Regulation

Just got an email about the new regulations coming down the pipe in BC for the real estate industry.    If you recall, the industry lost the right to self-regulate last year after a lot of reports of consumer hostile behaviours by certain brokerages in the overheated Vancouver market.   The Real Estate Council of BC was revamped with more outside members, and the Office of the Superintendent of Real Estate (OSRE) appointed to keep an eye on the industry moving forward. Since then they’ve tweaked the rules here and there, for example by making it marginally harder to pass the entrance exam for agents and by cranking up the maximum amount of penalties for misconduct by both licensees and brokerages.   I’ve seen a few job postings for the OSRE that stated the goal was to implement the recommendations of the Independent Advisory Group report that was released last year. Well the next changes have been released in draft form and are:

  1. Removing limited dual agency in BC.  This is where one agent represents both the buyer and the seller as clients in a transaction, with some restrictions.  Some remote and underserved communities will be allowed to continue with this practice for now.
  2. Increasing required disclosure about commissions and representation to clients.   Generally some minor tweaks to disclosure requirements to better inform clients about where their money is going, and what their relationship is with an agent they are dealing with. For example:
    1. 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.
    2. Before providing real estate services, an agent must disclose whether they are representing the party as a client (and therefore have a fiduciary duty towards them) and inform them how to file a complaint.  This is very similar to the current Working with a Realtor brochure and will almost certainly result in a modified version of that document.
    3. Before dealing with an unrepresented client in a trade (for example if an agent has a listing and a buyer goes to them directly to write an offer on the property), the agent must explain the risks of dealing with someone that represents only the interests of the opposing party, and a recommendation to get their own professional advice.
    4. When a seller’s agent presents an offer to a seller, they must include detailed information about commission and other remuneration that they would receive if that offer were accepted.

My take: These are draft changes open to comment (provide feedback here) until Oct 6th, but I’ll bet they will essentially pass as written.  Getting rid of limited dual agency is a no brainer and something we’ve seen coming for a long time.  Given that an agent must act in the best interests of their client, it is obviously impossible to do that for two people with competing interests. The increased disclosure laws are relatively minor tweaks to existing requirements.  Some additional transparency for consumers which is always good.   I’m not convinced that the requirement to scare an unrepresented seller via warnings about the risks of being unrepresented is in the consumer’s interest, but certainly getting a lawyer to review an offer before making one is a very good idea.

Overall fairly minor changes that probably won’t have much of an impact on the market outside of turning up the general level of wailing and gnashing of teeth in the industry.   I’m disappointed that they haven’t introduced the requirement for all offers to be recorded on a property to finally put an end to unverifiable competing offers that seem to appear at opportune times to goose a buyer.  Maybe that is still to come.  This is a start and it’s just another sign that the wild west era of speculation, lax regulations, and free money in real estate is slowly being unwound.

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167 thoughts on “Regulation

  1. 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.

  2. ” Condos and townhouses aren’t good for families therefore we won’t build townhouses and condos that are good for families….”

    Our previous residence was a townhouse. It was detached so we shared no walls. It was brand new, 3 beds, 2 and a half baths, an attached garage, open concept main floor, etc. There were 9 units only, so not a whole bunch of people to content with. Mostly we found it harder to find anyone willing to participate on the strata so the same 3 people did all of the work (me incl).

    Out of 9 houses, only 2 had kids! One person bought it on speculation from Alberta and it was never occupied. 3 of the houses had middle-aged single people live in it, and 3 of them were older married couples whose kids were already grown. When the only other family sold their house to another single guy, we immediately put our house up for sale. A single older lady bought our house as well! I kept in touch with one of my neighbours for years, and no family ever returned to live in that complex.

    My only reasoning for that is the postage-sized yard space. I’ve seen balconies with more yard space than we had! It was basically useless. We could fit a BBQ and a sandtable for our toddler, that’s about it. The nearest park was over 2kms away.

    There was also no visitor parking space, and there was a long driveway to even reach our complex, so no one came over to visit, and I couldn’t have gatherings at my house like I had always dreamed. Basically, living in a complex with my neighbours so close, who I knew all by name, I’d never felt so isolated!

    Last night my son had his 11th birthday party. Like every year, after the kids had their fun (trampoline park this year), we hosted dinner at our house. This year we were only 13 people, but that was perfect! We can fit 8 in our dining room and 6 on the patio outside comfortably (without breaking out lawn chairs etc). This time, after the 4 kids had pizza, they ran out into the backyard to play. The grownups wanted some more piece and quiet (the kids chose to eat inside for some reason while the adults chose out) so we chased the kids across the street to the park instead. They yelled Yayyy!!! And off they went for an hour. I don’t need a huge house and a huge yard. All I really needed, was enough room to accommodate my close circle of friends and family. (Thank goodness my own family lives thousands of miles away otherwise I would need room for another 15!!)

  3. At least with SFH special assessments you’re not at the whim of others (mostly). You can elect to fix a problem now before it gets worse instead of having delays due to a poor strata (“poor” both literally and figuratively). Or you can delay if you need to (recently unemployed, etc).

    Local: For a data point to your rhetorical questions, we have a 2,000 sqft 1950s house and rent out the suite downstairs. We could easily afford to not rent the suite, but we believe in density. We’re happy living in a 2br suite with a kid, and we like to invest the difference. And it’s an older house, so the layout is not ideal compared to modern builds.

    You’re right in that it’s all down to the person in question to define quality of life. That’s something they have control over though. They need to reprioritize. If their family is pulling $100k/yr, they’ll have to decide between stretching their finances to buy a townhouse in Victoria, or a SFH with a yard somewhere else. That sounds cold and unforgiving, but the way in which we reward work in our society is cold and unforgiving.

  4. Townhouses or condos are widely viewed as a crappier option in Canada. Partly for that reason there is a relative dearth of nice condos and townhouses, particularly ones targeted at and suitable for families. It’s self perpetuating. Condos and townhouses aren’t good for families therefore we won’t build townhouses and condos that are good for families….

    Re special assessments. Owning a SFH also causes special assessments – they just aren’t called that.

    Crappy neighbours are a possible problem both in SFH and stratas. In some ways you may have more recourse to deal with crappy neighbours within the framework of strata bylaws than for a neighbouring SFH.

  5. I agree with Leo.

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

    2 words… “Special Assesment”

  6. 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.

