Dark sales

52% of the sales of both houses and condos in the core were condominiums this year. Last year it was 46%, the year before it was 42%, 5 years ago it was 43% and ten years ago it was 44%

So as Entomologist alluded to, condos are now outselling houses in the core.

2016 had the highest number of condo sales in the core on the real estate board data service at 2,322. Before that the record condo sales was way back in 2007 at 1,945. So far we are at 1,862 and it looks like we are on track to beat the record set in 2007 but fall short of last years.

Just make sure you have a good real estate lawyer look over your offer of purchase or sale BEFORE you sign it.

The median price for a house in the core this month is around $830,000 and a condominium is $380,000.

At around half the price of a house, why have condo prices not increased for the last nine months? The MOI is way down to under 2. Only 1.4 new listings are being added for every condo sold. The only odd thing is that, unlike houses, the DOM is now 30 days to find a buyer.

Relative to houses, condos are cheap so why haven’t their prices increased?

Years back in 2015 I prophesied that house and condo prices were under pressure to increase and all we needed was some form of stimulus. That came with the black swan event of a crash in oil prices as many transient Alberta workers came back to BC to buy rental properties. But that flow of unemployed workers with their severance checks in hand has ended and prices have now plateaued and sale volumes have plummeted.

We are now in a market that is mostly the reverse of 2015 with declining sale volumes. Prices are sticky but as the volume of sales decline the possibility of a correction increases. It wouldn’t take much for the wheels to fall off the cart in this market as we could easily double the number of listings this spring and yet the high prices would deter a corresponding increase in sales.

As always, I look to the outer lying markets such as Sooke, the Malahat and the Gulf Islands as I expect these areas to correct first. So far I’m not seeing an indication of a market correction. For all of you land bankers (hoarders) this means that you can fly off to Aspen this winter with little to worry about.

Bean counter:

Very interesting article and thank you for noting it. I would have found it rather chilling reading if I had not already moved our assets out of Canada.

@Penguin
We have been long time residents close to Willows Beach and want to inform you that there are deals to be had in your price range of $700K to $800K. You just have to know where to look. Within a 5 block radius of where we live, we know of 3 private opportunities that have come up within your price range +/-5% in the last 12 months.

Penguin: I already told this story a long time ago on the blog but you could also try this – After attempting to buy a house the ‘normal’ way with a realtor, and then loosing three houses to multiple offers in late 2015/early 2016 – almost in a state of desperation, I placed a ‘house wanted’ ad on ‘Used Victoria’. You could also try ‘kijiji’ or even craigslist (though personally I’d stay away from craigslist). It stated requirements, price range, neighbourhood wanted, and no swimming pools (state whatever your requirements or wants are). Even in the red hot market that it was then, I received a number of replies and viewed several homes with owners willing to sell at a good price without a realtor and best of all: no competition! Many homeowners out there detest the exorbitant realtor’s fees that we all too often seem beholden to, you would be surprised. You’ll also find many homeowners don’t want numerous realtors and people tramping through their homes. Working directly with you, they’ll also get to work on their terms or time scale that works for them.

None of the houses were quite right, though most of them were quite nice, until I placed the ad yet again (at that point having almost given up): A builder contacted me – He was about to list his home on the market. The house was perfect! The builder signed on the dotted line and we did the paperwork properly with a lawyer for what we felt was then a very fair price in that market. Having done everything to the house in extreme well built quality, it was also a very rare find in the Victoria market. I had not seen anything like it anywhere else, except new builds, and it is actually over a century old but you would never know it.

Try it, you never know what someone is planning. Now, and over the winter is a good time as people are making plans for next spring. The winter is also the best time to view a house as you will see the most faults then. You will find that you may hit it off with the seller and become friends, and the seller could help you out with this and that details that you may need to learn about the house. Often, the seller will like to see his/her home go to a person that truly values it and they’ll extend that pride of ownership over to you. You will score a great house without all that pesky competition to contend with. More people should do it this way I feel. Also, yes – the market does appear to be cooling down from ‘red hot’ status it was then, so that’s even better for you – but – if a rare desirable property comes up you can bet there is still loads of people poking around since as we all know, the core of Victoria does not have much inventory. This way you’d avoid that. Good luck!

