Rate Reversal

To no one’s surprise, the Bank of Canada bumped the overnight lending rate from 0.5% to 0.75%, the first increase in 7 years.   It’s a small jump, one that won’t make much difference to anyone’s debt obligations, but it’s a sign that the bottom is in for rates.   Despite various alarmist polls out there (no, an increase of $130/month in payments won’t make most Canadians “struggle”), the majority will be just fine with any conceivable increase in interest rates.   Thing is, the majority is also completely irrelevant to the housing market.  The important thing is what happens at the margins.

The banks wasted no time hiking their prime rate by the same 0.25% which means it sits at 2.95% (except the special flower TD that charges 3.1%).  That means all those HELOCs just got more expensive (the typical HELOC of $70,000 costs an extra $15/month now).   Same goes for every variable mortgage out there.   Like I said, not going to break the bank for anyone, but it’s a sign that the seemingly endless period of decreasing rates might be over.

For now though, even with a 0.25% increase in the mortgage rate, the majority of the about 80,000 monthly mortgage renewals will be coming off a 5 year mortgage, and will find that the deal they are offered (red line)  is still lower than what they locked in for 5 years ago (green line).  

The precipitous interest rate drop in 2009 was the reason our real estate market stayed stable.   The same house cost drastically less to carry and prices plateaued while incomes increased over several years.   The result:  improved affordability which stabilized the market.   This is why I believe our next correction will not look anything like our last two.

Now we see the other side of the slope.   Prices racing ahead, and interest rates on the upward slope too.   That will quickly drive affordability back into the danger zone which correlates with price peaks in Victoria.

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180 thoughts on “Rate Reversal

  1. Ah, well said everyone. I actually believe there’s no real way to argue that the market is slowing. The reasonable conclusion is that we are also nowhere near the bottom yet either.

    But 5-6 stats a day, whether they are 3% increases, or 4% decreases is ultimately meaningless. Even in a market of of our size.

  2. newhomeowner: “Or that price slashes totalling 0.05% of the market says anything about the market?”

    Well my friend, the only point to myrealtycheck is to look at the trend. It seems that you are fairly new to the blog but the trend of dropping home prices has been evidenced over the last several months, especially on the mainland.

    That .05% turns into: Average Change Amount:-46737.24
    In Victoria: Average Change Amount:-38363.21

    If the trend leans towards dropping prices then the message is invaluable for “new home buyers”.

    Hawk, Local Fool, John Dollar, Leo S. and others put out a combination of well reasoned, balanced arguements, hypothetical ravings, and supported links to try to educate a lot of young people.

    Maybe they have their own agenda, maybe not, but read the message, read the links and then roll the dice. If you base your decisions on Realtor news and VREB reports then you are basically asking a car salesman whether you should buy a new car. Buyer beware.

    Hopefully people take the time to review the information from everyone. It could prevent them from getting sucked into a falling market and getting devastated financially.

  3. Hawk

    You can use price slashes. I will use month over month prices on similar homes and inventory and throw in DOM as John rightfully pointed out.

  4. We need the days-on-market to rise significantly to call this market done.

    At this point the number of NEW listings coming to the market has been keeping median and average prices flat for the last six months. Inventory or the number of ACTIVE listings/Sales has remained well into a sellers market this year which should have caused prices to rise over the last six months.

    The key is the days-on-market. When the median DOM gets over 30 days then we’ll see start to see significant changes.

  5. Increased price slashes mean everything gwac. It means buyers are balking at paying high prices and are backing off. No brain surgery needed there.

  6. Your chart missed the news Local. Things change on a dime these days. Vic condos trending down 50% this month. Gotta stay up to date. 😉

    “Canada’s home sales fall most in 7 years, as Toronto market plunges”

  7. Broadmead inventory down to 10. 12 to 18 during the spring market. No inventory buildup yet there. Surprise that we are not seeing more inventory there. Anyone know about the other hoods in the core.

    We need inventory to call this market cycle done.

    BTW at the end of the day slashes and over the list mean nothing. Its all about inventory and sale prices month over month on the same type of property.

    http://www.vicrealestate.ca/broadmead-saanich-east-homes-for-sale.php

  8. Garden, you’re also out to lunch and don’t read my posts. I have stated many times this market is in a topping out process which takes many months, and buyer exhaustion is showing up with increased price slashes the last few months. Sales are down YOY as well, what else is there to deny ?

    I don’t cherry pick, I pick the core houses, and if I picked all of them in the VREB stats, ie; Langford etc my posts would multiply ten fold.

  9. You keep reading a few cherry picked stats, and your brain forms an opinion without you realizing.

    Agreed, so I’ll add another.

  10. But you can’t draw any reasonable conclusions about the market with just a few data points. If anything, repeated posts detailing a few slashes or a few overs are worse than nothing, because they can subconsciously mislead you. You keep reading a few cherry picked stats, and your brain forms an opinion without you realizing.

    I’m not a bull or a bear here, just advocating for proper, reasoned analysis.

  11. Yep, just “ravings” from a “clown”…. posted by a “new home owner” and a “real estate salesman”. Sounds like Trump calling every new fact “fake news”. Sad.

    Maybe go hang out at VV where everyone is an expert bull…shitter. 😉

    Canada’s home sales fall most in 7 years, as Toronto market plunges

    Sales across the country are down 6.7%, with the GTA leading the way with a 15% dive

    http://business.financialpost.com/real-estate/newsalertjune-home-sales-fall-6-7-per-cent-biggest-monthly-decline-since-2010-2/wcm/2c58ae82-092f-4707-a63c-03788229293a

  12. I read Hawk’s “ravings” because it is important to watch the price reductions. Not necessarily the price but the number of price reductions. He also garners a lot of information from many sources that keeps one up to date on events.

    If you don’t like reading about price reductions then you shouldn’t like those that post about properties that sell over asking price. They’re different sides to the same coin.

  13. 1504 Lynnfield Place in Gordon Head appears to have sold quickly. They were asking $1.1 M. Anyone know the sale price? So, an updated 3000 sq.ft. house on a 9000 sq.ft. lot on a quiet street still seems to be in demand. On the other hand, I hope 1743 Blair Avenue for $860K sits on the market for a very long time. There are stains on the kitchen ceiling and they wallpapered the cupboards!

  14. Newhomeowner
    I just wanted to comment on Hawk….how he could be possibly motivated to continually post the same pointless info again and again.

    He is a clown, every forum needs a clown.

  15. I just wanted to comment on Hawk. I checked the website he posted for Vancouver, the site that lists the price slashes

    http://www.myrealtycheck.ca/
    Average Change: -0.05% Up:311 Down:712

    Does he think people are actually reading his ravings? Or that price slashes totalling 0.05% of the market says anything about the market? Or is he just an automated bot for one of these websites?

    I’ve been wondering now for weeks who would possibly refer to a 3% price reduction(or in the case of his source:0.05% of the market) as a ‘slash’ or how he could be possibly motivated to continually post the same pointless info again and again.

  16. Yep. Halfway through the month and we’re at 3 sales.

    Listings in GH up or down from before? Nominal?

  17. 62 condo sales so far in the core, but it’s a Sunday, so more weekend sales will show up tomorrow. At that rate we would have 12o sales for the month (likely more like 130 or 140 at the end of the month). Way down from last year and 2015, but significantly above the 110/120 from the slow years.

    How about Gordon Head though. How many sales of all property types have we had so far this month?

    3

    Yep. Halfway through the month and we’re at 3 sales. Last July there were 21.

  18. Barrister: “You are always playing with your own money unless you are planning on declaring bankruptcy.”

    You’re absolutely right, my friend, we got off on a tangent from the original discussion on whether our friend should but 20% down or put less down and invest the difference.

    With rising rates I was explaining that the use of investment funds to pay towards the mortgage would only change his investment into one asset class that would be declining. He would undoubtedly have to do that anyways.

    You have certainly touched on the likely option for a lot of highly leveraged people when this bubble disintegrates further, though.

  19. CS, I honestly hope that you stop believing that “paper pushers” don’t work with their hands. My family has technical degrees, we all have worked in the trenches with people who manufacture things – in fact, both my spouse and I have strategy & hands-on experience.

    It really is a discredit to all the engineers out there (and dentists, doctors, project managers) who build things that actually work – like your bridges, Internet phones, and computers that you’re typing on. With our hands & brains.

    How many times have we had to argue in meetings, then face customers, then rip apart machinery and circuit boards and code to make stuff work. Gimme a break.

    It would be nice if philosophic musings weren’t used to discredit people’s hard labour & thought in the real world.

  20. Is that 61 sales for the first two weeks?

    For the first 16 days of July.

    Local Fool, I would have to get access to the Vancouver real estate board to do some spot checks on their market. So I can’t be sure what is happening in Van. I would suspect that it’s likely similar to what is happening in Victoria.

  21. “Ah yes those good old days when we still had a manufacturing industry. It was truly a paradise”

    But without the acid rain from the nickel smelter, we’d have no batteries for Toyota Priuses which so improve the quality of air where dwell, with uncallused hands, the symbol-manipulating, urban majority.

    In fact, we have as much manufacturing industry now as in the 60’s. It is only as a percent of GDP that manufacturing has declined sharply, as all the paper pushers in finance, government, healthcare, and education have multiplied with abandon.