  7. So what you’re saying that people that want to live in Victoria contacted a Victoria-based realtor? Shocking.

    This building -> https://986heywood.com/

    is almost 2x per square foot

    compared to http://www.lyraresidences.com

    And I doubt it has anything to do with distance to work whatsoever and is more likely to do with preference to density. In the first building you can walk to downtown or Cook Street Village and grab a coffee, the second one you can’t.

  8. 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.

  9. @Local Fool – I’m not saying there aren’t downsides, but do those thing significantly reduce your quality of life? I just don’t think so. Yes you can be unlucky with strata, just like there are endless horror stories of being unlucky with neighbours in an SFH. Yes you can face unexpected costs but same in a house. A townhouse means you are closer to neighbours than in an SFH.

    But day to day, it wouldn’t impact our quality of life in the slightest. If I think about what percentage of my quality of life is affected by housing differences between detached houses, townhouses, and condos, I’d say it’s significantly less than 5%.

  10. 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.

  11. I live just outside Duncan. I’ve posted before how I bought an acreage last year (thanks to the years of reading HHV for helping to make the decision). It’s funny that, though obviously not in the majority, my friends here are a group of families who have all moved here in the past few years, some telecommuting, some working in Victoria or Duncan (often part time), all of them cobbling together jobs to make it work. We have all sought out a simpler lifestyle with fewer crowds, being close to nature, enjoying the familiarity of running into friends every time you go downtown, but being able to retreat to a great deal of privacy in our homes. I think it’s just personal preference, really. It’s not necessarily a better lifestyle than an urban one, but one that a subset of the population chooses.

  12. Personally, I can’t wait for the ‘outer core’ areas of Victoria to wake up and smell the appeal of urbanism. From my place in Cedar Hill I can drive downtown in 10-15 mins and bike there in 25, so it’s obviously not out in the sticks. Except that there are no sidewalks and commercial development mostly still looks like it’s 1985 in Burnaby. I’d be stoked for some more resi up/retail down townhouses and condos in our hood, some more commercial overall, some diversity and vibrancy. It is lovely around the golf course, but something to walk to other than the Shelbourne corridor, or heading into Victoria/Oaklands would be grand. If Sidney can do it, why can’t Saanich?

  13. 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.

    So what you’re saying that people that want to live in Victoria contacted a Victoria-based realtor? Shocking.

    I get your point, but obviously your clients are looking in town and not Duncan or Inuvik or they would be working with someone else.

  14. I strongly disagree. My family’s quality of life would be much lower in a townhouse.

    How exactly?

    we live in Victoria is purely because we can enjoy the amenities of a modest-sized city, which includes a nice-sized SFH with a yard. With the promised densification, future generations won’t get the chance to enjoy what we enjoy without being extremely wealthy

    Sure they will, just not in Victoria. Perhaps they will move to Nanaimo or Parksvilla or Comox as those cities grow. Then the people that want to live in a larger city will live in Victoria.

    Nobody wants to spend $4000/month for a crappy condo in those cities.

    They prefer paying the $4000/month over leaving for a cheaper city. People paying that much rent have the means and the skillset to relocate if they want to. It seems they do not.

    Fundamentally I don’t think there is any point in trying to rail against the growth of any given city. A city stops growing when there are no economic prospects or when there is an extremely overbearing government. Neither sounds appealing to me.

  15. “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. 😉

  16. I work for a company with distributed employees and a remote culture. I go into the office once a week, but don’t have to. We could have lived anywhere, basically. We chose the core for the amenities and the culture. Lots of great food, beer, and coffee options. I can get downtown by bike in 7 mins. We wouldn’t trade that for a commute and a bigger yard, or a smaller community like Duncan.

  17. 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 ->

    Can’t really replicate that in an urban village.

  18. I strongly disagree. My family’s quality of life would be much lower in a townhouse. The reason we live in Victoria is purely because we can enjoy the amenities of a modest-sized city, which includes a nice-sized SFH with a yard. With the promised densification, future generations won’t get the chance to enjoy what we enjoy without being extremely wealthy.

    I grew up in Croatia in a one-bedroom condo. I went outside and played with my friends in the park; awesome memories. When I was in elementary school my parents moved to Victoria and we lived on Roseberry in the Oaklands area in a one bedroom + den suite, I slept in the den, it was cool. More awesome memories of sliding down Roseberry during blizzard of 1996.

    Then my parents bought a house on Scott Street. 801 sq/ft up 2 bed/1 bath, basement rented. I literally never used the backyard as I would just go to Oaklands School to play basketball with friends or similar. Lived with my parents until I was 25 yrs old; totally content.

    My parents’ house is on a 5,500 sq/ft lot. If we lived on the same lot but in a duplex and only had a 2,750 sq/ft lot and half the backyard I don’t know how the quality of my life would have been worse? Quality of life to me is eating well, exercising, travelling, making new experiences, spending quality time with family, etc…..who cares how big the yard is and if you have no yard just walk over to a park.

  19. 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.

  20. 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.

    These age charts are based on percentages, not absolute numbers. If the population doubled overnight the chart would still look identical, but demand for housing would be 2x.

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

  22. The one big difference this time around is the vastly larger downsizing cohort, combined with declining household formation.

    If I recall correctly, you have been touting the ethereal “boomer wave” for a few years to justify continuously escalating prices here in Victoria. Further, you were repeatedly claiming we were beginning the next multi-year “inflationary cycle”.

    Unless I’m missing something, you certainly appear to have taken an about face from your tone from when I first came here in 2015.

  23. 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

  24. With the promised densification, future generations won’t get the chance to enjoy what we enjoy without being extremely wealthy

    True – this why there’s no SFH in Manhattan or Hong Kong. We’re still a long way from that, but as population and densification continues – future generations are less likely to enjoy the benefits enjoyed by previous one’s. The luckiest generation that ever lived, and likely will ever be – was the baby boomers. Likely, no generation coming after them will enjoy anywhere near as high a living standard and prosperity that they did, on average.

    What we really need to do is open up some of the vast tracts of land available to create housing for standards that people would actually enjoy. Locally this would be the ‘tree farms’ near Sooke in the hills. Like CS said – we could build new dynamic, modern communities here and link them by appropriate new forms of transit. But, I think most of us know this won’t happen – unfortunately – instead, densification will continue, and in the core and elsewhere in the CMA – SFH will become more unattainable.