“Hawk: If you regularly fart golf balls off coffee tables then I am not inviting you to the Christmas party.”

Well you’re no fun Barrister. I take it you don’t serve chili at your Christmas parties ? 😉

https://www.youtube.com/watch?v=R6dm9rN6oTs

More on “there are complicated tax rules when you sell”, basically you pay US income tax based on the gain of the house, not your world income. The same as in Canada (for a foreigner).

3Richard Haysom,

The correct regulation is called: Foreign Investment in Real Property Tax Act (FIRPTA). You can see all the details in Wikipedia. To be deemed as US tax payer is a different matter that related more with time length stayed in US than just house ownership there.

If you just own a property in US as foreigner (no green card or working permit), you can do maintenance work on it yourself as long as you don’t rent it out. If you rent it out, you must report rental (not world) income to IRS (there is also a flat withhold %). You must hire US personal to manage rental and do maintenance work. If you do any work yourself and are caught and reported, you could be banned to enter US for some years (due to working without permit). And there are complicated tax rules when you sell. I know these as we owned a condo in AZ until recently.

Note Canada does have very similar regulations in place, too. And we have foreign buyer tax in Vancouver and Toronto that US cities don’t have now.

… Or maybe sales numbers will increase, right? Hawk and JD – surely you didn’t miss the months on months of wannabe buyers frustrated by poor quality listings and a lack of options. All this talk of ‘dregs’, etc.

IMO, late November through end of December doesn’t tend to dictate seasonal patterns in Victoria. Mid-January through end of February, on the other hand, is much more influential. Last winter (early 2017) it was all about January. This year, what will it be?

JD, but if listings keep increasing just a small amount and buyers are tapped out by HELOC’s or by the new stress tests, or just basic affordability limits, then it won’t take nearly as much to tip the scales to buyers market. We have never seen this type of market before with so much high risk involved. It’s like balancing a golf ball on a glass coffee table. If someone farts it will keep on rolling right off the edge.

Active listings for houses in the core are at a three year high so far this month. And that’s different from what typically happens in the fall market. Active listing have historically declined in November not increased.

Too early to see if this is a trend towards a buyers market but still an interesting twist. We would still need an increase of 20 to 75 percent more active listings, given our rate of absorption, before this would be the start of a buyers’ market. But that can happen very quickly as it did in 2012 when active listings for houses in the core increased from 625 to almost 1,000 in under six months.

“The bigger they are, the harder they fall”

Thanks Numbers, good advice!

@Penguin
We have been long time residents close to Willows Beach and want to inform you that there are deals to be had in your price range of $700K to $800K. You just have to know where to look. Within a 5 block radius of where we live, we know of 3 private opportunities that have come up within your price range +/-5% in the last 12 months. Here are some tips.
1/ Walk around the neighbourhood you want to buy in
2/ Strike up a conversation with one of the old timers, we are generally in the garden doing something stupid
3/ Tell them that you are looking in the neighbourhood
4/ You’ll be surprised at how much you learn or which one of the seniors are thinking/planning to move on.
5/ Set a fair price and be flexible in your move in date (sometimes as far out as 1 year)
6/ you save realtor fees and most importantly…
7/ the long time resident doesn’t feel pressured and doing it on their terms!

With that said, there is one private house within 2 blocks of the beach that is on 5500 sq ft lot that is likely to go in the 750K to 775K range. Good luck. You just need some brains and some elbow grease to find these opportunities.

As per your original question, we sold privately. We sold to the tenants who rented off us while we lived in Rotterdam. They told me that if we wanted to sell let them know. They really loved the house, and my garden so it felt good to pass the house on to them. I set the price I wanted based on evalue sold and accessed prices of area properties. My own property assessment was useless since it was still grossly under valued. The greater weight on my price was having enough after all the BS to buy our lot we had an offer on with some to spare. They had a contract of sale their lawyer made with no conditions and I had my lawyer review. There counter offer met my requirements and we settled quickly at the kitchen table. The timing was good since we had a day between receiving the proceeds from the sale to lifting our financing clause on our lot!