  22. I drove through Sudbury in the late 60’s when air pollution was so bad it literally blackened the earth: acid rain, along with mining operations, stripped the land of vegetation, leaving 100,000 hectares of barren or semi-barren moonscape.

    Ah yes those good old days when we still had a manufacturing industry. It was truly a paradise

  23. Salmon Arm is a beautiful place filled with great, helpful and welcoming people.

    Naturally, That is where I grew up 🙂

  24. opps:

    You are always playing with your own money unless you are planning on declaring bankruptcy.
    It is not like a lot of American states where the bank is limited to going after the house.

  25. Leo S: “But once you commit to the $500k house it doesn’t really matter how much equity you have in it. If the market drops 50% you lost $250k regardless of whether you put $25k or $100k or $400k down on it.”

    Lol, true but like today’s kids, I wouldn’t be playing with my own money. If I paid cash, no mortgage, then I would be watching my money disappear. I could live with a $25,000 hit.

  26. “And what has happened to sales so far this July? They have fallen to 61”

    Noticing 15 to 20% of condos under $600K have slashed as well.

    Sounds like Toronto house tanking re-negotiating tactics John. Interesting indeed. Banks have finally hit their risk limits.

  27. Condominiums, unlike houses, are tightly intertwined with incomes. There seems to be a strong co-relation between prices and sale volumes.

    I don’t disagree, however, I’m curious what your opinion is with respect to condos in Vancouver. The prices there don’t seem to have that relationship, at least for the moment. So what gives?

    Speculation? Would that require a lot of it to overcome the fact that FTB’s cannot afford them, or are we arguing that the marginal buyer sets the price?

    Foreign money? I think this would have the same answer as 1, and I don’t know how much evidence there is that they are more or less the market in this shelter class.

    Downsizing? Could be. But then, where are the SFHs they are emptying? And who wants to overpay hundreds of thousands when you want to preserve that cash for your retirement? Why not go somewhere less expensive?

    Migration? Baaaaaah I don’t buy it.

    So if I believe that condos are, as you say “tightly intertwined” with incomes, what do you think is going on there? Is it one of the above or something else? And why does this intertwining appear to be holding here, but not there? Or is it? Just curious what you think…

  28. There have been some interesting things happen over the last month and a half.

    I had one auction where someone bid well over market value and the bank would not finance the sale price. The buyer went back to the seller and negotiated an $85,000 drop in the sale price on a $750,000 purchase.

    In another case I had the buyer come back to the seller and ask the seller to pay for closing costs and a cash payment. This is an interesting one as the bank was lending on the original sale price but the buyer was trying to negotiate a lower price afterwards. The bank lends on a value of $770K but the seller later negotiates a 20K kick back.

    Things are getting interesting out there.

  29. Last month the median price of a condominium in the core wiggled itself up to a year high of $384,250 with sales of 220 for the month.

    And what has happened to sales so far this July? They have fallen to 61.

    Condominiums, unlike houses, are tightly intertwined with incomes. There seems to be a strong co-relation between prices and sale volumes. Just a 5% increase in the median and we get a significant drop in sales volumes immediately.

  30. I would be tempted to go the CMHC route to protect my cash and then measure the depth of a correction/crash after the fact.

    But once you commit to the $500k house it doesn’t really matter how much equity you have in it. If the market drops 50% you lost $250k regardless of whether you put $25k or $100k or $400k down on it.

  31. @ Vicbot:

    “but our freedom of expression & creativity is one of our advantages.”

    Creativity is not entirely unique to us, and as the Chinese have shown, you can double and redouble the size of your economy in only a couple of decades without total freedom of expression.

    Our real advantage is our natural resources. Most of our industry consists in, or is dependent on, natural resource extraction. That is where we should be innovating and investing. Here, in particular we should be doing a better job of producing wood, more of it and better quality. That however will not happen as long as forest management is a Provincial monopoly.

  32. Deb, interesting to hear your thoughts on the Interior. I still hope you find a place to call home again here. Not saying this is your situation at all, but a friend who ran into some health problems had to move from 1500 sq ft to 500 sq ft apt, and she really transformed it into something beautiful – I was blown away by how much it felt unique – amazing what can be done with a bit of colour (eg., greens, blues), plants, a fountain on a balcony, personal pictures, paintings, etc. It’s like an inspiring refuge in the city.

  33. Being homeless, that is not having a permanent home after selling in JB back in 2012 (more fool me). We have been living in different places just to try them out. Penticton 2 months, Vernon 4 months, Salmon Arm 2 months. We have also returned to Victoria for 6 months in between these relocations to remind us what we liked in a place we called home for over 20 years.

    The interior is really wonderful. The further north you go the friendlier and less pretentious the people are. Salmon Arm is a beautiful place filled with great, helpful and welcoming people. We love it here but we won’t be staying much longer. Why? It’s so hot here! I alway thought I would love the heat, but also loving running and hiking it just doesn’t work for us. Others who like lounging by the pool, big lots and lots of room to play, I would suggest check out this little town. It is slowly growing and needs a few more good restaurants and coffee shops. The land is comparatively inexpensive and you are half way between big city Vancouver and the Rockies, you have to love that.

  34. Any thoughts
    I have $100k cash for a downpayment
    But living in the Island has been a major turn off for me specially the mindset and attitude
    With that said I have to stay for family reasons …

    So being self employed I was told my interest rate would be 7% with no questions asked
    And that would be for $275k max.

    But my question is should I wait for the market to cool down ?
    Just go get a regular ( Victoria Job Market brutal ) Job for 3-4 months to qualify for $500k instead ?
    Either way it’s gonna cost me , or invest that money into safe soft stocks ?

  35. Related to the negative side of cities: I agree we can’t focus only on the negative, but I don’t want thought control here where people can’t point out any of their bad experiences. We live in Canada not North Korea. It’s a slippery slope. Humour is also filled with the ironic side of the negative.

    Knowing both pros & cons saves people from making mistakes! They keep people balanced, honest, thick skinned, practical, realistic. When I read reviews on Amazon or TripAdvisor I skip to the “Average to Negative” because I want truth (and it’s been true!) I listened to a book critical of “financial advisers” in banks & it’s saved me money. I read LemonAid to buy cars.

    As much as I loved Stanley Park, Kits Beach & other beaches, mountain views & hikes (June/July/Aug), there were negatives: smog was brown & thick at times, the roadways were always crowded with traffic jams (due to bridges & endless condo towers), rain in winter was dark/relentless/soggy, etc. Condos were bought up by money launderers back into the 90s, and people shared stories. People warned me where NOT to buy or rent.

    Truth is made up of both positive & negative.

    If you disagree with someone’s negative feedback, then simply point out the positive, and disagree. You don’t have to attack that person for their negative experience.

  36. The agents are busy deflecting what’s coming with “happy family” stories while price slashes in top hoods stack up.. They choose to ignore the Toronto headline last week from the eastern agents : “Things just turned on a dime”.

    Funny how that is when your financial livelihood is at stake.

  37. 3Richard

    On a serious note I have to confess that there are days where I wonder if I should put the house up for sale at a ridiculous price and see if it sells. As my wife pointed out, Victoria seems determined to turn itself into another Vancouver.

  38. HAWK has got to me! I can’t take it anymore! He’s scared the bejebees out of me!….I’m selling! He and I are gonna become rental buddies! (First time I typed that it came out “mental buddies”!)
    It’s a 4 bedroom shit box bungalow with partial suite development (help I even have adopted his lingo!) and I’m gonna slash it till it sells!
    It’s on the border of that stuck up OB area, east Fairfield/Gonzales, can’t think for the life of me why I bought there, I guess I just like being pretentious! HAWK you win!…I need a beer!

  39. Went to the Moss Street Art walk today. Impressive display, from Fort to Dallas packed with people. Beautiful street and houses.

    The bears see overpriced old houses on tiny lots, I see happy families on wonderful diverse neighborhood.

  40. Luke: you can’t just call everyone who doesn’t share an opinion with you a troll!

    I don’t – he’s the only person I ever called a troll. Many disagree w/ my opinions and that’s just fine. (wolf- someone else called you that on my behalf one time when you were new here and no one really knew you – now we know better). I find him ‘troll like’ because he never seems to offer much of an opinion of his own and mostly just nit picks a other’s posts like a subversive person – seemingly with the intent of creating conflict, usually without offering much of an explanation.

    Application of the term troll is subjective. Some readers may characterize a post as trolling, while others may regard the same post as a legitimate contribution to the discussion. At first I don’t usually find his posts legitimate contributions. However, at times if I look into it further… then – though he may not intend it – I actually end up often w/ positive’s out of his ill -intention’s. Like when I mentioned some of those aspects of Toronto – like smog – I learned, while still present, the smog situation in TO is improving! Crime, while also omnipresent in such a large city – is also on the decline there. I also learned TO is home to North America’s busiest highway – that’s right, even busier than any in LA.

    I actually have him to thank for proving some of my opinions are correct, and learning a few tid bits in the process. For example, I’ve learned things through what he may have intended to be negative it turned out to be a positive. Like, when I learned the size of Vancouver Island was only 1/7 that of NZ or UK (which are very similar in size). I’ve often encountered people who say Van Is is about the same size as UK – boy are they wrong!

    So thank you, James Soper 🙂

    I think it’s a shame that there are folks on this forum bad-mouthing Canadian cities other than Victoria. That’s not the Canadian way. We should be displaying our pride and highlighting EVERY Canadian city and town. This is a beautiful country. It’s not a competition.