    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, from 2011-2016 it looks like most of the prairie cities were growing faster than us.

    http://www12.statcan.gc.ca/census-recensement/2016/as-sa/fogs-spg/Facts-cma-eng.cfm?LANG=Eng&GK=CMA&GC=935

    P.S. Hawk – rather than being jealous of you – I’m actually more empathetic of your plight.

  25. The once much touted potential of telecommuting, for example, seems to have been overestimated.

    Reliable internet and better teleconferencing software is making a difference, at least in the tech world. More and more companies are distributed teams these days. I gotta think that trend will continue as more old school managers with an asses-in-chairs mentality phase out of the workforce.

  26. We could easily stop population growth in Canada’s major urban centers, and thus cause house prices to fall greatly, simply by ending mass immigration. So a key question is, how many people should there be in Canada.

    For some reason, Justin Truedeau seems to think we need many, many more and better Canadians, the newcomers to eventually supplant the existing Canadians and their progeny due to the low and declining fertility of the native born population.

    This is a terrifically good plan if you are in construction, land development, municipal politics, etc., since it creates massive windfall profits.

    Other reasons for mass immigration are not so obvious. For the native born, it means, beside much higher housing costs, higher taxes to pay for the new schools, maternity hospitals, university places, etc. required for the new Canadians.

    Allegedly, immigrants bring additional skills, brains, etc. But insofar as this means greater competition for a not very large number of decent jobs for fresh school and university graduates, that is a benefit with a clear downside.

    The only reason I can think of for growing the Canadian population is to grow the economy and thereby the defense budget and thus achieve a more secure tenure of this vast land.

  27. @ 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.

  28. “We have a SFH in Gordon Head because we happened to be in a position to buy when they were much cheaper, but if the area was 100% well designed rowhouses and density was 2 or 3 times what it is now, that would be desirable from my perspective. More housing units closer to downtown is better, and our quality of life would not be significantly different in a townhouse vs a SFH (as long as the strata council was reasonable).”

    I strongly disagree. My family’s quality of life would be much lower in a townhouse. The reason we live in Victoria is purely because we can enjoy the amenities of a modest-sized city, which includes a nice-sized SFH with a yard. With the promised densification, future generations won’t get the chance to enjoy what we enjoy without being extremely wealthy. The irony is the smaller, crappier properties that density promises will eventually eat up the same percentage of household income, because people generally stabilize at a certain amount they are willing to pay for housing–they start with their dollar budget, and then look at what their budget will buy them. Once Victoria is all crappy condos and townhouses, people will bid up each other for the units until everyone’s spending 40% of their income on rent or mortgage–but this money will be paying for a much crappier property.

    Nobody wants to spend $4000/month for a crappy condo in those cities. They have to because that’s what the market has been bid up to. And if they find another $100 in their budget they’ll offer $4100 for the next slightly-better condo even though they don’t want to, and the cycle continues.

    If Victoria is ever so dense that Gordon Head could be filled entirely by townhouses, I promise you those townhouses will be much more expensive than the SFHs that are there now. Why would anyone think getting much less and paying much more is an improvement? We know density in Victoria will make SFHs unattainable for anyone except those with inherited wealth or double top-1% incomes–what’s the offsetting benefit that makes this worthwhile? We have a right to ask.

    “As an economist you understand that those prices are set by supply and demand. So if a one bedroom is renting for $4000/month that means demand is sufficient for the market to bear it. You may consider that densification has “deleteriously altered” San Francisco, but clearly the market disagrees. Demand is higher than ever.”

    A community is a public good, not a private one. Private markets are terrible at providing or preserving public goods. The high prices in San Fran right now are driven primarily by tech salaries, which are driven by giants like Google, Apple and Facebook, companies that like San Fran because it’s dense–large companies like to be situated in areas of high population density so they can always draw as many employees as they need. These companies are doing very well and so they throw money at their employees, who then bid up local real estate for everyone else who doesn’t work at these companies. The companies win, the employees sort of win (the benefit of their high salaries is mitigated as they lose a huge part of that salary to housing costs), existing homeowners willing to sell and leave town win (average 1950s shitbox goes for $2.5 million–but they only win when they sell and leave San Fran), and the rest (i.e. hundreds of thousands of people not in these categories) lose. It would be tragic for Victoria to become like San Fran, in my opinion.

    Since real estate is not a strictly private good, it’s a fair question to ask if the free market “winners” justify the “losers”, who are largely the lower class and who are participating in one of the greatest wealth transfers in history from poor to rich as they experience massive rent increases while enjoying absolutely no appreciation of real estate equity.

    I’m not even against density per se. Oftentimes increased density is preferable, like in Comox where the current population struggles to support decent retail options, or in Detroit where police have to monitor an area that used to contain 2.1 million people but now contains only 700,000. But Victoria is different from those places, really from any place in North America. It’s already quite dense considering the beautiful locale. It shouldn’t be a generic rapidly-growing North American city, just because the developers and large corporations would prefer it.

  29. 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.

  30. I’m still interested to see what is coming down the pike. (Telling the future). I can’t help but get the feeling that cities are about to go through a major change. Claims are made that cities are growing but it seems that they include the suburbs when they make that claim. I believe that people are going to leave the main core for the satalite suburbs. There will be no need to commute. Not in the old fashioned sense of the word at least. Fully Autonomous vehicles are just around the corner and people will at the very least just lie back and have a nap or start their work day. It will start with that but if they can work from their car then I believe that they will quickly eliminate that idea and simply work from home in the first place. Think of the cost savings for companies trying to provide space for it’s high tech employees. Think of the competative edge such a company would have over other high tech companies as they all chase winning contracts around the globe. I think the inner cities will wither as young people move to much much cheaper housing opportunities outside the main core. I know it is hard to tell the future but it is fun to play with ideas and I’d like to hear what other people think might happen.

  31. if you limit both sprawl and densification then houses reach a supply/demand equilibrium and the population doesn’t grow any more.

    And I would guess that equilibrium price will be very high (much higher than it would be if we would keep building). But this whole subject is academic since obviously stopping the construction of housing units of all kinds is never going to happen.

    Have you ever wondered why the supposed ideal number of people for a community is always more than there is presently?

    No, since I have never heard anyone talk about population in terms of an ideal number of people. Cities grow if they are doing well, and shrink if they are doing poorly. Trying to plan out exactly how many people we should have will not lead to anything.

    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

    It’s being accepted because there is no other good alternative. Capping dwelling growth isn’t going to happen, and sprawl is generally not desired (by west coasters anyway, there are cities where the residents are perfectly OK with sprawl).