CS:

I agree that we have reached some price stability but a much higher level than local incomes would support.

As I mentioned in another post the numbers coming from Vancouver have declined but enough to have a steady stream to maintain the higher prices.

@ Barrister

“I would point out that it is not simply an issue of foreign buyers but rather out of town buyers. ”

But according to Leo S, construction is keeping pace with population, so why would out-of-towners (who have always been a factor in the market) make so much difference? However deep their pockets, out-of-towners will certainly pay no more than they have to and in the current market one would not, therefore, expect them to drive prices up. And indeed, as JD has indicated, in the core, prices this year have not been driven up. The market, in other words, is balanced.

“Prices are not really declining—even in the dead of fall”

ICYMI Intorotroll, average and median prices dropped $40K for SFH’s and $40K for condos averages . It’s in one of those VREB news release internet articles you so despise.

You can’t be serious that RE prices must reflect local fundamentals. I agree that prices are very stretched and extreme by local metrics. However, there is massive amounts of foreign capital in the market.

I’m not really sure what you’re reading into there. That a RE market must reflect its fundamentals is demonstrably false. Vancouver does not behave this way, and neither does Victoria. Fundamentals are easy to break away from; you use debt to do it. This is especially true when credit is cheap and abundant. That’s what we’re doing. It’s what we’ve been doing. It’s when the credit runs out that there’s a problem – as debt repayment capacity is always limited by incomes. So can it break away? Of course it can. Perpetually? No.

On foreign buyers, and a large inflow of cash. No one said it doesn’t do anything, except maybe Garth. Sure it does. How much is difficult to say. But there’s a difference between say, the luxury class of a RE market, and a non-luxury class. The former often sees money from elsewhere – this is the segment of the market that is less attached to local incomes and generally isn’t much of a concern to a local population writ large.

But when all types of housing are unaffordable and even entry level dwellings are going parabolic, we have a problem. Our exploding consumer debt levels provide a very strong case that it’s Canadians who think that they either buy now or never, and others who are using equity in existing homes to buy condos to “strike it rich”. There’s a reason why our regulators are freaking out and throwing as many policy wrenches into the mania that they can. They know exactly where this leads, sooner or later.

If you believe that the Chinese or some other group are going to keep the entire RE market going independent of all local buyers, all I can say is you’re not alone.

“We are in recovery mode and real estate expected to boom”.

It just keeps getting worse for Hawk. Prices are not really declining—even in the dead of fall—and many still regard Victoria’s current prices as a relative “deal.”

“We are in recovery mode and real estate expected to boom”. Not sure if any reads the Gold-stream Gazette http://www.goldstreamgazette.com/news/greater-victoria-region-about-to-experience-real-estate-boom/

Not sure what to think about this. Thoughts?

I already predicted that LF wouldn’t like that last comment, he hopes it isn’t different now. In the 1980’s and even during the 1990’s still, China was still stuck in the dark ages so it is different now. There were not as large amounts of foreign money floating around the globe before 2000 like there is now – esp. to what was then considered a backwater (Vancouver). Japan may have had some influence on things in the late 1980’s, but it’s nothing like what we see today coming mostly from China. In Van in the 1990’s, we did see an influx of Hong Kong people who were afraid of the 1997 handover to China which did exert an influence there. However, some of these went back home after it was apparent the handover was going to go smoothly, partly causing a dip after 1997 that resumed around 2002 once mainland Chinese started to take notice of Van. The amounts of foreign money we see today have recently accelerated, and are the likes of which have never been seen before.

You are right I’m at a catch 22, being a home owner and like many others who bought in before the large price rises, having benefited from that foreign money flowing here, as I first bought in at age 23 in 2001. Back then, the average home price in Coquitlam was $250,000 – and driven mainly by local fundamentals at the time. Today, the same home fetches close to $1.4m. Here’s an example of a home similar to my first home that cost just $205,000 in 2001: https://www.realtor.ca/Residential/Single-Family/18680720/927-SMITH-AVENUE-Coquitlam-British-Columbia-V3J2X4
Back then I never imagined remotely things would be like they are today.