    Quite true Kalvin – so for me, lesson learned from here on – much as I love Victoria! Did I mention how awesome Victoria is yet? 🙂

    And – while we’re at it – let’s spare a few thoughts and prayers for our fellow Canadians in Williams Lake having to be evacuated due to those wildfires right now…

  41. It is the one thing about the island that bugs me..insular, superiority.

    Superiority complex.
    It’s ridiculous here.

  42. Manufacturing jobs are not returning to Canada.

    For manufacturing to thrive in a country, the country needs one of two things:
    1. Cheap labour and/or
    2. Unique skills to manufacture higher quality products than can be produced anywhere else for less money. Canada has neither.

    The last country that possessed both cheap labour and exceptional manufacturing skills was Japan in the 1970’s and 80’s. China is rapidly evolving its capabilities and will soon have both cheap labour and exceptional manufacturing skills.

  43. I grew up in Vancouver. Thought it was the centre of the universe. Moved to the Kootenays in my 20s to teach…it was a complete culture shock. Met the most amazing people and had so many experiences ( bears trying to break into our house when we were home)! Stories and friendships I will always treasure. And guess what many of those wonderful people had zero desire to live on the coast! Even Oak Bay does not appeal. Shocking I know!

    I love Vancouver Island and will likely never leave but I get that other places have good things and good people too.

    It is the one thing about the island that bugs me..insular, superiority.

  44. CS, following Germany’s lead is 1 option of many. There are things being invented now that will require new methods of manufacturing, new materials, new processes.

    Innovation is something that blossoms in open, creative environments. Engineers & manufacturers in China are good at copying but not necessarily producing something brand new. Of course this can change, but our freedom of expression & creativity is one of our advantages.

  45. CS: Yes, absolutely. Why not? I’ve worked with people who were born in BC, several folks from the island actually, and they moved to Toronto and love it. Two are practicing lawyers and just don’t see a future for their children on the island in terms of education and jobs. I really love Victoria, but it does have a serious drug problem. I’ve come across used needles while walking my dog and it really dampens my mood when I see that. There will always be troubles in paradise – wherever one finds it across this vast country.

  46. Laurentian University is great. My sister went there and went on to Osgood Law school. Said some of the best years of her l education were spent in Sudbury..great community spirit at the school. And we grew up in OMG Vancouver.

  47. “We should be displaying our pride and highlighting EVERY Canadian city and town”

    Including Sudbury?

  48. “But we have to find new “niche” markets where we can excel. That’s what every company”

    Can’t do that in competition with countries such as china that turn out twice as many engineers as the US but still pay little more than pennies an hour for labor.

    Global wage arbitrage has already destroyed much of North American and European industry. Germany prospers not by making stuff but by snapping together stuff made with cheap labor in Eastern Europe, Turkey and elsewhere. But we can’t all play that game. There’s not enough of it to go round.

  49. Spoken like a true salesman Rick. With rising rates and Trump about to be neutered, US dollar tanking, the North American economies are coming into a rough spot. Those who sold at beginning of the arc in the US clearly made the most.

    Just look at Toronto, 14% down in a few months or less. Who wants to be late to leave this party of drunks? Rick does.

  50. 18 months to go. Let the party continue, watch out Spring of 2019!

    If one accepts the premise that we are in the midst of a credit bubble, and further accepts that it’s a fairly advanced one, encouraging the “party” to continue isn’t particularly sage advice. Neither is extrapolating a timeline.

    People should be focusing on assessing the totality of their debt obligations, having a look at various stress scenarios, and eliminating or reducing asset classes which are suspected to be in that bubble. If you don’t and you’re heavily exposed, mathematics and gravity will do it for you.

  51. Interesting chart Hawk. It appears that all the bubbles have a rounding top period of 18 months plus with the exception of Thailand which must have had some dramatic event approx 1997. Looks like Canada and China might just be at the beginning of this rounding off whereas AUSTRALIA looks 4-6 months into it. So Hawk you may well be right but it looks to me both us and China have approx. 18 months to go. Let the party continue, watch out Spring of 2019!

  52. Surprise, surprise, looks whose credit bubble is the biggest. Not a good place to be #1.

    @crescatkevin

    Credit bubbles always burst. In what countries are today’s biggest credit bubbles? Here are three of them…

    :large

  53. Thank you Kalvin! I love Victoria with all my heart but the snobby superior attitude is prevailing and dishwartening.I recently moved up Island and I am shocked at the reaction of people in Victoria…they actually wrinkle their noses at the thought…..please…living in Canada is a privilege…many cities have lots to offer.

    Get over yourselves!

  54. oopswediditagain

    Yeah we viewed 10% down as hedging our bets a bit. We plan on being in this house for the long haul, and were behind on retirement savings.

  55. I think it’s a shame that there are folks on this forum bad-mouthing Canadian cities other than Victoria. That’s not the Canadian way. We should be displaying our pride and highlighting EVERY Canadian city and town. This is a beautiful country. It’s not a competition.

  56. Leo S. “….. whereas going for 20% down (assuming you have the money) is 100% guaranteed.”

    Hey Leo, excuse my arbitrary opinion on your conversation, but ……

    I’m definitely onside with your opinion on beating the market however I am not too sure about that 20% guarantee. Yes, it does save the CMHC fee but that’s $100,000 down on a $500,000 house. I guess, if for some reason I was forced to buy, I would be tempted to go the CMHC route to protect my cash and then measure the depth of a correction/crash after the fact.

    I guess, if real estate turned as badly as I believe it will, I would have to pony the money up later when the bank demanded said cash to renew, etc. In the meantime, the money could be earning at least 5%.

    Like I said before, the strategy is probably best during a declining interest rate environment and there sure isn’t too much room downwards and a hell of a lot of room up.

  57. “who’s against educating the poor? Not me.”

    Yes but the systemic weaknesses of US education make it harder for poor people to get ahead. (eg., allocation of local taxes, spending less per student than 2008, etc etc)

    I agree we need more manufacturing here, but the focus needs to be on newer tech, eg., number of coal jobs created is very very tiny compared to the opportunity in other sectors. This whole coal thing is symbolic and the coal miners are being used as pawns.

    I think it’s good that we’re elevating the standard of living in other countries with new types of jobs for them – they want to participate.

    But we have to find new “niche” markets where we can excel. That’s what every company does when losing ground in a market – they find new products to sell to replace the old ones. I had to do this constantly in my work over 30 years, and it can scale to the country as a whole too.

  58. @ Vicbot:

    I know that all software jobs aren’t being outsourced overseas

    No one said they were. But how many IT people work for IBM, Apple, MS, etc., overseas? How much of the high-tech industry that supports the chip fabrication business has gone overseas as Intel and others have off-shored much of their production? Even in the low-tech publishing world, most of of the IT work, key-capture, basic editing, typesetting, has gone to the Third World.

    “America” is not going to create an economic boom with coal mining jobs or by holding back education from its poorest citizens.

    The US, evidently is going to create some coal mining jobs, and lots of jobs fracking for oil. As Justin Trudeau’s more intelligent father said, with reference to weapons Canada supplied for use in Vietnam:

    “better dirty hands than empty bellies.”

    As for the education of poorest citizens, who’s against educating the poor? Not me.

    It will be Europe & China & Canada who’ll create these new technologies if the US keeps trying to revive old industries & holding its poorest back with low education standards.

    Better to have old industries than none at all. They pay taxes that support the elite institutions that do the critical research. Did you know that Trinity College Cambridge, an institution with a couple of hundred dons, produced more Nobel Prize winners than the entire nation of France?

    Thing is, if you offshore much of your IT and RandD and design, you destroy the incentive for poor boys (or rich) to strive for access to MIT or CalTech. Why bother, when Zuckerberg and his fellow Silicon Valley billionaires are off-shoring as many jobs as they can (Facebook was reported to be paying one dollar per hour to Moroccan editors) while lobbying to bring in more cheap Chinese and Indian brains on H1b visas.

    So no, don’t jump to conclusions. I’m not a Trump supporter. I suspect Trump is merely a fake people`s champion, his job to cut the white working class a bit of slack while the globalist project takes full hold.

  59. The weekend slashers keep stacking up, never see them on the weekend before, usually more post weekend and mid week. Market must be starting to really cool off.

    Prime Oak Bay by Willows Beach at 2399 Dalhousie St slashed $50K to $949K.

    3516 Plymouth Rd in Mt Tolmie slashed $80K.

    894 Currandale Crt a Broadmead border on it’s second slash down $80K.

    803 Sea Ridge Pl in Cordova Bay slashed $100K.

    There’s even a Bingo special in prime Landsdowne/ Richmond at 2890 Queenston St slashed $50K.

    Chop, chop, let’s hop. Make a low ball and make’em sweat. 😉

  60. Also agree with what Barrister, Leo, and Luke were alluding to, and also many others have said here on the blog in the past:

    Victoria’s core has a lot of people from other parts of Canada & the world – this is true of any retirement & tourist destination anywhere – US, Australia, Europe, etc. The locals have to compete with retirees from other cities, or migrants from Vancouver or up island or other countries (my neighbours are a mix of all of these). These people don’t always have to rely on 9 to 5 jobs.

    Exactly the same thing happens when people from Melbourne or Sydney buy places on Sunshine Coast in Queensland, or Whitsundays.