    Every single city that has densified has seen the cost of land go up exponentially.

    Right. I think the difference in perspective we have is that I don’t care about SFH affordability per se. I care about dwelling affordability. We have a SFH in Gordon Head because we happened to be in a position to buy when they were much cheaper, but if the area was 100% well designed rowhouses and density was 2 or 3 times what it is now, that would be desirable from my perspective. More housing units closer to downtown is better, and our quality of life would not be significantly different in a townhouse vs a SFH (as long as the strata council was reasonable).

    This is how you get situations like Vancouver, San Fran and Manhattan where $4,000/month one-bedroom apartments become the norm.

    As an economist you understand that those prices are set by supply and demand. So if a one bedroom is renting for $4000/month that means demand is sufficient for the market to bear it. You may consider that densification has “deleteriously altered” San Francisco, but clearly the market disagrees. Demand is higher than ever.

  32. John Dollar:

    Your logic is correct but take it just one more step. 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.

  33. “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.

  34. You don’t want density, you don’t want more population so I assume you don’t want sprawl either, so that means you want a hard cap on housing units. And you think that constraining supply is going to somehow not lead to increasing housing costs?

    Albeit on a different plane, the theory of supply and demand is like quantum electrodynamics and f the theory of relativity: some people just don’t get it, which would not be a problem, except that they seek to deny the feasibility of any plan of action contingent upon its operation.

  35. 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.

  36. Densifying hurts renters, low earners and long-time residents who have deep attachments to this city but will eventually be replaced by the highest bidder in a global bidding war for premium real estate.

    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? 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.

    There are benefits to density, and there are drawbacks. Personally, I think the drawbacks much outweigh the benefits, because what makes Victoria valuable is its small-town-but-big-city feel, and doubling the population will almost certainly ruin that.

    So what exactly are you proposing? You don’t want density, you don’t want more population so I assume you don’t want sprawl either, so that means you want a hard cap on housing units. And you think that constraining supply is going to somehow not lead to increasing housing costs?

  37. 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 ? 😉

  38. Yes, you can flood the market with smaller homes, smaller lots and condos and make the average house cost cheaper only because the average house is now substantially crappier.

    On a price per square foot basis smaller homes are more expensive to build. As a home increases in size there are economies of scale to the construction.

    Having lived in old and new houses, I prefer new construction over the war shacks through out this city. Some of the older homes are pretty to look at but most should have been razed a long time ago. But that’s also symptomatic of speculators. They’ll paint them up, put in a kitchen and bathroom with inexpensive materials but not build new. Because any guy and his dog can do that kind of work. And in a couple of years they’ll be back to being crappy again.

  39. 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.

  40. A favourite topic of conversation in every city seems to be local real estate, with the Bulls being the loudest. But I’ve noticed a subtle shift as the Bulls morph into Steers (castrated Bulls for you city folk). The Steers are getting passive about the future prospects of RE as an investment and a common thought I hear them expressing is “Well, I’ve been thinking of selling…”. In my cohort, the Steers are all over 60, semi-retired, and have enough assets to maintain their lifestyle, but a decline in RE prices could impact their future, so many are thinking of selling. But a few have older rental properties they bought years ago for under $300k and they seem content with their rental income. My simple point is that the Bulls morphing into Steers seems inversely proportional to the number of years they have owned their rental properties.

    Most of us older folks have seen this old Wall Street bit of wisdom playout several times in the RE market: “Bulls make money, Bears make money, Pigs get slaughtered.”

  41. @ 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.

  42. Actually Hawk… that’s your neighbor isn’t it? After all , don’t you live in the penthouse of OB hotel still? With that 500% stock return the $400/ night is easily affordable for you. Meet you at the snug for a beer later after the open house at the Beach Drive house today 😉

  43. 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…..

  44. “The average detached dwelling is moving further and further outside of the city. So is a condo that is within walking distance to work and services and costs you less to live in “crappier” than a house in the westshore where you spend 1.5 hours commuting every day and pay more insurance and maintenance on?”

    Yes, probably. And 30 years ago a white collar professional would have considered either option unthinkable. The wages of density are higher housing costs and worse housing options. There are benefits to density, of course, so we have to weigh the costs versus the benefits. To me the question is who is to be served by the economy? Homeowners or renters, the well-off or the less fortunate, newcomers versus long-time residents? Right now the first entry in each pair is being preferred… and I say this as a major beneficiary, a homeowner who’s well-off and who was once a newcomer. Densifying hurts renters, low earners and long-time residents who have deep attachments to this city but will eventually be replaced by the highest bidder in a global bidding war for premium real estate.

    If you increase density you guarantee that my home will go up in value, and low-income earners will have to suffice with less and less home until eventually being forced to leave the city altogether as in Vancouver, San Francisco, Singapore, Auckland, Sydney, and so on. Now, it’s not to say that density is all bad. When density is used effectively you can attract smart, innovative workers and businesses who will enrich the city by hiring other employees, increasing the tax base, spending money at local service businesses, etc. It can stimulate the economy. Is Victoria meant to be an economic powerhouse? Personally, I don’t want to live in a Toronto or a New York or a San Francisco. There are benefits to density, and there are drawbacks. Personally, I think the drawbacks much outweigh the benefits, because what makes Victoria valuable is its small-town-but-big-city feel, and doubling the population will almost certainly ruin that.

    Density has benefits, but one of its downsides to anyone except established homeowners is it increases housing costs. Pretending it will produce lower housing costs when exactly the opposite is the case obfuscates the analysis needed to make the best civic decisions.

  45. To be fair, 90% of Canada’s massive land mass is functionally unlivable

    All of BC is very livable and is incredibly sparsely populated. Same with most provinces except the far north but even there people live and enjoy it.

    Yes most people end up in the cities, but our cities are small on a global scale. It’s not like there is a lack of space there either. The real estate prices are due to policy. It’s like the rental situation. Is it bad because of somehow we have such an influx of people that construction can’t keep up? Nope it’s because there was a 50 year period when basically no rentals were built. Shocker, then there was a rental crunch.

  46. “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.

  47. the average house is now substantially crappier.

    The average detached dwelling is moving further and further outside of the city. So is a condo that is within walking distance to work and services and costs you less to live in “crappier” than a house in the westshore where you spend 1.5 hours commuting every day and pay more insurance and maintenance on?

