Regulation

At one time I thought condos and town homes were a step down from a house because the builders in the past built condos like they did apartment blocks. Boring, boring, boring units. But the upper end of the condo market have condos that are like living in a house. When you’re inside the units you can not tell if you’re in a house or a strata unit. And most of these complexes come with amenities like guest suites, libraries, work shops, exercise rooms, craft rooms, indoor pools, etc.

If you have a small family or you’re an empty nester, owning a condo is a better lifestyle than a house. Especially if you and your special someone like to travel on a moments notice. Book a cheap flight to Australia for a couple of weeks and you just have to walk out the door. After all isn’t that what retirement is all about – freedom. No kids, no dogs, especially no cats and you can be away.

You don’t have to be an introvert shackled to a pile of sticks sitting behind your laptop spewing bitter comments to the world. You could actually have friends.

957 Maddison St in Fairfield slashed $50K to $749K.

650 Langford St in trendy Vic West slashed $50K to $899K.

ICYMI, the Asians aren’t coming. When the big money that drove the bubble leaves, it’s all over.

Mainland Chinese Real Estate Buyers Continue To Dry Up

https://betterdwelling.com/mainland-chinese-real-estate-buyers-continue-to-dry-up/?mc_cid=f0b6a69550&mc_eid=1c71249e28#_

I agree with Leo.

3 words… “Limited Common Property” brings out the worst in people. Or AGM.

2 words… “Special Assesment”

Leo, it depends on your definition.

If you’re talking about quality of life in the most global sense, (longevity, absence of pathology, access to quality education and social networks) then the discussion is almost moot for it makes little difference whether I rent, own, or in the latter case the class of the accommodation.

If you mean it in the western sense of 2.2 kids (or for some people, zero), nice wife, 2 cars and a white picket fence, then we have something to tango with.

It’s a different type of living in attached vs not, the differences which to some people are trivial, to others – it would make them miserable, or more aptly, it could. And what do people prefer to live in, all other things being equal? Is that because it’s a “higher quality of life”? The bearer of the decision is the only person who can determine that.

If you had unlimited fiscal means, would you choose a townhouse, or a house? If a house, why? Why are those factors important enough for you to make a distinction between one or another? Would you be happier in a house? Why didn’t you buy a townhouse, save the few hundred grand difference and invest it? Or surely your kids could use it for college? You for retirement? Your wife for that trip of a lifetime she always wanted?

That last paragraph – rhetorical questions, of course.

I own a five year old Honda Civic and a two year old Tesla…….at the end of the day it is the same crap. Both have navigation, both have A/C, both have power windows, both are extremely reliable, etc. It’s not like I am sweating profusely, throwing out my arm cranking a manual window, and lost when in the Civic.

Same with accomodation….kitchen, bathrooms, bedrooms, etc. My kitchen is about 4x my parents’ kitchen yet my mother makes better dinners than I do. It’s not like the quality of life is better at my house because the kitchen is bigger.

In a SFH home you might have a 14×15′ master and in a townhome it might be 11×12’……..the extra few feet is not going to help you sleep better at night.

Is it nicer to have the 19th floor unit at Promontory overlooking the inner harbour versus the same floorplan on the 3rd floor starring into the Bayview? Yes it is and people will pay 150-200k more for the same floorplan on the higher floor but not sure if direct correlation between floor height and quality of life.

My family’s quality of life would be much lower in a townhouse.

How exactly?

I honestly doubt you have no idea the answer to your question, “how exactly”, but I’ll bite. If townhouses and detached were pretty equal, then most buyers given the choice would go with the former given the lower entry costs. Anyways…

One reason is the presence of a strata. Unless you have lived in one or known someone closely who has, you don’t appreciate the kind of stress and aggravation being part of one can represent. In the unlikely event your strata council is comprised entirely of reasonable people, you can still can be subject to all kinds of regular surprise assessments, especially if the building is older. Where those assessments are carried out, the terms of the contract are not something you have a final say in. You pay for whomever the strata chooses to do the work, using whatever material they choose for you. These assessments can also have the effect of making them not necessarily a whole lot cheaper than living in a detached.

Secondly, is sharing a wall with someone else. Someone could feel they don’t want to share a wall with a noisy neighbour, or have to watch their noise levels for the sake of the same. Why pay all that money to deal with that? Also privacy…kind of related.

Thirdly, I can (probably) do what I want with the structure of a detached. Repaint it a color of my choosing? Check. Fly a Trump or Cthulhu flag in my front lawn? Check. Park a boat in my driveway? Check. Any of that in a townhouse? Thank again.

Of course there are advantages too, but many will feel they don’t outweigh their disadvantages. It does come down to what a person values, I guess.

Nice one Hawk aka Jumpin Jack Flash.

“Can’t really replicate that in an urban village.”

Maybe because they don’t want to live around drunks and homeless addicts out til dawn.

“I grew up in Croatia in a one-bedroom condo. I went outside and played with my friends in the park….”

Yeah we know, for the hundredth time. Commie upbringing trained you to adapt to having less. I was born in a cross fire hurricane, and I howled at the morning driving rain, but it’s all right now, in fact, it’s a gas. 😉

Giving this a bit of thought I’ve had quite a few self-employed, retired, and work from homes clients over the years and interestingly enough the preference is to live in the core, not Duncan.

There must be desirability to living in or close to density, work aside.

One thing I love about density, in Europe particularly, is the social component. I spend a week in Zagreb every year visiting family and you have streets like this that go on for kilometers, it’s awesome -> http://www.navigator.hr/agency/wp-content/uploads/2016/03/tkalca.jpg

Can’t really replicate that in an urban village.