    Whether you agree or not, Victora’s core gets a lot of good press, and some of it talks about the wealth here, eg.,

    Oak Bay & North Saanich in high net worth (ranked #7 & #8 in Canada here):
    http://www.macleans.ca/economy/canadas-richest-places-2017/

    G&M calling it “paradise” in one article about the BC election, and with OB & Saanich also rated as some of the best places to live in Canada in MoneySense.

    That explains why people keep migrating here, which explains why Victoria has high house prices now. How that changes – nobody knows. There are always generational up/down cycles (30+year) in RE.

    btw, yes both Vancouver & Toronto are smoggy especially in summer when sunlight reacts with NOs & VOCs. OMG people in Victoria who’ve never lived in Vancouver disparage it all the time, but who cares – I loved parts of Van but acknowledge the awful parts too.

  61. CS, agree with some of what you’re saying but parts I disagree with:

    (a) Working in tech, I know that all software jobs aren’t being outsourced overseas and probably won’t because North America has always created new economic booms with new technologies – not replicating old ones (which is what they outsource)

    (b) “America” is not going to create an economic boom with coal mining jobs or by holding back education from its poorest citizens. As stated, all previous economic boom have been created with new technologies: cars, computers, cell phones, Internet, etc

    (c) Unfortunately a lot of people are worried about the decline of the American empire due to this backward-looking rhetoric. It will be Europe & China & Canada who’ll create these new technologies if the US keeps trying to revive old industries & holding its poorest back with low education standards.

    Canadian middle class has now surpassed that of the US, eg.,
    http://www.cbsnews.com/news/why-the-us-middle-class-is-falling-behind-canadas/

  62. Leo:

    To answer your general question, neither me or my wife had a job last year. But for your average 35 year old that is a important question. No job, no mortgage, no credit either.

  63. Agreed. It’s foolish to put 20% down

    I’m saying the opposite actually. Long run return of a balanced passive portfolio is about 7%. For less than 20% to make sense you have to beat the market, and very few will manage that whereas going for 20% down (assuming you have the money) is 100% guaranteed.

  64. My concern is what conditions such a correction would occur. Who cares if houses are 20% cheaper if you don’t have a job?

    Did you have a job last year?

  65. “makes sense to pay less than 20% down (and eat the CMHC fees) if you are earning more than 8% on your investments.”

    Agreed. It’s foolish to put 20% down unless one is trying to get away from the high-ratio category and thus qualify for a larger mortgage to buy a more expensive house (I guess this won’t to be true anymore if the stress test is expanded). The often quoted 6-7% investment return is average. People who know how to read a balance sheet and use Google can do better.

    Luke: you can’t just call everyone who doesn’t share an opinion with you a troll! 🙂

  66. Barrister, thanks. I feel, in a way, that I talked out of turn. However, when it comes to understanding the property market, it seems impossible to ignore the political as well as the economic dimension.

    Another thing we are attempting to offshore, of course, is the refining of bitumen. That is a change from the policy of an earlier generation, as I was told by a senior figure in BC’s Treasury Department when I happened to be seated beside him on a flight to Calgary. In times past, it was policy in Alberta to develop a chemicals industry to exploit the local hydrocarbon resources and thus build the economy. But no longer, apparently.

  67. “You’ve been posting price “slashes” claiming they are the sign we’ve reached peak the entire time prices have been going up. In any market there are going to be price drops. ”

    Bingo, you keep saying such and such a place isn’t worth that but then every place should be. Lots of similar shit houses have sold for $900K and I never heard any complaining from you. Now that they are getting slashed because they have no more suckers you make excuses.

    I’ve only been posting the slashes the past few months since they became relevant to an over priced market that the median SFH has flatlined since January as per John Dollar’s stats.

    The market has topped out regardless of VREB’s rigged stats and is now showing exhaustion of buyers, thus the large increase in price slashes.

    I know I will still have a job when the market tanks 20% and that’s all I care about, not the suckers who drove it up.

  68. “[Federal and Provincial Governments] … will protest more about rising interest rates than anyone else and will exert as much pressure as possible on the BofC to minimize any increases.”

    Only if they’re stupid.

    Why do we have low rates now?

    Because Canadian firms and governments off-shored and outsourced many, perhaps most of, our high-wage jobs in programming, manufacturing, research and design. We build new ships for BC Ferries in Poland. We buy fighter jets from the US. We have our bridges built in China, we export raw logs. Then we invite the world to Canada to replace our native population, thus ensuring a continual supply of low-wage workers ready to undercut the native work-force.

    Having thus created an unending recession, the Bank of Canada facilitates almost limitless money creation by the commercial banks, who have thus been enabled to reduce a large proportion of the population to debt slavery.

    Is that the kind of country that Canadians want? Do Canadians want a Prime Minster who says immigrants are more Canadian than those whose ancestors built the country and paid taxes to the government for generations and fought for the country in numerous wars? Or do they want a democratic government that serves all Canadians fairly and equally.

    If the latter, then we need a government that will rebuild out industries and protect our workforce. That’s happening, apparently, in America. Amazingly, American employers are finding that when the H2b visa immigrant quota is filled, there are still Americans available for work. That must hurt. What’s more, wages will rise, damn it. Keep that up and folks will be better off, demand will increase, prices will rise. Soon interest rates will rise whether the Fed or the BoC wants them to or not.

  69. I agree that both the Feds and the Provinces will be pushing to keep rates low. But that also might mean that the B of C will be too slow at raising rates which can cause a bigger problem in the long run.

  70. Remember Barrister, if the B of C pushes up interest rates one of the biggest loosers will be the Federal Government and some Provincial Governments. They will be hollering and whining about the huge rising debt cost, and which programs will have to be slashed. Collectively they will protest more about rising interest rates than anyone else and will exert as much pressure as possible on the BofC to minimize any increases.

  71. It will be more interesting if rates are pushed up another 2 points over the next two years.

  72. Interesting how a .25% increase in rates unleashes this panic in a lot of people. Hard to believe we were near 6%. mortgages just 10 years ago. That would be catastrophic now.

  73. I’ve been to TO for the first and last time and didn’t care for it – who cares?

    hahaha. Then don’t comment about things that you know nothing about.
    Quite simple.
    You’ve been to Toronto one time and feel qualified to tell people who’ve lived there what it’s about, and to tell me that I obviously haven’t been there lately. What the fuck do you know?
    Oh right, nothing.

  74. hawk

    Glad to see you think the market should tank at least 20% Bingo. With Toronto down 14% in a couple of months, 20% here seems very plausible before year end… for starters that is.

    What? You make no sense and you didn’t answer my question. I’ll answer it instead. For me to be interested in Sandover it’d have to be low to mid 500s. Would you pay 500s for that place? I suspect someone will be willing to pay low 600s, so it’ll never get down to the price I’d consider buying it at.

    So if and when prices drop, when do you jump in? What’s cheap enough for you? If the price drop on Sandover is significant to you, then why aren’t you out there checking it out to buy?

    You’ve been posting price “slashes” claiming they are the sign we’ve reached peak the entire time prices have been going up. In any market there are going to be price drops. It’s impossible to price perfectly. If price drops become the norm then that means seller expectations exceed what the market will pay. I’d expect that to happens around peak, but it hasn’t happened yet.

    I’m totally cool with a 20% correction. That would be extremely helpful for a lot of families. My concern is what conditions such a correction would occur. Who cares if houses are 20% cheaper if you don’t have a job?

  75. Same thing happen in 2008 LeoM. Construction just died for many years. What happened during the years to follow is a good roadmap to what could happen when the cycle ends this time. High end and further out homes will take a larger hit than modest core homes. Condos will also take a hit.

  76. I have one simple question for all the bulls that think this real estate party of huge yearly price increases will continue and then just plateau and stabilize in a couple years.

    What will happen when the building boom ends and all construction related workers are laid off?
    Direct and indirect construction jobs account for over 25% of living wage jobs in our region.

  77. Glad to see you think the market should tank at least 20% Bingo. With Toronto down 14% in a couple of months, 20% here seems very plausible before year end… for starters that is. 😉

  78. hawk

    1961 Sandover Cres in Dean Park still can’t get no love, relisted and slashed for a $90K total, now $699K.

    At what price would you buy that place? It’s pretty much original condition (including the roof) so it needs tons of money spent inside and out.

    Dean park is OK. Parts are really nice (lots of mature landscaping), but you are pretty much in the middle of nowhere. Not sure I’d want a view of East Saanich road either. Not the worst road to overlook, I guess, but it’s still a pretty busy road.

    1670 Dean Park road was a really cool big rancher (2500sqft) that just sold in May for 852K. Tons of potential with minor updates and a great yard. I’d move to Dean park for that house. Even at 700K Sandover doesn’t have the value. You dump 150K into it and it’s not as nice a place. That being said, I think 850K for 1670 Dean park was too much.

  79. or because you’ve never been off the island and still have an opinion on shit that you know nothing about.

    Looks like we have another troll by the name of James Soper – It’s clearly your own problem James. I’ve lived all over the world and travelled to every continent except South America (and of course, Antarctica). I’ve been to TO for the first and last time and didn’t care for it – who cares?

    Since you never contribute anything useful to any discussion on here, have no useful opinion on anything on this blog, and can only nitpick at comments I make negatively… I will pencil you down as a pathetic internet troll and will no longer respond to anything you say. You are just another miserable sad individual. End of story.