    Depends on your priorities. Certainly a nice house in a prime location is better, but that’s an ever shrinking percentage of the housing stock.

  48. With townhomes still hot and SFHs starting to decline it feels like a good time to jump into a house. Thoughts?

    Probably a pretty good summary. Since you have a townhouse already, trying to optimize out any price differentials probably won’t lead to much. Yes it is objectively a better time to sell a townhouse today and purchase a SFH than it was one year ago when houses had already taken off in price and strata properties were still lagging. As for now vs spring 2018? More or less anyone’s guess, but I would be very concerned about the stress test for new conventional mortgages taking a big bite out of the lower end of the market in the fall.

    That said I wouldn’t call the current SFH market quite back to comfortable buying levels yet. Still pretty miserable levels of inventory but good to start looking. Especially in the fall there are sometimes those unwanted properties that have been sitting for a while where sellers start to get antsy and will take lower offers.

  49. “But the majority opinion seems to be that the higher the price of living accommodation the better, so talking here of how to restrain or even lower housing costs seems a waste of words.”

    Densification will never make an existing single family home cheaper. I’m not sure why you don’t understand this basic concept.

    Yes, you can flood the market with smaller homes, smaller lots and condos and make the average house cost cheaper only because the average house is now substantially crappier.

  50. 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.

  51. In particular, I have urged rezoning Oak Bay Avenue to allow at least ten stories, with a view to doubling the population of the municipality. I’ve also urged rezoning the Uplands a vast tract of land occupied by a mix of decaying homes of the 50’s and earlier, plus trophy homes of the mainly non-resident. But the majority opinion seems to be that the higher the price of houses the better, so talking here of how to restrain or even lower house prices seems a futile use of words.

    Actually I think there is widespread agreement that increased density would help (Barrister being a notable exception). Problem is I don’t know a realistic plan for how to encourage councils to actually do something on that front. Would be nice, but the residents seem to be largely in opposition so I don’t know what there is much left to talk about.

  52. CS set the record straight. Forget about restrictive land use policy, NIMBYism, a monumentally stupid building code, the HPO, low interest rates, our relatively gentle climate, the low Canadian dollar, terrible infrastructure, fuddy-duddy old people with lots of money. It’s all on women’s lib and Keynes.

    Actually I think you and caveat are being unfairly critical here. You are talking about the supply side of the equation, CS was talking about the demand. Population growth is the demand and with a falling birthrate that population growth is from immigration. That’s a good thing! 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”.

    So, given demand will continue to increase due to growing population, the solution to housing affordability must lie in the supply side. That should be where effort is directed, but it doesn’t change the reality of where demand is coming from.

  53. Re: ” CS set the record straight. Forget about restrictive land use policy …”

    Land use policy, in my experience here, is not a subject most people seem interested in. But anyone who had followed the discussion over any length of time would be aware that I have urged radical rezoning as means to reduce housing costs. In particular, I have urged rezoning Oak Bay Avenue to allow at least ten stories, with a view to doubling the population of the municipality. I’ve also urged rezoning the Uplands a vast tract of land occupied by a mix of decaying homes of the 50’s and earlier, plus trophy homes of the mainly non-resident.

    But the majority opinion seems to be that the higher the price of living accommodation the better, so talking here of how to restrain or even lower housing costs seems a waste of words.

  54. Sweet, that’s still quite a bit lower than my current 5-year fixed rate.

    You won’t get that rate. They require it to be insured and usually of a minimum size. Last I checked rates it seems with the recent increases our renewal (not until next summer) will be higher than our current rate of 2.79

  55. Your trouble, Bman, is a simplicity of thought that precludes comprehension of the complexity of causal relations. Thus in discussing the relation between population growth and house construction you ignore the role of price, which is the driver of the supply–demand relationship.

    Likewise, in your comment about no-fault divorce and birthrate you fail to note that in an age of birth control pills, morning-after pills, and state-funded abortion (about three million since Pierre Trudeau’s premiership ended) the relationship between copulation and reproduction is tenuous in the extreme.

    But such are the defects of thinking of so many citizens of a democratic state that it is a simple matter for the state to disinherit the nation, and over the course of time, replace it with people from elsewhere who more adequately meet the immediate requirements of the ruling corporate interests.

  56. 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.

  57. Interested on your thoughts of selling a townhouse in the central saanich area now as opposed to spring 2018.

    I avoided selling in the madness of the spring/summer this year because I would have been bidding with all the other sheep on a primary residence.

    With townhomes still hot and SFHs starting to decline it feels like a good time to jump into a house. Thoughts?

  58. 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?

  59. “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”

    CS set the record straight. Forget about restrictive land use policy, NIMBYism, a monumentally stupid building code, the HPO, low interest rates, our relatively gentle climate, the low Canadian dollar, terrible infrastructure, fuddy-duddy old people with lots of money. It’s all on women’s lib and Keynes.

  60. 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.

  61. Introvert
    September 8, 2017 at 7:03 pm
    A back-of-the-envelope calculation shows that my house has appreciated 3.75 to 4% since we bought in 2009. That’s right in line with long-term historical price appreciation for Greater Victoria:

    https://househuntvictoria.ca/2016/03/17/a-brief-history-of-prices/

    So what was that about Victoria being in a bubble?

    <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

    Lol, I’m not sure whether you’re just being “cute” or actually being disingenuous.

  62. 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).

    Brother – fertility rates in Canada began falling under the watch of that noted SJW – Sir John A. Macdonald.

  63. 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 …

  64. “What is dissuading fella from walking out with the twenty-something?”

    In the era of no-fault divorce, probably nothing. Well nothing, if he has the morals of a Neanderthal.

  65. “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.

  66. .

    “I have noticed that many recent sales in Gordon Head have been at ask or often a bit less. But perhaps that’s to be expected given that it’s the end of summer, and that many of those asking prices were unrealistically high to begin with (sellers are fishing).”

    Sure thing Intorovert, you just ignore 20 plus slashes in your own hood. BS. All those starving agents were just too stupid to properly list it. Another typical perma bull excuse.

    The average growth rate only shows unaffordability if wages don’t go up in tandem which they haven’t. Exactly when bubbles form then explode in your face.

  67. “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.

  68. So what you’re saying is if the fertility rate was still 2.3, we would be blaming native born Canadians (probably Catholics, if abortion was still illegal) for driving up house prices.

    No, I am not saying that.