Likely, no generation coming after them will enjoy anywhere near as high a living standard and prosperity that they did, on average.

From a housing perspective; however, many other things have improved. The cheapest Honda Civic has way more features and safety than the most expensive baby boomer car.

Mike was dumping while the fools were buying his bullshit and his crack shacks. Fake bulls, just like most of the rest of them.

Here’s some stat’s updated from Stat’s Canada that show how we’re near the top of CMA’s growth rates in Canada.

However, Victoria will soon be back to the stagnant growth rates of the 90’s.

The most overlooked reason for our recent growth rates (’11-’16) is the ~30yr cyclical resource bust. Hence, why I’ve been pointing out the parallels with the late ’80s for years.
Ie. 70% oil crash of ’86 & ’14, rural to urban mass migration, Toronto topping, BC NDP taking the reins, loonie bottoming 69 cents now headed for high 80 cents, ..etc, etc.

The one big difference this time around is the vastly larger downsizing cohort, combined with declining household formation. That’s why I believe especially house prices will be in for a much rougher ride this time.

1991 vs 2016

@ Barrister

Young people move for jobs so if we redistribute the jobs to smaller communities like Duncan or Mill Bay that will allow for a much more rational creation of vibrant medium sized cities and towns while keeping housing costs in check.

Sounds good, but it contradicts Jane Jacob’s thesis that it is in densely populated urban centers that vibrant economic development occurs.

The Internet overcomes some of the limitations that distance imposes on economic interactions. Still face-to-face meetings are often a prerequisite to effective cooperation. The once much touted potential of telecommuting, for example, seems to have been overestimated.

However, if one were to link relatively small communities by means of high speed rapid transit, then population distribution among smaller centers might be productive. Then one would have the benefits of cheap residential land, proximity of homes to parks, beaches and mountains, plus easy interaction among economic actors.

But most rapid transit is ridiculously cost ineffective. Vancouver’s Sky Train, as I recall from the time of construction, required a subsidy of about $12.00 per rider. The only truly innovative form of transit that might have the right characteristics is the hyperloop. Because capsules travel in a vacuum and the energy required for acceleration of capsules can be recaptured with regenerative breaking, the system is highly energy efficient. It is also extremely fast, and therefore time efficient. The problem, of course, is the cost of drilling, which is why I believe Elon Musk’s reputation, in the long term, may depend largely on whether he can revolutionize the technology of tunneling, as he aims to do. With cheap tunneling, the hyperloop is the closest to Star Trek transporter technology that any of us are likely to see.

Take an objective look at the size of our downtown core. Should we be densifying when our city has not sprawled to a larger size as other cities?

Some sprawl would not hurt this city at all.

Our problem is that we have a badly planned city for our population size. At the tip of an island with only two main roads in and out. That makes our problem seem the same as Vancouver, but what really need are better roads and the core spread out over a larger area so that business can locate near intersections of major roads like Uptown has done. If our downtown business core was in Saanich instead of where it is now we wouldn’t have these severe traffic congestion problems and increasing air pollution from idling cars.

So sprawl might not be a bad thing for Victoria. Sprawl might even be a solution to our traffic congestion and reduce grid lock as we are all not trying to get to the same place each morning.

“Well either we get endless sprawl as the city expands into reams of single family developments up the island and out west, or we just cap the number of housing units available, and prices get bid up to a level until it reaches equilibrium and population flatlines. Sprawl replaces direct housing costs with externalities of commuting (worse health, lost time, environmental costs, transportation and infrastructure costs, etc), and the second is impractical.”

I agree with your conclusions. Implicit in your analysis is the assumption that Victoria will inevitably face a rapidly growing population, and so therefore it’s a choice of condos or sprawl to house them all. I think this is a bit of a false assumption, in that it doesn’t necessarily have to be inevitable. John Dollar’s actually got it right… if you limit both sprawl and densification then houses reach a supply/demand equilibrium and the population doesn’t grow any more. Yes, the average unit will be more expensive in that scenario but the average unit would still be a detached 1800 sq. ft. home rather than a 900 sq. ft. highrise condo. In the densification scenario, the average unit cost is less but the detached homes cost much more and quickly become out of the reach of anyone but the upper-upper-middle class. See: Sydney, Vancouver, San Francisco, Manhattan, Singapore.

The question becomes, is a growing population necessary? Every Western country believes so, because it allows us to enact the pseudo-ponzi scheme of driving up real estate prices to keep the citizenry happy. Have you ever wondered why the supposed ideal number of people for a community is always more than there is presently? That Victoria growing from 350,000 to 355,000 is wonderful and desirable and crucial, but staying at 350,000 is somehow not okay. Once Victoria hits 600,000 we will suddenly be told that the population absolutely must become 610,000 lest all hell break loose. If you think that an ever-increasing population is somehow optimal for quality of life, economic growth, and real estate appreciation, then you’ll be in favour of building more units to house these new people. If you build it, they will come. If you don’t build it, they won’t come. I’m not even arguing for or against densification per se; more than anything it bothers me that people accept densification as a fait accompli without getting the chance to examine whether the pros outweigh the costs… then they rightfully complain about housing costs without realizing that one thing directly causes the other.