  80. Philip Cross: If Canada’s easy money party’s over, the debt hangover looks brutal

    Canadians have been borrowing record amounts, pushing the ratio of debt to GDP to what some consider a precarious level. Overall, our debt-to-GDP ratio rose to 354.5 in 2016, up 102 percentage points in just a decade.

    Our ratio of debt to GDP surged 36.3 percentage points in just the last two years as all domestic sectors borrowed more and saved less to sustain spending, even as low oil prices dampened incomes.

    The most visible impact of all this debt financing happened in the housing market. House prices in Vancouver and Toronto took off after the Bank of Canada surprised financial markets with a January 2015 cut to interest rates. Instead of triggering a cheaper-dollar export boom, the bank unintentionally sparked a housing bubble. From August 2011 to January 2015, house prices in Vancouver rose a modest 4.9 per cent, but after the bank surprised with lower interest rates, they surged 46.4 per cent. The comparable figures for Toronto were a 21.2-per-cent increase until 2015, and then a 54.6-per-cent jump.

    In his recent book The Rise and Fall of Nations, Ruchir Sharma, Morgan Stanley’s chief global strategist, concludes that the single most reliable indicator of periods of economic weakness was “the kiss of debt rule, which shows that a major economic slowdown has always materialized when a nation’s debt has grown more than 40 percentage points faster than GDP over a five-year period.” If he’s right, we’ve got a big problem: Canada’s ratio of debt to GDP rose from 294.9 per cent in 2011 to 354.5 in 2016 — an increase of 59.6 percentage points in the last five years. That easily surpasses Sharma’s threshold. And Canada, exposed as we are to large cyclical swings in export earnings and currency effects on our debt, should be more prudent than most about leaving ourselves too vulnerable.

    http://business.financialpost.com/opinion/philip-cross-if-canadas-easy-money-partys-over-the-debt-hangover-looks-brutal/wcm/75885fab-e40a-4fd8-aedc-c4251ac7340b

  81. ““It was like a flashlight shining in your eyes,” he said.”

    There have been all kinds of lawsuits in the States from the use of reflective glass. Not only is there the harm from the glare but the reflection can actually cause heat transfer to adjacent buildings in some cases exceeding the capacity of the adjacent building’s air conditioning system. Not only are there the costs of adding additional equipment to counter measure the increased heat load there is also the added cost of increased energy consumption.
    Many municipalities in the States don’t allow the use of reflective glass anymore.

  82. Interesting court case. A lesson to others.

    Wow…..I would never buy something that required neighbour approval. That is a 100% receipt for disaster. Covenants limiting height to preserve views are very common, but I’ve actually never seen something like this where the neighbour has to sign off on the plans.

  83. Yup, rates are a big risk when stretched out to 25 years for sure. And it was much different than I thought on shorter time spans under the new CMHC fees.

  84. Would be helpful to look at just the final result of the investments after 25 years, where you own the house outright in every case. Using your numbers and assumptions, Leo:

    Thanks, very interesting. The reason I chose 5 years was because that’s how long you can realistically guarantee the 2.5% rate on the mortgage. 25 years makes sense from a house ownership perspective, but quite unlikely that successive renewals will remain at that rate. Anyway, found it interesting that the CMHC fees make it less obvious to choose a lower down payment than I would have thought.

  85. Interesting court case. A lesson to others.

    A Tanner Ridge homeowner has been awarded $102,000 in damages after a neighbour built a home blocking her views of the valley, the ocean and the mountains in contravention of a restrictive covenant.

    Justice Elaine Adair also awarded Li Zhang $7,500 to compensate her for the “intolerable” glare created by the metal roof on her neighbour’s new home.

    The dispute between Zhang and neighbours Ben and Erin Davies, who live across the street from each other on Bella Vista Drive in Central Saanich, was heard in B.C. Supreme Court in February.

    “The lesson, of course, is that people should not unilaterally decide to ignore documents that have been entered and placed on their titles such as restrictive convenants,” said Zhang’s lawyer, Michael Hutchison.

    “This was significantly important to my client for her well being, and it reflected a recognition from the court that she had bought her property with expectations that were being protected by a restricted covenant.”

    The Davies were bound by the conditions of the covenant and proceeded to build in defiance of their obligations, he said.

    “From a legal perspective, it’s a useful case because it reaffirms the principle that restrictive covenants will be enforced,” Hutchison said.

    Zhang bought her house in December 2013 because she loved the views. The house was marketed with a brochure highlighting the views. Zhang, who is from China and has limited English, moved in with her two children in February 2014.

    In February 2015, the Davies bought their property and built their home, blocking Zhang’s view, especially on the main floor of her house.

    During the trial, Zhang argued that the Davies’ house was built in breach of a restrictive covenant stating that no house could be built on the property purchased by the Davies without her prior written approval of the plans and specifications. The Davies argued that the covenant was void and unenforceable.

    By March 11, 2015, the Davies had permits to build, but did not have written approval from Zhang. Despite that, they went ahead with construction.

    The Davies said they started construction because Zhang had the plans for a month — an exaggeration noted by the judge — and they were not sure she would ever sign off on the plans. They had a building permit, financing for the construction and trades lined up.

    “Even though they knew Ms. Zhang had not given her written approval, the Davies were not prepared to wait any longer to start construction,” said Adair.

    On June 2, 2015, Zhang launched her civil suit. Twice, the Davies tried to approach her to get her written approval of the drawings. Zhang put up a sign telling the Davies to stay away and contact her lawyers.

    During the summer of 2016, the sun shining on the metal roof created a strong glare inside the east-facing rooms from sunrise to noon, the judgement said. When the sun is shining, Zhang is unable to use the kitchen, eating area, dining room and living room. A real estate appraiser said the light made it uncomfortable to remain in those rooms.

    “It was like a flashlight shining in your eyes,” he said.

    The appraiser said the loss in value to Zhang’s property from the roof and the construction was $153,000.

    The restricted covenant was put in place to preserve Zhang’s views and it required the Davies to get written approval from her, Adair found. “The evidence established there was a practical benefit to her lot in terms of the view and the real estate value.” The restrictive covenant is valid and enforceable and the Davies’ house was constructed in breach of it, the judge concluded.

    In addressing the metal roof, Adair said homeowners may do something perfectly legal in using their property, “but if you cause an unreasonable interference with neighbours by doing so, you are going to be liable.”

    The Davies could have taken steps to avoid this situation, said Hutchison.

    “They could have gone to court and asked for the court to make an order releasing their property from the restrictive covenant. Then it would have been up to a judge to decide whether or not the value to Zhang’s property for protection outweighed the reasonable use of their property. The issue would have been dealt with before anyone spent the money building a house.”

    Hutchison said he expects Zhang will be pleased her position was recognized. She has no plans to move, he said.

    “It’s unfortunate. I don’t think the Davies set out with intention of harming Ms. Zhang, but they preferred their interest over hers.”

    ldickson@timescolonist.com

    © Copyright Times Colonist

  86. Now is the last chance to cash out big. Waiting for the new NDP changes is suicide. Nowhere to go but down.

    In British Columbia, real estate investors need to seek shelter

    “Just look out east, to Toronto. Since their government introduced 16 measures in April to cool the market, prices have fallen 14 per cent in two months. Sales are down 37 per cent, new listings up 16 per cent and active listings are up 60 per cent. This is a government influencing market affordability effectively and instantly.”

    https://www.theglobeandmail.com/opinion/in-british-columbia-real-estate-investors-need-to-seek-shelter/article35688341/

  87. The new CMHC premiums do shift things ever so slightly. We did 10% down with the previous premium of 2.4%, which would only make the premium $10,800 on that $500k with 10% down.

    Would be helpful to look at just the final result of the investments after 25 years, where you own the house outright in every case. Using your numbers and assumptions, Leo:

    At 5% returns:
    5% down – $253,976.62
    10% down – $250,104.64
    20% down – $256,288.22

    At 7% returns (more “likely” based on historical returns, IMO):
    5% down – $407,057.45
    10% down – $380,471.52
    20% down – $346,108.30

    At 10% returns
    5% down – $812,602.95
    10% down – $716,132.96
    20% down – $553,258.86

  88. @Garden Suitor The math would have worked out differently before CMHC hiked fees this year.

  89. Marko:

    Thank you for the numbers. Do you have any idea why it commanded such a high price? It seems a lot out of line with other sales in the area?

  90. Based on my calculations and assumptions, it only makes sense to pay less than 20% down (and eat the CMHC fees) if you are earning more than 8% on your investments.

    Assumptions:
    500,000 mortgage over 25 years @ 2.5%
    Options: 5%, 10%, or 20% down, ($25,000, $50,000, $100,000)
    Investment returns: Variable

    Starting principals and monthly payments are:
    5%: $495,000 @ $2,220.65/month
    10%: $465,500 @ $2,088.31/month
    20%: $400,000 @ $1,794.47/month

    After 5 years the balances are:
    5%: $418,950
    10%: $393,983
    20%: $338,546

    Then there are the investments.
    5% down: Invest $75,000 for 5 years (difference between 20% and 5% down)
    10% down: Invest $50,000 for 5 years plus $134.34/month (savings compared to the 5% down case)
    20% down: Invest $426.18/month for 5 years

    What’s better?: Depends on your investment returns

    At 5% investment returns, net balance after 5 years (mortgage + investments) is:
    5% down: -$322,698.10
    10% down: -$320,815.01
    20% down: -$309,562.77

    Winner: 20% down

    At 8% investment returns, net balance is:
    5% down: -$307,211.57
    10% down: -$309,766.65
    20% down: -$307,231.20

    Winner: Tie between 5% and 20% down

    At 10% investment returns:
    5% down: -$295,551.83
    10% down: -$301,469.38
    20% down: -$305,543.41

    Winner: 5% down

    Did I get that right? Seems the answer is a little more complicated than it first appears, and as far as I can tell, unless you are an exceptionally good investor it is better to pony up the 20%

  91. Leo S. “Not really. If rates increase to the point where it no longer makes sense to hold the mortgage then you pay it off with the investments.”