You might not believe it, but I do feel empathy for others as I picture myself today, if at age 23, and see how it would be impossible to do the same thing as back then. I’d be looking at tiny condos if in the same situation today. I feel like the situation is unfair for others not able to buy into the market – it is not a feign of empathy. But – life isn’t fair and it never was. Some get lucky, others aren’t so lucky. However, I already had the OB haters, etc to deal with, so I ‘get’ how you might think that.

Penguin is right – myself and others who bought in before the large price rises got ‘lucky’. Some of us acknowledge that. The baby boomers who bought in before 2000 are even more fortunate.

Do I think it would be great if the Gov’t did something about the foreign money even if it negatively affected house prices? Yes, as it would be good for society as a whole.

Do I think foreign buyers are the only factor? No – you are quite right locals have taken on more debt to compete, and so are part of the story driving up prices. Also, lack of supply as population grows is another factor. Robust economy, yet another factor. But, if foreign money was cut off or heavily taxed we would at least not have that factor to blame anymore. I don’t think it will happen though.

This environment did not exist in the 20th century, and this is why it’s different now than it ever was before.

Translated: Home prices in Canada will not meaningfully fall because globalization and foreign money will prop up our real estate market. Ergo, both are new market fundamentals, and it’s different this time.

In the macro sense, globalization and the resulting depression of wages is a net bearish signal for housing, not the reverse. This concept us Canadians have recently developed that foreign cash will now hold up these insane valuations is cute, naive, and a bit humorous.

Foreign money is not a new RE market fundamental in Canada. It never was, and never will be. Foreign money in Canada has always been there; its presence has ebbed and flowed with other countries in the past having mass run ups in credit (late 80s and early 90’s, Japan was doing the same thing China is now, with buying RE left and right). Today, China must keep control of it if they want to have money to run their country.

No matter what anyone posts, a RE market ultimately depends on locals to drive it. If the market exceeds that which locals can pay, locals bridge the gap with debt. This can go on for years. But when debt grows larger than the economy’s ability to pay it, the market deleverages without exception. This scenario has been played countless times throughout history in all kinds of asset classes, and each time legions of very smart folks were convinced that that time was different. People complain that only the rich can afford the asset, and everyone else can’t. This isn’t new. We’ve seen this all before; all you have to do is have a quick look at history.

And to the poster directly: You can probably stop trying to feign discontent and empathy that RE is getting too expensive, as the bulk of your postings to date are almost contradictory to that premise.

Everybody is happy to have others pay right until they discover that inflation has pushed them into the higher tax bracket.

The Staggering Value of Urban Land

https://www.citylab.com/equity/2017/11/the-staggering-value-of-urban-land/544706/?utm_source=nl__link3_110317&silverid=Mzk3NDcyODEyNjExS0

http://vancouversun.com/news/local-news/new-housing-minister-selina-robinson-to-tackle-b-c-s-runaway-home-prices

So hey the new housing minister is Selina Robinson… Maybe some emails, phone calls as well as your local mla might see some results..hopefully..

Someone posted in another thread that BC’s new housing minister is Selina Robinson – here is her contact info:

https://www.leg.bc.ca/learn-about-us/members/41st-Parliament/Robinson-Selina

Who knows? Maybe she’ll actually do more about the issue than I think they will?

This is why I sold my last rental property a few years ago and why I’m done being a landlord forever. It happens here in Victoria more often than you’d think because it’s not often reported in the news.

I thought there is a “bad tenants” list here in BC? If you are a member of BC landlord association (called LandloardBC now), they can help you check the list when they help you run credit checking on new tenants. We were members when we helped friends to manage their rental house a few years ago, the $150 membership fee was the best money any landlord can spend, as the association was very very helpful.

For police officers and teachers, they normally have good pensions which allow them to retire at age 55, and they can live comfortably but not rich, even without selling houses. Selling Vancouver houses and moving to here would bring increased living standards than when they were working.