Every single city that has densified has seen the cost of land go up exponentially. Yes, the average unit goes down in price (temporarily), because the average has been flooded by lower cost, lower utility apartments and townhouses. But single family homes themselves begin to rocket up even faster. Show me a major city where single family homes ever got cheaper during a phase of strong population growth. Tell me the price of a detached home in Manhattan–they don’t exist, but if there were such a thing, it would almost certainly be $50 million. Densification doesn’t make single family homes cheaper. It makes it so that the average unit is smaller, and people will still end up paying the same 35-50% of income on housing costs. This is how you get situations like Vancouver, San Fran and Manhattan where $4,000/month one-bedroom apartments become the norm. As a pragmatist, I know that people can’t help but follow the same predictable choices, so the odds are against changing Victoria’s fate and thus I bought a home to hedge away my future housing costs and benefit from this dynamic through equity appreciation. But as an economist and idealist, I strongly suspect that Victoria would be better off without the rush to densification that has deleteriously altered many formerly livable cities.

I don’t buy it. Let’s say we never build another condo tower in this city and never rezone anything to a higher density. What happens

The city just doesn’t grow. People don’t move here for jobs and prices only rise marginally like other small towns in BC.

What makes Victoria popular for young people are high paying jobs that they couldn’t get in most other towns in BC. They moved from rural Canada to the cities for jobs.

The government has stimulated the construction economy to keep us out of a recession. But you can not keep building forever. Eventually it ends and you are left with a high vacancy rate and depressed housing sales for a decade.

Jealousy will get you nowhere Luke. Can you tell them they need a few hundred grand more slash….. and sorry, I drink alone. I’m a depressed angry bear right ? 😉

Historically starter houses and newer condominiums in the city core were alternatives for first time home buyers with equivalent pricing.
That’s not the case in the last couple of years as starter homes and pre-construction sales of condominiums have been swarmed by speculators.
The median price for a re-sale condominium built in the last five years is $450,000 and a starter home in the city is $500k to $600K. A difference of some $50k to $150K
As a cross check you could also look at the residual value of a new house built in the city assuming constructions costs of $250 a square foot. Subtract the cost new of the home to get a land value under its current utilization as an improved property. Compare that to the price of a starter home in the same neighborhood that would be attractive to a builder looking for a lot to build on.

I’ll let you do the math on this one, and let you come to your own reasonable conclusion about the price of starter homes in the city being too high or too low relative to new homes and newer condos.

@ Mukluk

We have a higher rate of immigration per capita than any other country, and essentially 100% of those immigrants head to our urban areas. Thus it’s natural to expect immigration will drive up real estate prices for the vast majority of Canadians.

That is surely a pretty accurate assessment. However, I question whether the pattern of every rising population in a handful of major centers is inevitable or desirable. Most people take processes such as urban development as something organic and beyond human control, except on the petty and corrupt level of city planning. The result: every worsening urban sprawl, every growing traffic problems, every declining energy use efficiency and efficiency in the use of human capital as people spend more and more time engaged in the business of converting fossil fuels into atmospheric pollutants in the process of getting from their place of residence to their place or work, entertainment, education, etc.

Why is it that we have no university departments or even entire universities devoted to the engineering of the human environment? Why can we not have high density villages of one to ten or twenty thousand distributed among the Sooke Hills and connected to one or several commercial and business hubs by novel forms of rapid transit? Why do we have every increasing numbers of wires, dongles and cables hanging from wooden poles on virtually every street? Why do municipalities continue to dig up roads to fix sewers and water lines? The whole design of our cities is nineteenth century.

And it’s pathetic how we fail even to think about it. Instead, we insist that we have to go on sprawling outward from a few urban centers in the ridiculous belief that higher density living will inevitably be more costly — an obvious confusion of the effects of population and of density on housing costs.

Luke’s neighbor just slashed his crapbox $100K on 629 Beach Drive. The rich don’t want prime Oak Bay ocean view that he touts ad nauseum.

Funky Fernwood had to slash $30K at 1413 Vining St. Once was hot is not.

Same goes for the once hot Gorge hood at 3126 Earl Grey Street slashed $20K on a starter place.

A second Camosun hood place right by St. Mike’s ( with the best school in the world according to the pumpers) can’t catch a bid but are gnashing their teeth dropping it a mere $10K like his brother around the block.

Another 15 slashes city wide since yesterday from Langford to the Peninsula. Drip, drip, drip…..

“I’m a first gen immigrant, and it would be a heck of a shame if a country as large as Canada decided it was “full”.”

To be fair, 90% of Canada’s massive land mass is functionally unlivable (and many would consider the remaining 10% pretty intolerable for much of the year as well). Canada’s livable area can be thought of as a relatively long and thin band not dissimilar to Chile, with major gaps in the prairies.

Within that band, Canada is fairly urbanized. The vast majority of Canadians live in urban areas, areas that are increasing in population, population density and therefore real estate price.

We have a higher rate of immigration per capita than any other country, and essentially 100% of those immigrants head to our urban areas. Thus it’s natural to expect immigration will drive up real estate prices for the vast majority of Canadians. Whether we’re okay with that is up to the policy makers and the electorate.

It’s all on women’s lib and Keynes.

Also immigrants apparently. Only the humans that arrived in North America between 1492 and 1968 or their descendents are OK. The rest came too early or too late to be Canadians.

No one can honestly predict what will happen to the real estate market in the next 6-8 months, despite what they’ll have you believe. Since you aren’t under any time crunch to sell, if I were you I’d spend at least a few months looking for a great fit and a great deal. Greater Victoria has such a wide spread between house types and prices, so I’d give myself the greatest amount of time to find a house that is a real gem that suits me, for a good price.