    … which effectively negates the diversification and puts it into a diminishing return. This would also be in addition to capital gains paid (hopefully) on the portfolio.

  92. Thank you Marko and Hawk for the price check on Despard; still a million more than I thought it was worth. Makes you wonder who thought it was worth 3 Mil.

    The seller paid $2.38 for this home at the asbolute bottom of the market in 2013 so obviously there is historical appeal to it.

  93. Thank you Marko and Hawk for the price check on Despard; still a million more than I thought it was worth. Makes you wonder who thought it was worth 3 Mil.

  94. I would have easily low balled these guys in the Uplands at 3055 Valdez Pl with a pool by Beach Drive with over half an acres versus that ugly box on .21 acre.

    They just slashed $200K off to $2.4 million. Make an offer and you’re almost 3/4 a million saved. Rich doesn’t mean you’re smart or have taste.

    848 Rockheights Ave slashed $50K to $849K, nice place too.

    1961 Sandover Cres in Dean Park still can’t get no love, relisted and slashed for a $90K total, now $699K.

    With the core median languishing for 6 months now, it’s just a matter of time til the price slashes really kick in bigtime.

  95. Vicinvestor,

    What basement are you referring to ? My ocean/city view apartment for a song is doing me just great as the daily price slashes continue. If I was that rich I would have much better taste and brains than to buy that ugly box. PT Barnum wins again.

  96. CS. I went to put my name on the list for he island 20 years ago about. It would have taken a decade or 2 or more to get to the top of the list. Island is amazing

  97. @ Leo S

    Re: Toronto

    “For those living and working downtown the city itself Is consistently rated highly on livability”

    Yes, I had a job just round the corner from Queen’s park and very much looked forward to living in the city: Lots of brick houses, like a English Midlands city that made me feel very much at home; polite, unaggressive drivers; lots of interesting residential districts. Our problem was affordability. Our OB bung would have fetched about $140 K and the cheapest house we saw within 10 km of the center of town was over $400 K. The cheapest houses in Rosedale and Forest Hill were $6 or 700 thousand.

    But amazingly, you can get a place now in what is surely the neatest district close to downtown, for a mere $14,276 plus $71,830 for the long-term lease on the land (well that’s if your on the list of 150 eligible people).

    https://www.theglobeandmail.com/real-estate/toronto/on-the-islands-the-single-best-deal-in-toronto-realestate/article34949164/

    Wow, I’d take that like a shot.

  98. “85 DOM and a $200K slash to get it done. Another rich bag holder in an ugly cold designed box”

    They priced it high to begin. Still a very healthy sale price & likely a huge profit for the seller. Hawk, the best you got is snoring in your basement suite dreaming of homes like this.

  99. I’m going to assume that the $800,000. mortgage was simply an example because your greatest risk wouldn’t be your 6 or 7% return; it will be increasing mortgage rates.

    Not really. If rates increase to the point where it no longer makes sense to hold the mortgage then you pay it off with the investments.

    The risk is only if rates increase to the point you can’t carry the larger mortgage and the markets are down so you don’t want to liquidate your investments to pay it down. Relatively low probability of that though.

  100. “1535 Despard – sold for $2.97 million.”

    85 DOM and a $200K slash to get it done. Another rich bag holder in an ugly cold designed box.

  101. Luke thanks I accept credit. I called Toronto an armpit and I also called a downturn in that shitholes realestate a few months back. Thank you for remembering.

    I lived there for a long long time. I have not met a person from Toronto who moved here who regretted their decision.

  102. What about Royal Toke after the medical weed growing “facilities” like Emerald Health.

  103. Hawk has a name for every shithole in this city,ie: CokeBay, and Golden Head.

    What’s the name for Royal Oak?

  104. so clearly others share this opinion.

    Hawk has a name for every shithole in this city,ie: CokeBay, and Golden Head.

  105. Oops … appears I ruffled some feathers today b/c I don’t care for big smoggy cities like TO.

    or because you’ve never been off the island and still have an opinion on shit that you know nothing about.

  106. Can anyone please tell me what 1535 Despard Avenue sold for; thanks in advance. It seemed way over priced.

  107. Oops … appears I ruffled some feathers today b/c I don’t care for big smoggy cities like TO. And, dared to touch on some controversial issues. Btw… it was Gwac who coined the phrase about TO – ‘armpit’ (sorry I stole that from you Gwac – but you should get the credit for that).

    Also, Rook – seriously – I’m not the only one who knows Langford and Burnside aren’t quite the best ‘hoods in the city… not about something I just devised in my head. I’m always careful to avoid talking negatively about Langford at work for ex. because it might offend people who live there – but sorry – truthfully, I find it really hard to think of anything good about the place, esp. with how they so carelessly developed it – they could’ve done a much better job. Someone else on here (not me) called it ‘Langhole’. Hawk calls it ‘Gangford’… so clearly others share this opinion.

    Trying to stay away from the battles. No point…

    I get it Gwac – you’re quite right… don’t offend the bears or dare touch on talking about controversial issues…

    A greater portion of people here not owing anything on their mortgages won’t hurt, but I really don’t know how much it would help. One thing’s for sure: we’ll eventually find out.

    Yes we will eventually find out, and I think it’s quite possible there will be some sort of correction. No one knows what that will look like though. I personally think: flat. To me, it does appear that this city has more affluence than average that’s not meant to offend anyone. Vancouver, for ex. appears to have more affluence than here. Even Rook said more luxury cars driving around. But that’s all about perception (and who know’s how they all finance this?). There’s a ton of down and out poor people here too, but it wouldn’t matter to them if a house cost $100k, they still wouldn’t be buying. Since we can’t find local stat’s on debt’s/mortgages/etc more updated than 2011, we don’t really have a good idea of what the picture looks like now.

  108. No one cares about government workers or mortgage free seniors, it’s the 10,000 plus who have moved here in the past few years that are related to the real estate construction industry that will have no job when this cycle all comes to an end, which it will. You aren’t running to Alberta if you lose your job with oil in the tank.

    As CS pointed out, the EU QE unwinding next year plus the Trump runaway train wreck will hit the wall with a huge thud.

    Ultimately it will be a mass credit crisis where the rates may be still low but the credit dries up and lending criteria tightens like never before. The experiment from 2008 clearly hasn’t worked.

    Credit market a bigger systemic risk than during 2008 crisis: Bank of England

    http://www.reuters.com/article/us-britain-boe-financial-stability-idUSKBN19X20G

  109. Ya, it’ll be very interesting to watch all of this. I just hope we all still have jobs at the end of whatever ends up happening.

  110. Local

    Demographics/desirability/type of workforce plays a big part in the depth and length of a downturn.

    Vancouver downturns are different from Toronto and Victoria is different from both based on the past.

    Vancouver seems to have a wait list that jumps in quickly after a downturn. Toronto is more speculative. Takes longer to recover. Victoria the large government workforce and older age treat things differently here with prices.

  111. oopswediditagain:

    Yup, $800k just a roundish, plausible figure. And agreed, this plan works much better in a low or decreasing interest environment.

    We bought a SFH in the core last summer and our mortgage (with CMHC) is around $575k, and with rental suite we’re sitting at mortgage+taxes at 19% of net family income. Obviously I hope that rates don’t go up too much so we can keep plugging excess income into retirement savings, but we’re relatively well positioned to weather some storm.

  112. Insulation is debatable. For instance, if Vancouver finally blows, the resulting effects will be all over the Province. It’s like I remind people, it’s not like an equity bust. It reverberates throughout an economy.

    A greater portion of people here not owing anything on their mortgages won’t hurt, but I really don’t know how much it would help. One thing’s for sure: we’ll eventually find out.

  113. Garden Suitor: “Also we can get into what happens if you invest”

    Fair enough, but I would be a hell of a lot more comfortable for you if you were doing this is a declining interest rate market. I’m going to assume that the $800,000. mortgage was simply an example because your greatest risk wouldn’t be your 6 or 7% return; it will be increasing mortgage rates.

    Good luck.

  114. Luke,
    ‘When someone can show me Stat’s that are detailed for our local area and not National area that would be more telling for what may be in store here…’

    Go look it up yourself if you think it’s that important. Or maybe you can find someone from the “crime, immigrant communities that don’t integrate, and cookie cutter nightmare ‘hoods” to do your bidding and find those numbers for you.

  115. “(and much of this being the armpit called TO full of smog, traffic from hell, crime, immigrant communities that don’t integrate, and cookie cutter nightmare ‘hoods)”

    Huh. I haven’t been to Toronto in a decade, but I found it to be clean, polite, friendly, very multicultural, and surprisingly unpretentious. The urban neighbourhoods had actual street life and places to go at night (unlike Victoria), and some really lovely old homes. They were anything but cookie cutter. Would’ve moved there in a heartbeat if the right opportunity came up.