    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.

  69. “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?

  70. Bman, your thinking on the question of marriage seems a bit to basic as a starting point for any sensible discussion.

    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.

    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.

  71. 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.

  72. “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).”

    So what you’re saying is if the fertility rate was still 2.3, we would be blaming native born Canadians (probably Catholics, if abortion was still illegal) for driving up house prices. And if you could do me a favour, please explain how no-fault divorce factors in to a lower birthrate. 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?

  73. 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. 😀

  74. @LF:

    “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”

    Chiefly responsible, surely. In 1984, when Pierre Elliot Trudeau had lowered Canada’s fertility rate from in excess of replacement to below replacement (decriminalization of abortion, no fault divorce, massive Federal budget deficit — 8% of GDP) there were fewer than 3.3 million residents of Toronto. Today, after 33 years of negative natural population growth among Canadians, there are 6.6 million residents of Toronto or twice as many, going on almost three times as many by 2040.

    So where have they come from? Very few from the backwoods of Saskatchewan or the outports of Newfoundland. So mostly, they must be immigrants.

  75. 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?

  76. Wonder who “uote” is?

    Not me.

    But I wrote what appears under “uote” at 7.33.

    My typing must be going from bad to worse.

  77. “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.

  78. That’s right in line with long-term historical price appreciation for Greater Victoria…

    Didn’t look at the graph, but I’ll take your word for it. However, there’s a niggly detail in there that comes to mind. I’ll use extreme numbers to highlight the point.

    3-4% per annum on say, $10 isn’t very much. 3-4% next year on the compounded amount – same. So on and so forth.

    3-4% on $10 million would be a different matter entirely. The percentage gains are the same, but in Absolut dollars, it’s substantial.

    It’s like if I claim I made a 1000% return on my investments last year. That could be true…but actually, I bought 1 share of X stock for 1 dollar, that went to $10. Not so impressive. But a comparatively lousy 7% return on $250,000 – sweet.

    Absolute dollars can’t be overlooked – that’s real money that has to be payed back. And as you say, prices are very high, and 3-4% on those increasing values over a few years is a substantial sum that I don’t believe will continue in perpetuity.

  79. 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.

  80. 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.

  81. 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.

    I don’t pay attention to slashes; that’s what a desperate renter like Hawk is relegated to doing.

    I have noticed that many recent sales in Gordon Head have been at ask or often a bit less. But perhaps that’s to be expected given that it’s the end of summer, and that many of those asking prices were unrealistically high to begin with (sellers are fishing).

    Make no mistake: despite the slashes and sales going under-ask, prices are still very high.

  82. “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.

  83. @LF:

    Japan is a bit different in that they have a crisis underpinned by ageing and restrictive immigration.

    We have an aging population like Japan.

    But you make a good point about immigration. The implication seems to be that if we want reasonably priced housing we should build a wall and stop the flood of illegal immigrants arriving via the US, while abandoning Trudeau’s contention that Canada is a post-national state open to all the world where immigrants are really better than the people born here and living under the sad delusion that, as Canadians, they have some rights in Canada over and above all and sundry who may want to come here from the rest of the world.

  84. 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.

    😀

  85. Local Fool: “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.”
    <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

    If they do plan on introducing any kind of measures I think that you are bang on regarding the wait. No sensing getting dirty when the Feds are going to do that job for you.

    On a different note, Garth has a very interesting revelation on the U.S. crash. Oh well, it’s not like Canadians would be that foolish, right?

    http://www.greaterfool.ca/

    “In case you missed it, the Yanks have recently discovered it was speculation by upper middle-class families that created a housing monster which ended up eating them. Forget the common belief that deplorables hopped up on NINJA (no-job, no-income) subprime loans caused the crisis by defaulting in droves on mortgages they could not afford. Nope, says a paper authored by several university economists. Never happened.

    Analyzing credit data, they conclude the biggest snoflers of new mortgage debt during the housing bubble were those with scores in the middle and top of the credit score distribution. People at the bottom didn’t actually borrow more, with their debt levels remaining constant. Their default rates did not spike when crisis hit, either. It was the wealthier people freaking, selling and walking.”

  86. “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. 😉

  87. 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.

    Yes – while a large and rapid decline in house prices would be a great way to “restore affordability” no government wants to have that happen on their watch because of the likely economic fallout and general voter grumpiness it would cause.

    Waiting a bit makes sense, because if the federal changes cause a turn in the market, the NDP won’t want to grease the slide in the housing market.

    Given the ideological stripe of the NDP I suspect we could see some measure around the PTT. Higher rate of PTT for short holding period and perhaps higher PTT on very high priced houses. It would be interesting if the surtax idea http://www.francesbula.com/uncategorized/ubc-economists-recommend-a-surtax-on-vacant-properties-as-the-call-for-new-strategies-to-moderate-housing-speculation-grows/ gained traction.

  88. “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.

  89. @NE14T
    I live in that neighborhood. The rush hour traffic jam is really not bad unless trying to get to the Westshore (which would be the same traffic jam coming from somewhere like Brentwood). When the interchange is done I’m guessing the 5-way corner will get less traffic because the real backup happens down by the hospital, so people will avoid that route if McKenzie isn’t clogged up.

    It is a nice central location to everything. I bike downtown for work and the Centennial trail connects up to the Goose via bike lanes on Interurban. Good elementary school close by (Northridge).

    I live even closer to the prison and was concerned before I bought. I knocked on neighbor doors and asked around to get a feel for it. The prison is a non-issue unless you hate having a quiet neighbor. I figure if someone were to break out (which last happened 30 years ago) they wouldn’t be sticking around the area.

    Trades will be your biggest barrier right now. Everyone good is very busy and booking into next year.

  90. 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?

  91. 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.”

  92. @Curious Cat. Thanks for the feedback. We’re definitely interesting in the house but the question becomes at what point does the house become too expensive? Is an offer of $600,000 reasonable? Is $630,000 a better offer? Would $650,000 be too high….? These are questions that in this crazy market are so hard to determine. This house could sell for $590,000 or it could sell for $700,000. Tough to know what to offer. We’d need to put in a basement suite pronto to afford the mortgage and I hear you about trades and contractors and their timelines. Upstairs could wait for renos until we’re ready. We’d be fine to live with the original style for a few years at least.

    @Introvert I agree that Wilkinson traffic sucks but I bike to work so it wouldn’t be a huge problem. The overall location seems good assuming a prisoner doesn’t escape and break into my home 

  93. 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???