I think a lot more of those Vancouver/Lower Mainland purchasers are just ordinary folk. They may have made some money on their sale of their homes in Surrey or the West Side but still needed a mortgage.

They came here because they were out priced in their mainland cities and were young enough to relocate their families and find work here. They are just as hampered by the high prices now as the locals. As they most likely had to take a cut in their incomes to live here. And those may be a reason for the stagnation in house prices in the core.

Sure there may be a few extremely wealthy that have moved here but if they are that wealthy why would they move from a city they were very comfortable living in? With that much wealth, they could winter in any city in the world.

And besides our prices are being driven by the demand for middle class housing not upper income.

We are quick to forget what it was like 4 years ago. I don’t think it can get much worse for buyers…

Prices could be rising.

Penguin:

What are your criteria for a house at this point? More importantly, are you thinking in terms of five years or twenty five years.

Only 14 new bankruptcies in the last 3 days of the week. Yikes ! We even beat out Vancouver by one. Nothing to see here folks, just keep the line moving please. 😉

https://justice.gov.bc.ca/cso/viewNewCaseReport.do

Won’t be long til the fence sitters who are waiting for more money wake up and realize it’s not going to happen. When an economy is based on easy credit and the noose is tightening, then you have one massive ticking time bomb.

B.C. Now More Dependent On Real Estate Than Alberta Is On Oil

http://www.huffingtonpost.ca/2017/11/10/b-c-now-more-dependent-on-real-estate-than-alberta-is-on-oil_a_23273530/

House prices in the core have been very stable over the last 10 months with the median at $863,000 +/- 3 percent. That certainly underscores how stable prices and the market has been this year at this price point. House prices in the core are at an equilibrium point and that makes supply and demand in balance.

Active listings averaged 408 per month . And sales averaged 170 per month. The average months of inventory being what has been historically called low at an average 2.4 ( +/- 30%) MOI. NOTE: In past markets a balanced market with stable prices exhibited 5 to 7 Months of Inventory but at lower prices when more people could afford to buy and more people were likely to list their homes to move up the property ladder.

Personally, I’ve seen more people choose to renovate their homes in the last year or two, than sell and move up to a better property. Simply because they could not find very much in the price range that they liked and could afford, and chose to spend their money on their current home instead.

Another indicator of the health of the marketplace is the New Listings to Sales Ratio which is sometimes expressed as the reverse in a percentage form.

The average NLS for 2017 is 2,605 new listings for 1,697 sales or 1.53 new listings for every sale (or 65%) Historically a ratio between 1.5 to 2.5 new listings for every sale or (40 to 60%) has been considered to indicate a balanced market. In historic terms the market for houses in the core has been in balance but right at the margin of a balanced and a sellers market.

The last indicator is the much maligned days-on-market (DOM). This is the one key indicator that denotes a “hot” market to buyers and sellers. It’s the one most proffered as showing the health of the market. And this year it is 12 days. WOW! This is really low. A historical balance is between 30 to 90 days and all lenders without exception have chosen this to define a balanced market as such. Mostly out of ignorance as this is what they’ve been told by their mentors and have never had the DOM indicator explained to them. At 12 DOM the house market in the core is on fire so much so that you’re roasting wieners along side the Devil by this one isolated indicator. If you’re a prospective purchaser for a house in the core that means you are getting regular updates on new listings from your agent, the car is gassed, the baby is tossed in the back seat, and you’re off to the next showing in minutes. Hopefully the agent hasn’t intentionally under priced this one so that there isn’t a 6 baby stroller pile up in the driveway.

I helped a family member sell a condo in Vancouver 1.5 years ago. I approached two realtors and got their view on value and marketing. Then we paid $400 for an appraiser to have a look. After that we polled people in the building and found someone that wanted the unit. It was one of only two units in a 16 unit building that had a proper ocean and mountain view which is why I figured this approach might work. The price agreed on was towards the top of the range identified by the realtors and appraisers. The realtors and appraisers were quite consistent in their views on value.