Well I’m a dilettante I guess. Spouting off over low interest rates, excessive credit and extrapolative expectations. No, no, and no.

Someone better draft a letter to the MLA, because Poloz’s bumbling metamorphosis into a scary bird of prey coupled with Jeremy Rudin’s cheap brand of OSFI fascism is clearly a step in the wrong direction.

Livid. Wait till I get a hold of Planned Parenthood. And who makes cyclen anyways?

Recap of tonight’s discussion.

All the things wrong with our housing market

1) Pierre Elliott Trudeau
2) Justin Trudeau
3) Female suffrage
4) Birth Control
5) No Fault Divorce
6) Legalized Abortion
7) Budget deficits in the 70s and 80s

Should be easy to fix.

uote = CS sock puppet?

House price appreciation it seems generally agreed is related to the growth of cities. Canada’s major cities are growing, mainly through immigration, therefore immigration is a factor driving house prices.

However, Garth is probably correct in asserting that the recent highs in Toronto, Vancouver and Victoria are more the result of a mania than rising demand for space-limited urban housing:

As the bubble bursts, one in seven families in the GTA own multiple properties. Mortgage debt has been increasing by three times the inflation rate. The debt-to-income ratio among the majority of those buying seven-figure homes is 450% or greater. At one point earlier this year some developers estimated 80% of sales in new condo buildings were to people with no intention of moving in.

… Real estate became a cult, an obsession and then a disease. Speckers and flippers replaced the FOMOers as the driving force in markets in Vancouver, Victoria, Toronto …

“But if the fella she’s married to can walk out any time he takes a fancy to a twenty-something he works with at the office, then his spouse obviously has to look to her own economic independence. Hence, most university graduates today are female; many or most entrants to the professions today are female; and most women today consider career more important than family, which is almost certainly a factor, and probably the largest factor, accounting for the decline in Canada’s fertility rate.”

What is dissuading fella from walking out with the twenty-something? He can have a torrid affair and try and lie about it. If the helpless spouse doesn’t believe him, or has evidence to the contrary, she can file for divorce on the grounds of adultery. Or she can just put up with it, and he can have as many torrid affairs as he wants. Either way, he comes out a winner.

“If you were able to do the math, you would see that with a fertility rate of 2.3 and no immigration Canada’s population would have risen from 1884 to the present by only around three million, whereas, the actual increase has been almost eleven million.”

Ah, ok. So we just would have built fewer houses. Gotcha.

“But here’s the point, if marriage is more or less indissoluble, a woman is assured of economic support provided only that here spouse is able to work. Such being the case, she may be inclined to devote her main energies to producing and raising children.”

Hahaha, and you call my thinking on the subject basic?

If anything, it should have the opposite effect, as those previously trapped in fuck-free marriages, can fuck to their heart’s content with people they actually like fucking. Should lead to more babies, no?

I always loved sociology.

I’m not sure I’m following the nexus between those earlier policies and the particulars of the housing market today, other than it had a role in adding more people – but whether it was internally or externally generated, population growth may have ended us up in the same place. If there was no growth in the population, the economy would be on a long decline downwards which carries its own considerations. There are several western countries that have this issue looming. Anyways, what do I know about this…ehhh not much. I’ll leave it at that. 😀

They’re going to live in houses and apartments that would otherwise be available to Canadians. So I think there can be no question that immigration drives up the cost of housing.

That presumes a static supply of housing, does it not? And granted, immigrants add demand to the marketplace which in isolation is a price growth metric, but my question would be, are they responsible in whole or part for the Toronto/Vancouver bubble and the concordant inflation of their periphery markets (ie, ours)?

I would guess this mess was wealthier folks with established credit histories that accessed leverage, and poured it into RE en masse for greater exposure to rising prices. What do you think?

“but in general, my understanding is immigrants writ large have less purchasing power than non.”

Well, Canada is a cold country, so immigrants aren’t going to be living in shacks made from palm leaves. They’re going to live in houses and apartments that would otherwise be available to Canadians. So I think there can be no question that immigration drives up the cost of housing. Remember, Canada’s fertility rate has been on a decline since Trudeau I, from 2.3, i.e., well above replacement, prior to precious père Pierre to less than 1.6 now (the replacement rate is 2.1).

Now as an immigrant, albeit of more than 50 years, I defer to the native born on fundamental political questions, and there is a fundamental issue at stake here. Do Canadians want to be replaced by people from elsewhere in process ongoing for the past several decades, or do they want a less competitive market for jobs and housing allowing young people to buy houses and form families earlier, have more children and thus fully replace themselves?

Or do they, as Justin Trudeau evidently does, wish to replace themselves gradually, generation by generation, with people from elsewhere?

I suppose there may be something slightly primitive about those Canadians who want to see themselves and their fellow Canadians assured of an indefinite posterity. And there may be something rather selfish about Canadians who think that just because Canada is a democracy we shouldn’t expect to dictate national policy simply in our own interests.

Probably that’s what the Beothuks and the Tasmanians were saying to one another just before they went extinct.

The implication seems to be that if we want reasonably priced housing we should…

That would presume that immigrants coming to Canada drive up the cost of housing. I actually don’t know what the data on that is, but in general, my understanding is immigrants writ large have less purchasing power than non. While there are certain categories of immigration that I think are more contentious (QIIP, anyone?), on the whole, I question the notion of them buying 1000k+ homes.

Opinion is malleable to data, but I’m disinclined to look. Unfortunately it’s Friday night, my girlfriend is out and I’m at home sulking. Only having Absolut in the freezer isn’t helping either.