    As for crime:
    http://www.cbc.ca/news/canada/calgary/crime-poll-mainstreet-research-perception-reality-1.3722834

  116. Have to assume Victoria is no different than the average.

    Victoria will be a bit different due to demographics. An older population and older people are less likely to be carrying a mortgage

  117. Luke,
    The naïveté is staggering that somehow because there are a lot of rich people in Victoria we will be isolated from the the rest of Canada in the oncoming financial crisis.
    That blunder aside, your little class system you have devised in your head with Langforders and Burnsiders below and everyone else above is baseless and foolish. Scoff inducing actually.
    Yes, there are more luxury cars driving around in this city than many in Canada. But I, being a regular folk making the average wage here in the city, know plenty…..pllllllenty of other regular folks making the same wage.

  118. oopswediditagain:

    Yup, but that $22k gets rolled into the mortgage over 25 years.

    I don’t think it’s that useful to think of how many years of gains that would equal, as years 1-5 of compounding interest on $80k lump is going to be very different than years 20-25.

    Also we can get into what happens if you invest the ~$350-400/mo payment difference between 20% and 10% down, but it’s still likely going to come a fair bit ahead if you go 10% down and lump the rest into the markets.

  119. 3Richard Haysom: “I agree with this analysis 100% I think Calgary is good proof of this … ”

    http://www.msn.com/en-ca/money/topstories/hobbling-out-of-recession-alberta-braces-for-effects-of-interest-rate-hike/ar-BBEjmaQ

    A survey released this week by the insolvency firm MNP Ltd. found six in 10 of Alberta homeowners polled were worried about the impact that rising interest rates will have on their finances.

    “Some people have been living on credit, unfortunately, to get by,” said Donna Carson, an insolvency trustee at MNP. “Some are back to work but they’re not doing the same thing they were before; some are not at the same pay levels.”

    “Calgary’s real estate market showed some signs of improvement in the last six months, when 10,300 homes sold, a 12 per cent increase over year-ago levels but well below pre-recession levels and the 10-year average, according to the Calgary Real Estate Board.”

    There were nearly 6,700 homes on the market in June, the highest peak in nearly seven years.

    “On the whole, the outlook would be reduced demand and lower prices,” Goatcher said.

  120. What might be helpful is knowing what percentage of houses have a mortgage at all in Victoria and how does that compare with other Canadian cities. The breakdown in various municipalities of mortgage free would also be helpful.

  121. Garden Suit0r: “Why put $160k down on $800k at 2.x% mortgage when you can put $80k and invest $80k for an avg 6-7% long term return in the market?”

    Just on the face of it, probably to avoid the $22000 CMHC fee. That would be be equivalent to 4 to 5 years of $80,000 invested.

  122. We’re in Calgary right now. More than a little hand-wringing going on over the interest rate hike. It’s yet another headwind that Alberta doesn’t need, say the newspapers.

    Weather is lovely (if you’re in the shade reading a book and drinking a cold one): currently sunny and 30.

    Hope all is well in Victoria-land.

  123. “prices plateaued while incomes increased over several years. The result: improved affordability which stabilized the market. This is why I believe our next correction will not look anything like our last two.”

    I agree with this analysis 100% I think Calgary is good proof of this, we are entering a third year of severe economic slump and actually declining wages and for all intended purposes the SFH market is holding steady, basically flatlined (curious term!). The condo market however is a different story entirely.

  124. equity-based housing markets are unsustainable

    That is probably untrue. It really depends on a lot of factors.

    I’d say the odds are that market appreciation in Victoria at above long-term average rates is unsustainable and won’t continue forever, but the market here is built partly on home equity and has been for quite some time imo.

    And look at places like Hong Kong, Auckland, Sydney, some East and West Coast US cities and much of Europe. Usually the houses get smaller as density increases and in the desirable places homes are either multi-gen, based on prior equity, or markedly higher priced per square foot and for the land.

  125. Local Fool:

    Some percentage of those insured mortgages are taking advantage of the spread between interest rates and average equity/bond market returns. Why put $160k down on $800k at 2.x% mortgage when you can put $80k and invest $80k for an avg 6-7% long term return in the market?

    We went with 10% down for our place and invested the rest.

  126. Or, like at least 70% of homeowners, and probably more SFH buyers, this isn’t their first home and they are using equity from a prior home to buy the next. Sometimes paying cash outright if they are moving from places like Vancouver.

    …equity-based housing markets are unsustainable. But yes, there’s no doubt that this is a factor, if not the largest factor – especially last year.

  127. In short, people can’t actually afford the prices relative to their incomes; they are using excessive leverage to bridge that gap.

    Or, like at least 70% of homeowners, and probably more SFH buyers, this isn’t their first home and they are using equity from a prior home to buy the next. Sometimes paying cash outright if they are moving from places like Vancouver.

  128. Luke: “They are not all that much effected by debt or interest rates because, esp. by now, they’ve built up so much equity many can weather any downturn easily. Or… there are the many wealthy people who have moved here from elsewhere with lots of equity,”

    I’m not sure where the core of Victoria stands regarding debt levels Luke but it doesn’t really matter when it comes to a “correction/crash” because the home value will tumble regardless.

    According to just one mortgage brokerage, Victoria stands number three in terms of “Top Producing Cities / Towns for Mortgages in British Columbia”. Hey, maybe everyone in Victoria went through them. Who knows. However, it does seem to suggest that Victoria got just as caught up in this market as the rest of Canada.

    http://www.superbrokers.ca/stats/canadian-mortgages/british-columbia/

    That would also suggest that they will eventually follow the same path as debt becomes more onerous.

  129. I’d say – Langford’s/Burnside’s of the world aside – there is a lot of affluence here, or that wants to be here, and I for one don’t blame them.

    That is a complete supposition and of little value for debate – it can’t really be confirmed or denied.

    However, if the affluence in this city is unusually high, it would appear to be challenged by the degree of extreme indebtedness that Victorians, and a few other cities, are taking on to buy houses. In short, people can’t actually afford the prices relative to their incomes; they are using excessive leverage to bridge that gap:

  130. iOS 11 has an AI based analysis of the current webpage and uses this to make suggestions of topics that are related. On this page (and others covering the Canadian market) it just suggests “subprime mortgage crisis”. 🙂

  131. And you haven’t been there recently…

    Last year, subway is still great for getting around. Tell me more about the horrific crime that Toronto is full of? And lordy, immigrants, who could imagine, especially with Vancouver & Victoria having none of that.

  132. The question of the future of Western economies is, as my Miami business school contact explained it to me, reminiscent of the mediaeval debate between the nominalists and the realists: does the wine and wafer of the communion service really turn into the blood and body of Christ, or is a wafer, always just a wafer.

    Following the crash of ’08, the bankers adopted the nominalist view that helicopter money really can be transformed into bread and wine, or luxury condos. So far, experience seems to confirm their belief. But are we now to see the miracle of the transformation of free money into real wealth exploded?

  133. Luke

    Again, we need local Stat’s to show more info. than National Stat’s. What goes on for almost 99% of people in Canada who live outside of the CRD doesn’t show us a clear picture locally.

    Agreed. >60% of the population is in Ontario and Quebec. Stats about Canada as a whole don’t represent BC very well.

    I’m not sure that I buy the affluence thing in Victoria. Could be true but with housing costs here I’d assume your average family in the interior has more disposable income than a family in Victoria (so a Victoria family is more likely to be in financial trouble).

  134. Yes thank you CS – a lot of affluence wants to be here – but many can’t… quite true. Some of us, who are very lucky indeed – are here 🙂

  135. Here’s a stat for you… Greater Victoria’s population of approx. 370,000 people is about 1.06% of Canada’s population of approx. 35 million.

    Again, we need local Stat’s to show more info. than National Stat’s. What goes on for almost 99% of people in Canada who live outside of the CRD doesn’t show us a clear picture locally.

  136. @ Luke:

    “there is a lot of affluence …that wants to be here”

    Really?

    You’ve got a sweatshop in the Pearl River Delta where hundreds toil at making paper flowers, or fancy toilet roll holders, or whatever, for the Western Market. You’re sick of the air pollution, the contaminated drinking water, the crowds and riots so you want to live in Victoria, described to me by a visiting student from Wuhan, in the words: “It is paradise here.”

    Thing is, how you gonna run your business to pay for your Uplands mansion when you’ve become a Canadian landed immigrant and are living here in “paradise.” It’s the same problem for most people. It’s not feasible for reasons of family, business or ineligibility for Canadian citizenship, or the necessity of filing a Canadian tax return.

    Sure you can buy a house here, but only as a holiday home, or a speculative investment. As a holiday home it may soon pall, what with the uncertain weather and the difficulty of long-distance property management. And as a speculation, well it looks like this is the time to cash out.

    And that student? Last I heard, he was doing what nearly everyone does, earning a living as best he could, in his case based in non-paradise Chicago, working for a US multi-national.

  137. Totally explains why there are so many sold signs and places being rebuilt in Gordon Head. I grew up there and know a total of 2 families still in the same house.

