May 7 Market Update
Weekly sales numbers courtesy of the VREB.
| May 2018 |
May
2017
|
||||
|---|---|---|---|---|---|
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Unconditional Sales | 133 | 1006 | |||
| New Listings | 335 | 1451 | |||
| Active Listings | 2109 | 1896 | |||
| Sales to New Listings | 40% | 69% | |||
| Sales Projection | — | ||||
| Months of Inventory | 1.9 | ||||
A relatively slow start to the month. Sales down 20% from last year while the usual start of the month listings and re-listings brought inventory up to over 2100 which is an increase of 17% from the same time last year.
Back when the market was smoking hot, we didn’t see any interesting sales to speak of. Properties sold in bidding wars over ask or quite quickly at asking price. There really was no such thing as a deal to be had relative to the current market because too many people were paying attention. Now that it is slowing down I see more sales that would be considered interesting. Such as a townhouse that was presented for a bidding war and sold in a weekend… at $150k under ask.
Overall though, still about a quarter of places are going for over asking price. While we can always expect some properties to sell in bidding wars no matter what happens, in a slow market that percentage is 5%, so there is still substantial interest in well priced properties.
A few people commented that the previous article about affordability that only considering the scenarios of flat rates or an increase of 1% was too narrow a band. I re-did the moderate wage growth scenario with rates rising 1%, 2%, or 3% above current levels. At plus 3% that would mean a 5 year fixed is being sold at about 6.5% which is very high compared to the last decade but not at all out of the ordinary for mortgage rates in general. As you can see, in that scenario with affordability improving it would erase all of the gains from the last price runup.
I personally don’t expect rates to increase that high (the economy can’t take it) but it certainly shows how much our current prices are built on an environment of low rates.
Just reading this blog VREAA
https://vreaa.wordpress.com/
It’s like reading a whole blog by Vancouver Hawks.
Sounds pretty bleak over there makes you wonder is it really?
Good point. Calling it a school tax is a weak attempt to make it more popular. What you don’t want to pay your share for the children?
Monday post: https://househuntvictoria.ca/latest
VicInvestor:
There has never been a younger generation that has been helped as much as this one has. Nor has there been a generation that either has or will shortly inherit as much. With six siblings I inherited my portion of the family home which came down to a bathroom and a hallway. This was at a time that mortgage rates were 14%.
If you want a quick fix for the housing market stop bringing in 300,000 net immigration and you will see supply soon start to outstrip demand. Then wait about five years and you will see a major increase in supply as the greedy boomers start to either die out or downsize.
The problem with this “luxury tax” is that before you know it inflation will start to include most homes. People seem to forget that the land transfer tax was also brought in under the guise of only effecting luxury homes. Notice that the tax has no build no cost of living adjustment. I know that the politicians are familiar with the concept since all of their overly generous pensions are inflation indexed.
It is a beautiful day out there and hope everyone gets to enjoy it.
2k I cant even argue this. Deferring is the way to go. So what if you have 100k at the end. Your heirs will still get a lot of $.
Only issue I have its going to general revenue not schools so call it what it is. BC tax.
@Vicinvestor Luckily it seems that the public is not buying into it. Even in Vancouver a headline like “Owning $4 million house in Vancouver no blessing as seniors face $2,000 a year more in taxes” is so patently absurd that even the financial post can’t successfully spin it anti-government.
“They could sell their home, and are eligible to defer both the new tax and property taxes, but Kent says that’s not the point.”
Facts are not the point! I don’t want to hear facts! What about emotions!
http://business.financialpost.com/real-estate/owners-of-multimillion-dollar-vancouver-home-owners-say-they-cant-stomach-tax-bump
Is it just me or are boomers one selfish and entitled generation? If you’ve been lucky enough to see such massive capital gains in your property (we’re talking millions!), then stop complaining about a tiny $2,000 of extra tax a year! We need to stop catering to these seniors and help the younger generation.
1/ population keeps growing
2/ SFHs have not kept pace
3/ FBs have always been and always will have a place in the Canadian RE marketplace
4/ FDI or FREI is governed globally under multiple conventions
5/ % rates are at crazy levels
6/ the world is FLUSH with credit…still!
7/ prov + local governments add a gazillion new taxes to dose the fire
8/ RE is still stubbornly high, but down trending
These are all trends. Will 5/ and 6/ be enough to hold back all the other factors? Is this all FBs fault? The answer is a resounding no. Not saying we shouldn’t, but there are way more factors at play. How much does a FB pay now even if they are owner occupied? Here is a $2MM example:
PTT 38000$
FBT 400,000$
GST if applicable 100,000$
Let’s not include ongoing prop and school taxes and spec taxes… that is 548,000$ for all levels of government. Put another way extreme way, sell a $2MM new house to FB and you could use 548,000$ subsidized housing for a local? How long would it take someone making the avg wage in Victoria to pay that amount of taxes? Would the amount of taxes justify a net net gain in terms of services used in our province.