    Nice! We have a 35-year mortgage, too, and it will end up being a 15- to 20-year mortgage due to aggressive pay down.

  94. 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.

  95. @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???

  96. Also to follow up on my last comment, that house, when I was househunting Aug 2008, would have sold for around $475,000. If anyone is curious.

  97. @ 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.

  98. The best five-year fixed rate from a broker for an insured mortgage is now 2.48 per cent…

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

  99. @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.

  100. LeoM: “Hawks perennial chart is starting to play out as he predicted… 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.”
    <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

    Hey Leo, apparently that small surge in SFH just might have been selective reporting.

    http://vancitycondoguide.com/vancouver-detached-volume-down-36-year-to-date/

    ” For January 01- August 31, 2016 the average sales price of a detached home in Vancouver was $2,864,520.00. Comparing the same time frame this year, the average sales price was $2,607,377.00. That’s a 9% drop.

    The median sales price dropped even further, from $2,339,000 to $1,980,000, a 15% decline.”

  101. 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.

  102. If Hawk stuck to “x, y, and z are presaging a crash, IMO” he’d have a modicum of credibility. Instead quite literally every event, occurrence, situation, and news story serves as proof that a crash is imminent.

    And because some things that should be self-evident but can be taken out of context especially if they are part of a thread of a conversation …

    Cool, did you guys know that if you make a prediction within the thread of a conversation it’s not really a prediction? Only a prediction made by someone standing on a rock, alone, shouting, can be interpreted as a prediction.

  103. 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.

  104. 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.

    Not sure if I agree. Edmonton and Calgary have seen lots of building over the last 9 years despite the HPI showing prices are below (Edmonton) or just above (Calgary) the 2008 levels.

  105. 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

  106. NEa4T: is the bath/kitchen reno a need or a want? You can get up to $40k tacked onto your mortgage for the suite. Agree with totoro that you can hold off on the renos, and that if anything you’d want to take care of the windows before bath/kitchen. Also agree that if you’re getting up to the $700k mark anyway, might want to look for a place that doesn’t need the renos in the first place.

    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 🙂

  107. 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.

  108. Looked at 1290 Glyn road last night. It was very busy with a constant flow of people coming to view it. Nothing special about this place other than the fact that there’s 3 bedrooms upstairs and the basement height is just over 7 feet. The house is basically straight out of 1963 with some updates to mandatory stuff like roof, oil furnace etc. Kitchen and bathrooms are all original.

    And I think to myself. Should we buy this (it’s listed for $554,000)? Our realtor says it will sell well into the 600s. I feel like a fair amount of people are panic buying right now with their “locked-in” rates before the BoC raises interest rates again.

    Even if we bought for 600k we’d need to immediately put in a $35,000 basement suite to be afford to live in our home. Probably another $50,000 for kitchen and bathroom renos.

    So now up to 700k for a “fixer-upper”.

    Thoughts?

  109. “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.

  110. 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.

  111. It isn’t just the amount of appropriately zoned land that gives land its value.

    What gives land is what use it can be put to and what restricts that use are:

    Political
    Social
    Physical
    and
    Economical

    You have to have all four for land to have value. A decrease in any one of them would have an effect on value. The most important one being economical. If it isn’t economically viable to develop vacant land with say a house then the price of land will decline to the point that it does become economical.

    While vacant residential land never loses its utility and thus never depreciates it does rise and fall with the market. Massive cities like London, New York or Beijing have land prices rise and fall. They are a lot more constricted than ours, yet their land values vacillate with the market. Even they are not too big to fail.

    A reason why lenders generally do not lend more than 60 percent on vacant land because land prices are more volatile than a property with a house where it’s possible to get 95% financing.
    .

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

    Here is my argument for SFH affordability deteriorating over time.
    Given:
    Victoria is growing in population
    Victoria is growing in density

    Thus, land becomes more valuable (in the long term) since the available land is not being expanded as quickly as the increase in demand. SFH value is mostly comprised of land value. Increasing SFH values (and changes in lifestyle preference) have pushed a greater percentage of the population into condos/townhouses than in the past.

    You can also think about it this way. Let’s say 50 years ago, 80% of home buyers were buying a detached single family house. That means that the income/wealth of those 80% must have been enough to purchases those houses. Now it is say 50% of home buyers are getting into a SFH (the exact number is not important). It is reasonable to assume that the income/wealth of the SFH buying group is higher than that of the condo buying group on average. So affordability of SFH for the population has worsened, but affordability of SFH for the people buying SFH may be about the same.

  113. Is that the reason why a couple of bad eggs on this blog are constantly harassing others? So that prospective buyers looking for information stop coming to this blog?

    How evil of them as there are only a few blogs that are as good as this one in discussing the market. As most real estate blogs are just cheerleaders for the real estate industry. It would be sad to see them win and this blog end in obscurity.

  114. @ 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.

  115. In a housing recession, the worst hit are the first time buyers who got in at the end. In our case that may be most of those that purchased in the last three years and have a mortgage of more than 3 or 4 times their gross income (not including income from rentals).

    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. They also may find themselves upside down in their mortgage and not permitted to sell their home by the bank. Owing more than the home is worth and not able to make necessary repairs to the home.

    And because some things that should be self-evident but can be taken out of context especially if they are part of a thread of a conversation. I have to add this part for the screenshot someone is likely to log and then print and tape onto their wall. This is not a prediction. We are not in a housing recession. This is just a scenario of events that could happen again based on historical occurrences. Oh yeah and – In my opinion.

    https://youtu.be/w1mN7306csw RIP Just Jack

  116. @ 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.

  117. “the crapboxes with under 4000 sq ft. lots on busy roads weren’t packed at all!…

    Hawk post’s prices ‘slashes’ regardless of what the market is doing…”

    Luke, once again you are so full of shit. I never started posting the slashes in any big way til a few months ago when it was so obvious the tide was turning and you couldn’t ignore the daily list of them in all areas of town and especially your Snob Bay.

    I lost track how many stories I read on here from those at open houses of crapboxes on Bay St and all the other busy streets and they were shoulder to shoulder.

    I even mentioned a few similar stories from friends who were looking at places on busy streets and their bad experience being treated like a herd of cattle by the agents and their arrogant attitude to put up the cash or hit the road.