Total selling costs pretty low. Notary for conveyancing plus appraisal plus my time to make a trip to Vancouver. Of course if they had held on till now they would have made more. That was unknowable of course and in any case it was the right time for them to sell (plus it still tripled in price over the 24 years they owned it).

We have sold three houses privately (and 2 with realtors) in past 30 years. It is not rocket science, but does need hard work and good knowledge of market condition, the selling process and the regulations.

Our most recent private sale (a SFH with multiple offers) was in Oct 2009. We bought a new and bigger SFH nearby in Feb that year, and rented out the old house as market was bad then. But by Oct 1st, the tenants wanted to break out the lease due to family reason. With no reply to our rent ad posted immediately, we decided to sale. Lucky for us, the market was much better by then, and we had a couple evaluations done not long before (we did tell realtors that we would try to sell privately first), so we set a price that was good for us and reasonable for the market.

We posted for sale ad on UsedV, Craigslist, Kijiji, and got more than 30 inquires in the next two days. I talked with all 30 plus people over the phone and selected just 12 families that we felt could fit for the house (1000 sqft with partially finished basement) and the neighbourhood, to come and have a look the house (each had 30 minutes private viewing, and was told about the offer day and time)

The showing was on Monday and we got 6 offers by 6pm Wed. Since most of the offers were above our asking price, We decided that we will not do any counter-offer, and told all of them about the process we would follow.

We accepted the highest offer first, but it fell through the next day due to financing issue. We had two back-up offers, one of them with buyer realtor, and the price the realtor offered would cover the commission we pay, so the two offers were really the same price to us. We chose the family without agent and we knew wouldn’t have financial issue and asked if they want to continue, they did. We supplied PDS and survey to them and the house passed inspection and mortgage approval. But they had to find and use their own lawyer, as in BC law society and the notary society prohibit their members from acting for both buyer and seller.

At the end, the family who bought the house was happy and they did finish the basement with a suite afterwards. We were happy as we got a good price that was over asking and beat the price realtors would list for, without price negotiation and paying commission. The other families who didn’t get the house were also fine, as we were very open to them on the process.

So the key points of a private house sale are very much the same as other sales, know the process, know the market, know the rules, be honest and be fair.

The only thing that has changed dramatically and will continue to change, I think, is how to market your home for a private sale. Back in 1991, we put ad on TC, sold conditionally to the neighbour from next street but he couldn’t sell their own house, so my co-worker bought it. In 1999, we sold (in ON) via Grapevine to a stranger. But now, in a good or balanced market, one doesn’t need to spend any ad money at all, if you and your house are prepared and presented well.

4173 Bracken Ave slashed $50K to $799K. Nice place in nice hood by St Marg’s.

1339 Carnsew St in Fairfield slashed $60K.

116 South Turner St in James Bay slashed $100K.

3651 Craigmillar Ave in Maplewood slashed $50K.

3661 Craigmillar Ave, slashed $40k.

rush4life, they tried the cheap auction pump and were too naive to realize that game ended months ago and are now waking up. If it failed then, it usually fails after they jack it up, especially on a busy street.

One of the issues is separating out the actual property from the season. While I believe that places tend to sell for lower on a price/ask ratio in the fall/winter, that is likely more to do with them being places that are less desirable (left over from spring) than the season.

Could maybe be done for condos that are more uniform.

Would you be able to isolate the ones that were left over from the spring, and remove them from your calculations? I just think it would be an interesting topic to tackle, and I realize your analysis wouldn’t be scientific.

The so called hot market for 2 bed 2 bath condos under $500K that someone was touting as flying off the shelves has fallen off a cliff. Only 6 sales since Monday in the core and 5 went for under asking and the 6th was $5K above after a $25K slash. I sense there’s a change in the wind in the condo mania market.

We sold our home privately earlier this year in May. It had been previously listed on MLS for 6 months with one offer we didn’t accept.
I spent quite a bit of time writing the ad, no long story just point form with good information and decent photos. I ran the ad on Craigslist and sold it within a week. Pricing was the hardest thing to figure out, but we decided to price it close to what we thought was fair value and we sold for very close to it.
We are still looking for an acreage to purchase though!