They are still high, but time is on the buyers side not the sellers. I can’t wait for December where hopefully 2/3 market factors will be in place and people wake up and are freaked. I.e., when OSFI and even higher interest rates are in place.

“I wonder if they’re biding their time to wait and see what the market does over the next few months. It would make sense. ”

Probably see a crash as likely if not inevitable and don’t want to do anything that would expose them to blame.

Hawk, I don’t think he minds my articles one way or another. Those who do can scroll the page and skip the lame jester suit.

Aside, that bird picture yesterday made me laugh out loud. At least when you flame another poster you have a warped sense of humour, a character trait to which I can personally relate.

😀

“Canadian housing braces for ‘biggest rule change of all time’”

Local, you’ll have to quit posting these damn internet articles. Intorovert is getting all worked up and is having a bad week with all the 20 plus slashes in Golden Hood the past couple months. It’s like the buyers see the price of landing dropping more. 😉

“Hawk: your slashes would be more meaningful if we knew what they got slashed down to. $50k on a $2mil house isn’t that big of a deal, but $50k on $500k is. Just a thought for you ”

Garden, can you point out the $2 million one with a $50K slash ? I recall the $124K slash in Oak Bay on the $1.2 million. You perma bulls seem to be exaggerating again.

Must be tough on the guts watching the shift when you just bought or think you’re sitting on the birdshit seat.

Ya, that’s the part I was interested in. I wonder if they’re biding their time to wait and see what the market does over the next few months. It would make sense. The market has been undergoing a lot of policy changes recently and soon to be, and performance broadly has been deteriorating.

Despite their impassioned plea for affordability, they still are accountable to the electorate, and probably don’t want to be seen as nixing a market where 70% of the population are home owners.

Thoughts?

Sounds like the only action we will see in the very short term is ending fixed term leases. That isn’t going to have much influence on the market. I guess it makes owning a rental marginally less desirable so puts some minute downward pressure on prices.

Housing affordability
“We are determined to make housing more affordable for everyone. We will deliver a comprehensive housing strategy to create homes for people in partnership with others, including increasing the supply of rental, social, co-op and owner-purchased homes. And we are examining options to curb speculation in B.C.’s housing market.”

” The government will move this fall to:
•Make housing more affordable by closing fixed-term loopholes on leases to close the door on unfair rent increases and increasing the stock of affordable housing around the province.”

Throne speech just now was pretty dearth on housing policy…

CS,

Japan is a bit different in that they have a crisis underpinned by ageing and restrictive immigration. They definitely had a bubble back in the 80’s, but not the subsequent demographic means to really pull out of it. Been fighting deflation ever since.

Not saying such a long term decline here is outside the realm of possibility, but again, I think they’re a bit of an anomaly.

@Introvert “Sweet, that’s still quite a bit lower than my current 5-year fixed rate.”

I know, right? My five year rate when I closed on my house Oct 2008 was 5.79%. To be fair, I had a 35 year amortization period…….. falling interest rates allowed me to blend and extend with lower interest rates, keeping my payments the same, which let me drop the amortization period drastically. So my initial payoff date of 2043 with lower interest and increasing my payments by 10% a couple times has resulted in a new payoff date of May 2029. Thank goodness, because who wants to be paying a mortgage into their 60s???

UVic students face housing crunch; funds sought to expand residences

http://i.imgur.com/uAoA7m0.jpg

And, showing how dead set against illegal secondary suites Saanich is:

http://i.imgur.com/qbBc9h1.jpg

http://www.timescolonist.com/news/local/uvic-students-face-housing-crunch-funds-sought-to-expand-residences-1.22530379

@ JD:

” Massive cities like London, New York or Beijing have land prices rise and fall.”

And in Tokyo, land prices are off 60% since the bubble top of 1990.

@NE14T I definitely see some value in that house. I agree with other posters on here that you may be overlooking the most important aspects of the house.
The lot size is very big and flat. Mature landscaping is a LOT of work, but can really make your house stand out if you put some time into it.
Ceiling height of 7’4″ – awesome. People with older homes with under 7′ have all considered at some point whether it would be worth it to dig out or raise their homes to achieve that. It’s not. My basement height is about 6’7″ with the ceiling and it feels fine for me at 5’6″, but anyone over 6’1″ has to duck under my 6″ beams.
Getting a suite put in for $35k seems ambitious… I had a pretty nice washroom put into my basement over the winter, and kept track of every single receipt. It cost me $25k almost to the penny. Contractor had quoted me $15k. There’s no way for another $10k I would have been able to install a kitchen as well (cabinets and appliances and flooring and plumbing and electrical… it alllll adds up) and tear down walls and redo the rest of the space. My carpenter was charging me $30/hr + materials and the cost of materials keeps going up (especially drywall with the new tariffs introduced last Sept). Plus I was super lucky even to find someone competent to do the work! Luckily my bestfriend who was building a brand new house hooked me up with her builder, who hooked me up with one of his subs. And the timeline? Wayyyy longer than originally estimated! 6 weeks? No, it was 3 months. There is a constant waiting game either for materials or for one tradesperson to come in and do their part. Framing is all up, wonderful, but then the electrician is busy all next week and the plumber says he’ll come in Friday and then suddenly it’s not until the following Wednesday, etc. “Oh and did I forget to tell you I’m going to Hawaii next week so everything is on hold?” Greeeeeat! Bottom line, if you can’t afford the house without the suite, then pass, or find a house that already has one. Another option is to rent one of the bedrooms to a mature homestay student. They pay ~ $850/mth. I have a friend that does that, and says her Korean student is pretty much never home and has gone travelling for a week in the summer and over the Labour Day weekend, etc. And when she is home, she just stays in her bedroom with the door closed all the time.