These are observations and not my opinion, but the numbers are finite for FB. FYI in the Philippines, a certain amt of the housing stock is allocated for FBs, I think it is 20%.
Mostly because they bought in the past. At this point the average household can certainly not buy a detached house. However they could still buy a condo.
The average guy CAN afford to buy a place because many do. Bears cannot because they don’t make enough money because they didn’t pay attention in school. Which life would you choose?
Has it occurred to anyone that one of the reasons that the average guy cannot afford a house is because we are being taxed to death already? The average working guy is a lot worse off than he was in my dad’s day. What percentage of the jobs in BC are either directly or indirectly from one level of government or another?
It’s easy to be doom and gloom, but I was under the impression that you were in your 70s, Barrister. Are we talking the 40s here? the 50s?
I mean, all levels of government taxation amount to around 42% of GDP. But consider what we really feel is government spending and what we feel is a waste. My GP is a small business owner, but he bills island health. So he’s part of that government gravy train. The guys widening the road on my way to the office all work for various construction companies, but they bill the city. So they are part of that as well. Should we fire my GP because he’s a bum on the government dole? Or what about the road crews?
We have more doctors, better roads, and more services then ever before, and people recognize it. So we rarely hear calls for fewer doctors or road crews. Where the benefits are less tangible to the electorate the government often cheaps out big time and this is where government can often fail us. A great example is the CRA. The CRA should’ve been clamping down on foreign buyers, flippers, splitters, etc etc etc decades ago. By counting heads at the CRA the federal government gave up on tens of billions of dollars of lost revenue – and that’s free money to us as a huge portion of this is foreign bankroll. They were penny smart and pound foolish. A few million in salary would’ve brought in a ridiculous ROI. Now the NDP (and before them, the provincial liberals) have had to step up and come up on their own taxation regime where the fed has failed.
They are certainly the weakest of the bunch. That said it’s sometimes a little difficult to tell since there are so few of them that the chance sale of a few more or less will substantially change the picture.
Condo sales only down about 20% compared to same week last year.
Leo, interesting about the SFH sales this week, How are condos doing. Iwas told that sales above 2 mil. have just about frozen, is this true?
Getting away from all the academic theories for a moment, went to an open house for a new listing down the street and in spite of being there for twenty minutes not a single soul walked through during that time.
I suspect that I have just made Hawk’s day.
Hmm.. Single family house sales down nearly 50% compared to same week last year.
Yeah the idea that increasing income inequality (by decreasing taxes on the highest earners) will make housing more affordable is likely not defensible.
However the relationship in both directions is rather tenuous. Tax policy certainly has an impact on house prices, but the level of taxation is not one of the primary factors.
That’s not my thesis, just a fact. The highest RE prices in Canada are found in the lowest tax provinces, and also affordability in BC has gone down hugely since the BC Liberals and federal Conservatives cut taxes. That was my response to someone who claimed high taxes are responsible for unaffordability. But there’s a lot more to it.
The big picture is the tax system, through legal exemptions (e.g. principal residence, HOG, property tax deferral), lack of enforcement (e.g. flippers getting away without paying taxes, illegal short term rentals, evasion of taxes on foreign income), and low property taxes, encourages RE as a vehicle for parking money legally or illegally. Add to that government guarantees for mortgages that would be considered insane for any other asset.
Unfair exorbitant taxes are obviously unfair and exorbitant. But the point in question was what proportion of the tax a government raises — whether the total be fair or unfair, exhorbitant or reasonable, should be based on property, and that really has nothing to do with the risk of fascism or the probability of the expropriation of property.
And when discussing the taxation of property it is necessary to be clear as to what is meant by property. In advocating a capital tax, I referred to the taxation of all property, real estate, financial assets, works of art, jewelry, etc. Such a tax, at a rate of one to one point five percent, as in non-fascist Switzerland, would presumably have an impact on the RE market, but it would have many other effects. In particular it would have something of a leveling effect since it would oblige the wealthy to pay tax on unrealized capital gains on RE, financial assets, etc.
A capital tax, would indeed be the answer to Warren Buffet’s plea to be taxed more heavily than his secretary. At one point five percent, a capital tax would cost him something like a billion a year, which would indeed be more than his secretary pays, but well within his ability to pay while accumulating billions more.