    Guess OB is different than Golden Head, sorry about that…

  138. What I’m saying is I think the mainstream nicer SFH area’s in the core are mostly established people who have been here for a very long time (and the lack of inventory shows that most aren’t leaving). They are not all that much effected by debt or interest rates because, esp. by now, they’ve built up so much equity many can weather any downturn easily. Or… there are the many wealthy people who have moved here from elsewhere with lots of equity, and hence added to the prices and demand (and many more than what the Stat’s on the last post show since after renting for just one month you become ‘local’).

    Totally explains why there are so many sold signs and places being rebuilt in Gordon Head. I grew up there and know a total of 2 families still in the same house.

  139. (and much of this being the armpit called TO full of smog, traffic from hell, crime, immigrant communities that don’t integrate, and cookie cutter nightmare ‘hoods)

    You’ve never lived in Toronto clearly.

  140. ‘Census Mapper’ has updated some of it’s info for the 2016 census… but unfortunately they still have much updating to do so we can’t yet see how some things have changed from 2011 -2016 w/ regard to mortgages/debt/being ‘house poor’ etc.

    It would be nice if some of this info. get’s updated soon – then we can get an idea if things have changed locally from 2011. From this 2011 data, for ex., we can see the vast majority of Victoria was doing just fine in ‘Shelter cost higher than income’ as mostly less than 5% of people are in trouble. Bear Mountain in Langford is up around 20% having trouble in this regard, but not so much in the core.

    https://censusmapper.ca/maps/36#12/48.4473/-123.3593

    This link shows those who are ‘house poor’ (concentrated in Langford/Colwood or Burnside/Fernwood) Has this changed much from 2011? We don’t yet know – I wish they’d update.
    https://censusmapper.ca/maps/75#11/48.4458/-123.3971

    Go to the upper right hand corner, and click on ‘Published Maps List’ to get more different types of info…. that even includes – ‘percentage of ‘haunted homes!’

    What I’m saying is I think the mainstream nicer SFH area’s in the core are mostly established people who have been here for a very long time (and the lack of inventory shows that most aren’t leaving). They are not all that much effected by debt or interest rates because, esp. by now, they’ve built up so much equity many can weather any downturn easily. Or… there are the many wealthy people who have moved here from elsewhere with lots of equity, and hence added to the prices and demand (and many more than what the Stat’s on the last post show since after renting for just one month you become ‘local’).

    Whatever goes on Nationally (and mostly in TO) does not necessarily mean it will be copied locally…

  141. CS – those National charts are interesting but here’s a question…

    How does talking about Canada as a whole (and much of this being the armpit called TO full of smog, traffic from hell, crime, immigrant communities that don’t integrate, and cookie cutter nightmare ‘hoods) correlate to Victoria? We don’t yet have updated Stat’s on debt for Victoria. We don’t have current Stat’s on Assets/Equity/wealth for Vic. I’d say – Langford’s/Burnside’s of the world aside – there is a lot of affluence here, or that wants to be here, and I for one don’t blame them. Numbers Hack illustrated a good point that some of the affluence generators will be turned away by the red tape, but all of Canada is full of red tape (so these types will be turned off by Canada).

    Victoria is a tiny portion of any National Stat’s so I’m not convinced any National Stat’s have much meaning for Victoria. When someone can show me Stat’s that are detailed for our local area and not National area that would be more telling for what may be in store here… for now we don’t have this information.

  142. The banks promptly lent out the free cash real cheap. Folks responded rationally — borrow at below inflation and invest in real assets, chiefly houses. The result, massive house price inflation that only incited further investment in housing, until even with dirt cheap money, people were spending more on debt service than ever before. But why worry? Short of cash? Borrow some more. Now, central banks have begun thinking like “Info.”: Time to get interest rates back to “normal.” But how?

    And that folks, is exactly what’s happened. And there is only one way this gets resolved – which is the same way massive consumer over-leveraging always gets resolved.

    The “nice” thing about our situation, is that it’s obvious. There’s really no stealthy, slithering snake that’s slowly coming up to chomp us while we sleep. The reality – and inevitability – of this is painfully obvious to anyone willing to look. Million dollar bungalows, bidding wars, 30% YOY increases are not normal. A “real estate economy” is a contradiction in terms. It’s not a “new paradigm”. There is no “permanently high plateau”. And for goodness sake, it’s not different here, and different this time.

    It astonishes me how some folks raise the same bullish arguments that appear in virtually any housing bubble anywhere, and have been repeated over and over – and over – since the 16th century. And the end result is always the same. And you know what? Once those people have learned, a new generation pops up that will think they are smarter, their financial acumen superior, their financial and policy tools more robust (but will be mere variants on old themes relating to leverage). You’ll warn them. It won’t work. And we do it all over again. In the information age, not seeing what’s right in front of you is just inexcusable.

    Could house prices here climb higher still? Yes, they sure can. But it won’t be because the real economy supports it, it will be because lenders are supplying desperate buyers with the same tool that we’ve used for centuries to grow land bubbles – leverage, leverage, leverage. It doesn’t matter how much you borrow – your house is worth more next year.

    I agree with Leo et al. When we have our inevitable deleveraging event, it won’t be like the others we’ve had. But we need to have it, and the longer we wait, the harder it will be to endure once it happens.

  143. CS: “While one feels sorry for those shut out of the property market by sky high prices, one begins to feel even more sorry for those who have not been shut out of the property market by sky high prices.”

    Well said CS. A lot of boomers who should have learned from previous housing booms and busts contributed in no small part to the financial stranglehold of the kids today.

    The copy and paste media spoon fed today’s smartphone addicted millennials just enough real estate pablum to seal the deal.

    There will be very few winners in this ugly unraveling but there were/are certainly a lot of contributors to the creation of the upcoming mess.

  144. “could you please re-post your gas vs. electric vehicle cost calculator?”

    Yeah, forget this uncomfortable business of interest rates, let’s talk about cars.

  145. “Fear of rising rates may cause a shift toward fixed (at the margin) which is in effect a larger rate increase for those choosing that.”

    If the fear is rational, locking into a higher rate protects against a future higher than higher rate.

  146. Following the mortgage-fraud-induced financial crisis, governments opted to save the banks, which they did by printing money, trillions of it, and lending it to the banks for free. The banks promptly lent out the free cash real cheap. Folks responded rationally — borrow at below inflation and invest in real assets, chiefly houses.

    The result, massive house price inflation that only incited further investment in housing, until even with dirt cheap money, people were spending more on debt service than ever before. But why worry? Short of cash? Borrow some more.

    Now, central banks have begun thinking like “Info.”: Time to get interest rates back to “normal.” But how? Folks have borrowed not only to buy houses but to cover living expenses, including fancy cars, outdoor kitchens, global travel. And the corporate sector isn’t in much better shape. Corporations may have invested for a profit, but with below inflation loan capital and a global recession, they haven’t been too successful making a return on investment. Think Tesla: cars, rockets, hyperloops, batteries and roof-top solar. But where’s the profit? Amazon has a profit but its very, very small. In fact, relative to market cap, the business sector has rarely been so unprofitable.

    So how’s everyone to pay back their loans as interest rates rise and Canadian RE crashes? While one feels sorry for those shut out of the property market by sky high prices, one begins to feel even more sorry for those who have not been shut out of the property market by sky high prices.

  147. Jamie Dimon, JP Morgan CEO, said:

    Unwinding QE will be “More Disruptive than People Think”

    “We’ve never had QE like this before, and we’ve never had unwinding like this before,” said JPMorgan CEO Jamie Dimon at the Europlace finance conference in Paris. “Obviously that should say something to you about the risk that might mean, because we’ve never lived with it before.”

    May be even more difficult in Canada than in the US:

    Source: “Canada Is In Serious Trouble” Again, And This Time It’s For Real

    Here’s another chart from the same source, which is kind of awesome:

  148. Fear of rising rates may cause a shift toward fixed (at the margin) which is in effect a larger rate increase for those choosing that.

  149. The banks wasted no time hiking their prime rate by the same 0.25%

    Of course they did. They gave us 0.15 of the .25 drop, then when the target rate bumps up they raise the full .25.

    Hopefully that’ll be reflected in bank dividends.

  150. I may have miscounted but it seems that we now have 19 houses for sale in the Uplands. Makes one wonder if the first sign of a price collapse might actually start from the top down? Not saying that it will but considering the rate of sales in the Uplands this year we might be looking at over a years worth of inventory.

  151. “Interesting that most banks increased their prime discounts on variable mortgages meaning no increase for new mortgages.

    They did not increase their prime discounts by 0.25%”

    Nice to see Bearkilla spin the BS as his slum shacks crumble daily.

  152. Expect 2 more hikes between now and January seems to be the general consensus. When new stress tests rules kick in, with 40% not paying any principal on HELOC’s I would expect them to be refused mortgages. That’s when the rubber meets the road.

    For now the psychological change that rates are going up is huge. Cheap money days is over and the media will remind you daily….and yes $130 a month is a lot of money for young families with growing child care costs and expenses.

    I remember those days well, lots of equity but month to month is tight as hell even with two decent incomes. Throw in 2 more hikes and it really hits the wallet for those on the fringe.

  153. you say that the next correction will be different,; can you clarify what it will look like in your opinion?

    I’d be guessing he means that it will entail an actual price drop, as opposed to a stagnation in prices. Both can be considered corrections.

  154. The elephant in the room is that Canadian rates are directly affected by the rates in the United States.
    It is far from the only factor but it seems to always go unmentioned by the B of C.

    Since I am always challenged by charts, you say that the next correction will be different,; can you clarify what it will look like in your opinion?