence, and the large % makes Victoria at risk for ups/downs based on the larger Canadian & global economies.

  92. Haven’t noticed Leo doing anything but giving the facts out in an easily understandable form for free and making some reasonable interpretations of the data.

    I also haven’t noticed that Victoria is particularly prone to booms and busts. It seems prone to appreciate at a higher rate than less desirable areas, but looking back into the recent past there have also been long flat periods.

    As for foreign buyers. In Victoria the majority seem to be Americans and the overall rate is less than 5%. I don’t think you can say they are 20% of “new entrants” if we have a lot of Canadians moving here from other areas of BC and Canada – which we do – and there are no stats on whether foreign buyers sell and rebuy in our market.

    I’m not sure if the rate of foreign buyer purchases is higher than in the past or not. That would be an interesting stat to know. My guess is it might be slightly higher given the weak Canadian dollar. And they can’t be predominantly buying up the high end properties if the average purchase price is about 750k.

    What is true is that affordability has declined in the last three years as prices rose quickly. Of course, the heart surgeon who owned a nice house in Uplands prior to the run up could sell and retire to the Okanagan now. And the successful business owner who owned a more modest home in Oak Bay prior to the run up can still sell and move up. And those that owned a modest home in Vancouver can afford an Uplands home now if they sell. It is those who don’t have equity who have been most disadvantaged in the SFH market.

    What does this mean? With a home ownership rate of about 70% it means that most British Columbians have equity. They may support measures that curb appreciation and create more affordable housing stock, but it appears unlikely to me that they would support measures that would erode equity or cause a crash. If the Greens and NDP don’t handle housing carefully majority support will likely shift back to the Liberals and an election might ensue.

  93. I would say that out of town buyers, particularly from Vancouver as well as the rest of Canada make up a significant portion of new demand.

    Yes, about 28% of the market is out of town buyers. Note that “buyer origin” stats are 100% independent of the “foreign buyer” stats. Someone could be a local buyer with non-Canadian nationality and vice versa. https://househuntvictoria.ca/2017/03/16/whos-buying-in-victoria/

  94. anxious not to discourage those well-loaded investors, money-launderers and sundry other crooks from abroad applying their suitcases full of cash to the purchase of Uplands homes

    How did you read that out of the stats? Whether they buy or not makes no difference to me 🙂
    Seems to me they just aren’t coming in great numbers unless they’re doing it in a way that is not shown in the data. There was widespread fear that the foreign buyer tax would drive people here, but it seems not to have happened. I support the foreign buyer tax to be extended across the province but I have to admit I doubt it will make much of a difference. Are foreign buyers having an impact on the market? Yes absolutely, I just don’t think they were behind our explosion in prices. If we had data back in 2013 when the market was dead I bet the percentage of foreign buyers would be roughly the same.

  95. Leo, you’re beginning to sound like a real estate agent, anxious not to discourage those well-loaded investors, money-launderers and sundry other crooks from abroad applying their suitcases full of cash to the purchase of Uplands homes that are stagnating on the market as prices exceed what seems reasonable or even feasible to a locally employed heart surgeon or successful small business operator. In fact, soon, the only locals able to buy at the top end may be realtors like Marko.

    In fact, it appears that foreign buyers are a huge factor accounting for something like one fifth on entrants to the market. However, we don’t know how many foreign owners are sellers. Also we don’t know what they are doing with their property while they hold it: keeping it mostly empty, as in the case of many homes it would appear in the Uplands; or do they rent them?

    Add in the fluctuations in demand from out-of-town Canadian buyers and you have a seemingly very unstable housing market in Victoria, prone to booms such as we’ve just witnessed and liable to busts, as experienced in the 80’s: not a happy place for first-time buyers. Indeed not a happy place for those many Victorian home-owners who had hoped to trade up from their condo or starter SFH.

    In these circumstants, it would seem probable that if the Greens don’t buy into any NDP proposals on housing market regulation in any near future BC election, their Oak Bay-Gordon Head representative will be thrown out with the unrecyclable rubbish.

  96. I dont think that first time buyers are the only source of new demand and not even the greatest source of new demand in parts of the city core. I would say that out of town buyers, particularly from Vancouver as well as the rest of Canada make up a significant portion of new demand. Correct me if I am wrong but the last stat i vaguely remeber is that about 20% of sales were to out of town buyers.