As for the kitchen and bath reno I agree with the other posters. Why is this necessary? The layout looks very functional, tons of cupboard and counter space. You have a dining room AND a breakfast area. Do you have any idea how much $500 in paint can do to transform the entire upstairs?? The floors are awesome, looks like oak everywhere. It would cost someone over $10k to put that much hardwood in their house! I actually love how the current owners have kept to the 60s theme by furnishing with mid-century furniture. (However ruined with the 90’s couch and the rugs.) Get rid of those ugly curtains in the bedrooms and get some faux-wood blinds from Home Depot and you have instant upgrade. If you want to upgrade the doors for cheap, simply replace the knobs! The one bathroom is huge in comparison to my main bath. But nothing HAS to be done right away. If you are worried about your friends or family being all judgy because your house isn’t out of the pages of “Modern Living” then your friends suck.

Bottom line, if this house was available when I was house hunting back in 2008, I would have put an offer on it.

We can’t afford 700k outright. I’d like to avoid renos if possible but I also don’t mind doing them if required. The windows will be a pain for sure and likely need replacing within a few years. You guys are correct in that we don’t need to reno the kitchen and bathroom right away. That would likely happen a couple years down the road once we’d saved up cash for those renos.

Local Fool – “If buying is something someone needs to do now – so long as you’re there over the long haul, you can properly afford your mortgage at ~6% and your expectations are balanced in terms of capital growth/loss, you may be okay. If I were a RE investor here today, I might look elsewhere. It’s when people lose that balance of perspective that they (and often the wider economy) get into trouble.”

Totally agree with your sentiments on this.

OK time to buy if you “need” to, have the financial capacity and have in mind a minimum 5+ year holding period.

IMO most first time buyers wouldn’t hurt themselves by waiting another 6-12 months, especially if they have been waiting a while anyhow. Whether prices are falling or not, it’s clear they are not shooting up month by month anymore. Even if prices don’t fall in the 6-12 month timeframe there is a good chance of encountering better selection/less competition.

I think overall it is a bad time to be a RE investor in Victoria (by this I mean putting money into purchasing new investment properties). That said I am sure astute RE investors are finding overlooked opportunities even in this market.

As always it is almost certainly a lousy time to sell your principal residence in hopes of buying back in later at lower prices. Some people did this successfully in the States, but most ended up waiting longer than expected and making less money than expected on the trade. Folks that have tried this in Victoria circa 2007-2008 are still waiting for the payoff and must be getting very bitter.

If you are financially overstretched by your current real estate holdings (investment or principal residence) it is still a good time to sell.

Canadian housing braces for ‘biggest rule change of all time’

People rushed to lenders Thursday to lock in contracts and get pre-approved mortgages after the Bank of Canada raised its overnight lending rate the day before.

On the horizon in terms of tighter credit regulations is a new rule from the Office of the Superintendent of Financial Institutions that would target home buyers with down payments of more than 20 per cent with a tough new stress test: they would have to qualify based on a rate 200 basis points above their contract.

“It could be the biggest rule change of all-time,” said Rob McLister, the founder of ratespy.com.

Consumers are also soon going to be hit by increasing rates on long-term mortgages which are priced based on government of Canada bond yields. The best five-year fixed rate from a broker for an insured mortgage is now 2.48 per cent and a typical discretionary five-year bank rate is up to 3.04 per cent.

http://business.financialpost.com/real-estate/after-rate-hike-canadian-housing-braces-for-biggest-rule-change-of-all-time

It won’t be a fixer upper anymore if you put the money and time in to fix it up. If you can afford 700k is there something already fixed up with a suite in that neighbourhood? Renos aren’t super fun to live in.

If you are thinking you’ll stay long term and the time and effort to reno is worth it keep in mind that those garry oaks might impact your light and garden space. And those single pane original aluminium frame windows are not energy efficient and not fun to live with in a high humidity climate during winter – you’ll probably want to replace them at some point.

Also, you don’t need to reno the kitchen and baths right away – only the suite if you need it for income. Maybe a dishwasher if there isn’t one though.

“If interest rates were to go to 5 percent or more how likely is it that a family making say around $100,000 a year is ever going to be able to pay back a mortgage of half a million dollars in their life times. ”

I know of a couple of families in the just under $100K range that are paying below rental costs on their mortgage and one spouse has a second job just to afford the kids and their growing costs.

I don’t think some on here grasp the costs of raising a couple of kids these days, especially if they excel above the average in sports or music, etc. I know for a fact if the rates push their mortgage up anywhere near $700 to $1000 a month they would be selling ASAP.

Lots more price slashes the last 24 hours with a couple relists with small or no change that should have sold with their prime condition and hood. Shows some sellers are in denial that the market is shifting.

Lot sales and prices are an indicator of future construction, jobs and the economy.

If we look at vacant land sales in Langford and Colwood, that would be rough indicator of what we may be seeing in six months to a year from now.

Primary Year Vacant Land Sales, Number of
2007 65
2008 32
2009 50
2010 37
2011 26
2012 22
2013 47
2014 45
2015 42
2016 59
2017 15 (projected at 22 for the year)

As I’ve said before, it is too costly to build a home and make a profit on the sale if you don’t have a bump in house prices during the construction period. Without that bump, you’re just working for wages.