As am sure you will agree, Patriotz, that is only half the story. House prices also depend on availability. If the black death swept across BC and reduce the population by two thirds, house prices would fall to a very low value indeed. Equally, if Victoria’s municipalities rezoned to several times the present density, land prices would fall sharply, as would the price of houses.
Many of these things have become a lot harder due to recent changes. Reporting of sale of Principal residence, spec tax, AirBnB licensing. More transparency on presales and beneficial ownership. Much of the rest would be easy to catch with a bit more sophistication on CRA’s part. I’m fairly confident that the vice is tightening in an appropriate way on those fronts.
Hmm.. And you are betting less than 9% decline? That’s not a bad bet, I’d expect about that much so pretty much even odds whether it will land on less or more. I’ll take you up on that, but only beer for you not all the readers! Remind me in 2020 🙂
That’s going to be a tough one. I have not heard a single peep from inside Quebec that they are interested in killing the QIIP.
You really think David Eby’s actions on money laundering are not real? They are attacking it from both ends. I don’t think it’s fair to say they are only focused on the tax side.
It is just more complicated than pointing to tax rates. I grant you that higher tax rates result in less disposable income, but it is more complicated. Federal tax rates are the same, subject to territorial rates to encourage migration. If low taxes are the cause of high RE prices, then RE prices in the Yukon, Northwest Territories and Nunavut should be through the stars – they are not. here are their tax rates:
Yukon
6.4% on the first $46,605 of taxable income, +
9% on the next $46,603, +
10.9% on the next $51,281, +
12.8% on the next $355,511, +
15% on the amount over $500,000
Northwest Territories
5.9% on the first $42,209 of taxable income, +
8.6% on the next $42,211, +
12.2% on the next $52,828, +
14.05% on the amount over $137,248
Nunavut
4% on the first $44,437 of taxable income, +
7% on the next $44,437, +
9% on the next $55,614, +
11.5% on the amount over $144,488
Here are the provincial and territorial income tax rates:
QUEBEC:
$42,705 or less: 15%
More than $42,705, but not more than $85,405: 20%
More than $85,405, but not more than $103,915: 24%
More than $103,915: 25.75%
Newfoundland and Labrador
8.7% on the first $36,926 of taxable income, +
14.5% on the next $36,926, +
15.8% on the next $57,998, +
17.3% on the next $52,740, +
18.3% on the amount over $184,590
Prince Edward Island
9.8% on the first $31,984 of taxable income, +
13.8% on the next $31,985, +
16.7% on the amount over $63,969
Nova Scotia
8.79% on the first $29,590 of taxable income, +
14.95% on the next $29,590, +
16.67% on the next $33,820, +
17.5% on the next $57,000, +
21% on the amount over $150,000
New Brunswick
9.68% on the first $41,675 of taxable income, +
14.82% on the next $41,676, +
16.52% on the next $52,159, +
17.84% on the next $18,872, +
20.3% on the amount over $154,382
Ontario
5.05% on the first $42,960 of taxable income, +
9.15% on the next $42,963, +
11.16% on the next $64,077, +
12.16% on the next $70,000, +
13.16 % on the amount over $220,000
Manitoba
10.8% on the first $31,843 of taxable income, +
12.75% on the next $36,978, +
17.4% on the amount over $68,821
Saskatchewan
10.5% on the first $45,225 of taxable income, +
12.5% on the next $83,989, +
14.5% on the amount over $129,214
Alberta
10% on the first $128,145 of taxable income, +
12% on the next $25,628, +
13% on the next $51,258, +
14% on the next $102,516, +
15% on the amount over $307,547
British Columbia
5.06% on the first $39,676 of taxable income, +
7.7% on the next $39,677, +
10.5% on the next $11,754, +
12.29% on the next $19,523, +
14.7% on the next $39,370, +
16.8% on the amount over $150,000
Yukon
6.4% on the first $46,605 of taxable income, +
9% on the next $46,603, +
10.9% on the next $51,281, +
12.8% on the next $355,511, +
15% on the amount over $500,000
Northwest Territories
5.9% on the first $42,209 of taxable income, +
8.6% on the next $42,211, +
12.2% on the next $52,828, +
14.05% on the amount over $137,248
Nunavut
4% on the first $44,437 of taxable income, +
7% on the next $44,437, +
9% on the next $55,614, +
11.5% on the amount over $144,488
“Tax changes are always going to be contentious, so rather than start there I’d prefer that Canada stop pussyfooting around and address the issue head on: restrict foreign ownership, kill the QIIP, track beneficial owners, clamp down on money laundering and permitting lawyers to circumvent FINTRAC, etc. We should send a message — loud and clear — that ours is not a country for wealthy unethical parasites. Want to build a life in Canada? Great. Want to steal from us? Intolerable”.