    You keep saying prices can’t go up, but when they show signs of going down now you’re denying the daily lists of price slashes across the city are having no effect but the stats are now showing they are. Another hypocrite.

  118. 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?

  119. If interest rates never rose substantially, it would be a tough sell to say “pre-2008 prices are returning”, as you have nearly 10 years of currency inflation to deal with as well (unless you mean inflation adjusted). It’s possible they could fall that far, but I wouldn’t bank on it as the lower interest rates decrease carrying costs dramatically. Another manifestation of a correction is an extended stagnation of prices, or a small drop in prices combined with stagnation. If rates rose substantially though (2%+), I would speculate a larger drop in prices may occur.

    You need to also consider the state of the consumer, which has deteriorated considerably in the last 3 years, as the run up has accelerated. It’s not a harbinger of doom – I’m hopeful we’re not facing some kind of armageddon, but I do believe that there is plenty of room for a substantial change in our market, of the type a lot of people aren’t used to anymore. Slumps are a natural and necessary part of economic growth in our market, and we have tried valiantly to extend the “boom” phase.

    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.

  120. 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?

  121. Just remember a short while ago those crapboxes had packed open houses and were selling in days at over asking. He’s pointing to a trend of price reductions and when the market drops like it is now it is often those homes that start the descent in a correction or crash. You don’t have to be an economist to figure out that with higher interest rates and more govt intervention to come there is only one way left for this market to go.

    the crapboxes with under 4000 sq ft. lots on busy roads weren’t packed at all!…

    Hawk post’s prices ‘slashes’ regardless of what the market is doing…

    Gov’t intervention is key – what BC does is going to be different than Ont… we will see 😉

    The trend is with the ‘have nots’… not yet with those who are looking at quality homes, which can still be overpriced as we see in the Bank St. example… ‘Have not’s’ will always suffer quicker…

  122. “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.

  123. Local Fool, you have managed to sum up all of the bubbly Canadian housing markets excellently. A well thought out commentary makes everyone think a little bit deeper about their positions.

  124. … now city work projects shut down due to lack of flaggers … Perms bulls think bubbles never end.

    Flagger shortage = sign of local real estate meltdown.

    or

    Flagger shortage = symptom of booming local economy, something usually regarded as a positive.

    Take your pick, folks!

  125. 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.

  126. The market never escapes fundamentals indefinitely, and the cycle is an expression of this.

    Local, do you think you’re in a better position to understand the Victoria real estate market after reading that book? I think houses here have looked out of whack from ‘fundamentals’ for going on forever…so I’m not sure it helps a great deal? This blog was full of smart people chattering away in 2013-14 on a daily basis and no one saw the apparent buying opportunity at that time. We were all looking at the fundamentals!

    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, which suggests to me there’s more going on here than what’s captured in that book (granted I haven’t read it!)

  127. How does taking on a mortgage however many years ago put someone in the catbird seat today? I’m not getting it.

    Evidently, you’re not alone.

  128. @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. 🙂

  129. Introvert

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

    How does taking on a mortgage however many years ago put someone in the catbird seat today? I’m not getting it.

  130. 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.

  131. “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.”

    Just remember a short while ago those crapboxes had packed open houses and were selling in days at over asking. He’s pointing to a trend of price reductions and when the market drops like it is now it is often those homes that start the descent in a correction or crash. You don’t have to be an economist to figure out that with higher interest rates and more govt intervention to come there is only one way left for this market to go.

  132. … 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.

  133. @ LeoM,

    Yes, and the bull can go to the same site and pull this article up:

    https://beta.theglobeandmail.com/real-estate/toronto/the-buyers-are-back-in-torontos-housing-market/article36184927/

    It’s difficult to draw conclusions from media, as you demonstrate.

    Numbers, numbers. Data. Prices, migration, income, DTI ratios, GDP, interest rates, rental yields. Everything else is, “we’re great”, “it’s different here”, “everyone wants to be here”, extrapolative expectations, etc.

  134. 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.

  135. From the Globe and Mail:
    The Bear takesway:
    “The average home in the GTA sold for $732,292 in August, a 20.5-per-cent drop from the market’s peak in April, when prices for all types of homes averaged $920,791, according to the Toronto Real Estate Board.”

    The Bull takeaway:
    “Compared with a year ago, the average price for a home in the GTA is up just 3 per cent”

    Hawks perennial chart is starting to play out as he predicted… 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. Victoria has started its Fall fall a bit early this year, maybe it’s the start of serious corrections across Canada.

    https://beta.theglobeandmail.com/real-estate/toronto/toronto-home-prices-extend-torrid-slide-from-peak/article36181877/?ref=https://www.theglobeandmail.com&service=mobile

  136. 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 ?

  137. Luke, you have serious brain damage bud. Those are all typical Victoria homes. Since you have developed the Oak Bay snob syndrome you might want to visit outside the tweed curtain where the real world lives.

    Many high priced posh houses like yours have been slashed too but don’t want to hurt your feelings posting those.

    But what the hell.

    2231 Windsor Rd slashed $60K.

    857 Victoria Ave slashed $40K and 82 days on the market and still no takers.

    585 Falkland Road slashed $124K and no bidders.

    Just some crap boxes in your snobby hood that makes you no different.

  138. 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

  139. When a market softens it’s going to be the crap boxes that are mostly land value that are going to have the reductions first.

    The builders’ are not as interested as before and really who wants to live in those houses. A small target market that just shrunk a little more means the prices for these marginal properties will decline before main stream houses.

  140. 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.

  141. AZ, similar flip attempt at 252 Superior Street. Bought in the upper 600’s and tried to start low 800’s and now reduced again to $764K for like the #4 slash.

    Lots more slashes out there over the past few days. 1744 Foul Bay Road on slash #2 or maybe 3.

    1420 Fort Street slashed $46K today.

    2107 Oregon Ave slashed $41K.

    Lots of condo slashes too with the high listings keeping the competition honest.

  142. 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.

  143. 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?” 🙂

  144. My bad. Introvert must be having a kanipshin. Frothing at the mouth at the retirement home.

    Who is ripping off whom.

  145. 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.

  146. Good tweaks but pretty much a nothing burger for the market and for the realtor business. This looks like the government doing the minimum possible that still allows it to say it has taken action.

    Yeah not sure why it took them so long to do this.

  147. Good tweaks but pretty much a nothing burger for the market and for the realtor business. This looks like the government doing the minimum possible that still allows it to say it has taken action.

  148. 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