@ Barrister

“We need to learn to play nice or the internet Gods will strike us down.”

Or at best, house hunters will conclude that this is a site mainly for sore flippers and speccers, thus distracting attention from the undoubtedly good information that the pros. have to offer, and the comments of the earnest students and observers of the market.

@ Ash:

“Leo posted an affordability chart some time ago. It showed Victoria is not immune to the real estate cycle, but it also showed that affordability gets worse at each peak/trough than the last”

Wrong. It also showed that affordability got worse at each peak/trough than the last. What the future holds no one knows.

If rates don’t rise substantially, are you still anticipating a reversion back to pre-2008 prices?

Luke, it sounds like Ash has you predicting pre-2008 prices? But I can’t remember you ever saying that?

Local, I agree with a lot of your points. But some of what I’m hearing is reminiscent of a previous poster named “info”. That Canada didn’t get the correction it deserved in 2008, that we were cheated out of a good cleansing, and therefore the market has been artificially inflated ever since. But how long can one hold on to this notion? If rates don’t rise substantially, are you still anticipating a reversion back to pre-2008 prices?

“Clearly a sign of impending doom. Nothing says crash like a labour shortage.”

Just like in 2008. Projects/condos get cancelled,investors pull money and layoffs kick in all the way down the chain. Must be a couple of Trump University grads who skipped out a lot.

Clearly a sign of impending doom. Nothing says crash like a labour shortage

Ash,

I can say it helped me to recognize and understand things I didn’t before. It’s like a clarification, I suppose.

Understanding fundamentals and using them to make a market prediction are separate things, IMO. Leo, I think, has explained that a few times, in response to my crowing about fundamentals – if were all about fundamentals, predictions would be easy, and bubbles impossible. Clearly there is more at work.

So what gives with Victoria…in my view? There’s a few things, but most of them actually have little to do with the city itself. I don’t believe the real economy has fully recovered from 2008. Central banks flooded the world with liquidity, and while it has been successful in achieving price recovery, I don’t think that equates to market recovery. In other words, today the prices of certain asset classes are artificially inflated relative to where they should be.

Canada has done the same liquidity easing, and the price of debt became equal to or less than inflation. In 2008, the RE market in Canada began to correct from its ascent that began in ~1999, but several interventionist policies (among them, extended amortization periods and a large drop in interest rates) were put in place and values began to rise again. That IMO, had an enormous impact on Canadian psychology – if 2008 steamrolls the mighty US market but ours hiccups – what could possibly stop it?

People started to notice – hey, RE can give me risk free, capital gains free returns that I cannot get in the market right now, since yields are so low. Then the oil bubble burst, and rates here went down further. That’s when RE excitement started turning into mania; add China trying to move their money to a safe haven and voila – you have the classic makings of a bubble. Except now, there’s not a lot of tricks left that can reignite this market much more.

The only thing left is more leverage – and regulators know this. They also know what’s going to happen if it continues unabated. That’s why you’re starting to see major policy changes.

For Victoria specifically, there are certain qualities it has that are desirable to some Canadians, so it will probably always command a premium over Winnipeg. Victoria is also growing, which will cause SFH’s in some areas to become more expensive relative to incomes and greater density will be required. The latter is another basic principle. But that is not a platform for unabated price growth, to a point where virtually no one can afford it. A sustainable market needs both low entry and high exit points.

What is misleading many people in this country is that the expansive period of this credit cycle is among the longest ever seen globally, which is causing people to either forget about the principle of mean reversion, or they think it’s somehow been sidestepped. It hasn’t, but that notion is almost inconceivable now.

Victoria real estate is just like any other market, and is subject to the same fundamental laws, variances and vulnerabilities as others. The only unknown is human psychology – and that changes on a dime. I don’t know what our market is going to do next, but in the short to medium term, I’m not bullish.

Thanks for the question, and your time.

First the restaraunts are shutting down and now city work projects shut down due to lack of flaggers. The kids aren’t alright, they’re leaving town. Perms bulls think bubbles never end. This one will be like a historical hurricane.

https://www.cheknews.ca/flagger-shortage-capital-region-johnson-street-bridge-closure-postponed-due-lack-crew-availability-364410/

We need to learn to play nice or the internet Gods will strike us down.

@Anna

Potentially increased net-worth via RE. A home owner’s net worth would be calculated via value of assets against liabilities. Strong growth in housing prices in the last few years would have had a positive net effect on the former, assuming the equity wasn’t extracted.

In his case, the inflated price of the asset itself does nothing unless he sells it and given that’s likely his sole property, it does little for him other than hike his property tax and insurance.

It just depends on your particular situation. I’d rather do away with the liability of a RE holding at this point and count on managing liquid investments and a few other hard assets. Although…that viewpoint is certainly changeable depending on market conditions. 🙂

Yes Intorovert, fake charts from the real estate boards and well known financial websites. Those Toronto owners just found out the cat ate the bird seat. 20% = OUCH.

http://onjacksonstreet.com/wp-content/uploads/2014/02/cat-eating-bird.jpg

… if the recent small surge in Vancouver become just a slight bounce before Vancouver SFH prices follow Toronto’s plunge, then Hawk’s chart will be something that all the bulls will be wishing they’d paid more attention to.

No, nothing can make me wish I’d paid attention to FHawk’s News’ tired and unoriginal charts that he copy-pasted from some other desperate renter, somewhere on the Internet.

If a credit card company is charging you 18 to 20 percent who is ripping off who.

Did the credit card company put a gun to your head and make you sign the card application?

Looking back and seeing how others have dealt with massive debt, I think a better way would have been to “Trump” my creditors instead of paying them back or perhaps negotiating a deal at 25 cents on the dollar.

That’s an interesting conclusion to draw. This sentiment must be a symptom of the bitterness and resentment you feel for having misjudged the real estate market for so long, an error that has meant real economic consequences for you and your family.

In retrospect, you know that taking on a mortgage 5, 10 or 15 years ago would have put you in the catbird seat today.

Luke, when I walk in a store and see price slashes show up when there weren’t any a few months ago with buyers lined up around the block, something tells me that people have stopped buying those products.

Real estate is going out of vogue. Massive mortgages aren’t cool with a ball and chain around your neck for 30 years. Toronto down 20% and rates heading up bigtime with record debt kinda sends the message don’t ya think ?

And then there’s also the overpriced quality homes… like 1513 Bank St for almost $1.9m loonies + GST… this will be one of Hawk’s next price ‘slashes’. Price reductions on anything don’t really mean much because anyone can overprice any home, and many do just that. Then, they wonder why it doesn’t sell…

I had a look during the open house on the Bank St home last Sunday, and it’s a good quality house and everything like that. However, it’s on a narrow and smallish lot of only 40′ wide, so the whole place seems narrow (even the hallway’s are narrow). Nothing terribly exciting about it and you’re sharing your bedrooms upstairs w/ your tenant’s and their suite which is also upstairs! I hope your student’s or tenants don’t make too much noise with parties to keep you awake before you have to go be a slave the next morning to pay the huge mortgage (unless you’re from Van I guess – but then, why would you want a suite set up like that?). My prediction is that one is going to sit for a long long time

Holy crap Hawk!

Those are either on busy streets or total crapboxes or both.

Can you find any quality home not overpriced that aren’t on busy streets for any reductions? My guess is… nope.

For those of you that are interesting in learning a little more about the “Real Estate Cycle” from a Canadian context and investment perspective, I’d like to suggest having a look at the book called “Secrets Of The Canadian Real Estate Cycle” by Don R. Campbell et al.

While it’s from 2011, it describes everything that has been going on to that point, the different stages of our RE market, and the telltale signs indicating which of those stages we are in. It provides some of the impetus for the type of materials and dialogue I tend to post, and at its essence – it’s really very simple.

It stresses the importance of understanding economic fundamentals, which is the key to strategic RE investing. These fundamentals are directly responsible for the boom to slump, slump to recovery, and from recovery back to boom cycle, that repeats itself over and over. The market never escapes fundamentals indefinitely, and the cycle is an expression of this.

Yes – we can moddle it, extend it, financially engineer this or that leverage-based product, but in the end the cycle will always play out. When the most recent CMHC assessment tells you that fundamentals in Victoria do not support its housing prices, that’s based on this elementary and inescapable principle.

Anyways. Not trying to plug this book for any reason other than I have personally found it rather illuminating. Cheers.

In a listing agreement, it must be specified how much commission goes to the listing brokerage and how much to the cooperating (buyer’s agent’s) brokerage. Also it must be specified how much commission goes to he listing brokerage if the buyer is unrepresented.

This is a really positive change! I am hoping it will encourage competition within the marketplace in that listing brokerages will offer discounts on commission that goes to the listing brokerage if buyer is unrepresented.

Currently there are online two lines in the listing agreement for commission; the gross commission and the cooperating commission. For example, $30,000 for the gross and cooperating commission is $15,000. There is no line for double end or unrepresented buy and it defaults to $30,000 gross at that point. A third line explicitly stating the commission with unrepresented buyer is a brilliant move. Hopefully the consumer now will be….”so if the buyer is unrepresented you still want $30,000? How about $18,000?” 🙂

Even in this “hot” market with high prices and short DOMs, bank foreclosure applications seem to be up this morning in Victoria’s law court but we are still half that of Vancouver.

There are some benefits of not being the next Vancouver.

I would think that as market prices remain stable to decreasing we might see an increase in applications as home owners find it more difficult to consolidate their debts into a mortgage. Not so much with first time home buyers as they were stress tested but those that have dipped into their home equity.

I remember when I had finished school my debt was so high that I was using one credit card to pay off the other. It took several years to get that debt paid off. And it was tiny compared to the debt people carry today.

There is a world of hurt coming down on some people when interest rate rise and they don’t have their debt under control. It isn’t immediate either. You can cut back on expenses today but it will take a couple of years of strict budgeting to get that debt down to a manageable level.

Looking back and seeing how others have dealt with massive debt, I think a better way would have been to “Trump” my creditors instead of paying them back or perhaps negotiating a deal at 25 cents on the dollar. Paying off your debts seems so “old school” these days. If a credit card company is charging you 18 to 20 percent who is ripping off who.

Let’s hope they create new rules for the shyster developers that manage to walk in and clean up the cash then walk away.

Vancouver real estate developer faces lawsuits, extradition to U.S.

“Closer to home, Chandler’s 92-unit latest Metro Vancouver condo development sits empty more than a year past its anticipated move-in date, mired in a complex tangle of legal disputes, including homebuyers alleging breach of trust, private lenders launching foreclosure actions, and a municipality seeking to recover more than three years’ worth of unpaid taxes.”

http://vancouversun.com/news/local-news/dan-fumano-vancouver-real-estate-developer-faces-mounting-lawsuits-extradition-to-u-s-on-fraud-charges