Bravo – I fully agree. One thing further – the income tax system needs a complete makeover. We should have a flat tax. How about 10% across the board.
Patriotz – trust me, I understand your thesis – it is just plainly wrong. Allowing governments to tax more and more, just breeds more foolish spending by governments. Taxing people so they have less money to spend on housing is what you are saying is propping up RE prices. Your thesis is that lower tax regions have higher RE prices. The money will never end up building affordable housing – our PM will just take another expensive vacation. Incomes and higher paying jobs, after you take out the blood-sucking money-laundering and dirty foreign money, are what housing prices are based on. Respectfully, take the blinders off and read the investigation reports of the real reason for the price-tags of the real estate in the areas mentioned: foreigners parking their ill-gotten gains in our RE market [looking for safe areas], fentanyl drug money being laundered through casinos and RE, housing speculation by unscrupulous flippers, etc. Read the Vancouver Sun reporter’s, Sam Cooper, findings. Here is a good start for you:
http://vancouversun.com/news/national/huge-b-c-money-laundering-investigation-pivots-to-drugs-and-guns
http://vancouversun.com/author/samcooperprov
One of the best is Madam Justice Griffin’s recent decision which goes through what is really happening – it has nothing to do with taxes:
https://www.straight.com/news/1014966/two-families-feud-over-three-vancouver-houses-and-money-transfers-china-canada
Clearly not, since Ottawa and Edmonton, which have higher incomes than Vancouver and Victoria by quite a bit, have far lower housing prices.
As for the rest, I don’t think you disagree with me as much as not understanding my points. The biggest being that taxes per se are not the problem, but disparity in taxation among sources of funds going into the housing market.
And you’d better believe that Quebec has the highest taxes in Canada. Nova Scotia is pretty close, but its housing is also among the most affordable.
Patrriotz, I could not disagree with you more. Firstly, housing prices are based on incomes. Indirectly, a person’s willingness to pay is based on income. Secondly, we collectively as Canadians are over-taxed [income tax, sales tax, excise tax, tax, tax tax]. The income tax system is flawed because it creates a disincentive to work and innovate. You say, “he more affluent pay (or should pay) a higher % in taxes than the less affluent, so the income tax system makes buying more affordable, not less”. That is patently inaccurate. You need to define “affluent” – I suspect you are referring to higher income earners. However, income is earned in many forms, namely: wages, salary commissions, dividends, interest, and capital gains. These are taxed differently. The fact is that the current income tax regime hurts our competitiveness on the world stage – Mr. Morneau disagrees, but every leading economist and corporate executive has argued that our income tax system punishes [not rewards] innovation and success. The end result is a lower standard of living for all.
Quebec does not have the highest taxes in Canada. You point to “BC, Ontario, and Alberta” – please focus in on the pockets of disequilibrium – it is Vancouver, Victoria, Calgary and Toronto [not the entire province] – so income taxes have nothing to do with it. Foreign buyers are now focusing in on Quebec – Montreal is now the hottest RE market in Canada and, unchecked, will catch up to Vancouver, Victoria, Toronto and Calgary.
No disrespect, just a difference in opinion.
No. House prices are determined by how much buyers are willing and able to pay. In fact, the more affluent pay (or should pay) a higher % in taxes than the less affluent, so the income tax system makes buying more affordable, not less. Provided all the money going into the housing market is subject to taxation, that is. The problem is when it isn’t.
Note also that Quebec, which has the highest taxes in Canada, has among the most affordable housing. The provinces with the lowest taxes, namely BC, Ontario, and Alberta, have the least affordable housing.
Leif said: “I agree with franc the real issues are
“restrict foreign ownership, kill the QIIP, track beneficial owners, clamp down on money laundering and permitting lawyers to circumvent FINTRAC”
There is another way to reverse escalating home prices… start reporting your friends and neighbours who are ripping off the system.
In the past five years I’ve met so many people who are not reporting income. AirBnB, basement suites, people picking up discarded receipts at the landscape material yard to claim on their income tax, claiming home owner grant on their rental, claiming the home owner grant on their Victoria property that they use during the summer while living in Alberta, American’s living here part time then selling and claiming the principal residence exemption and not reporting the profit to the American IRS, and now empty house owners scheming ways to pretend they live in the house like the Alberta doctor and his vacation house in Victoria. If I was inclined to cheat on my taxes I’d keep my mouth shut, but many people boast about it and rationalize it.
Unfair exorbitant taxes on land owners has a history worth studying. It’s often the first step to fascism, expropriation/eminent-domain, especially when the government deems the property is under utilized. Be careful what you wish for because it’s possible to go down this path in a passive way when the various levels of governments chip away at the affordability of property by imposing ever increasing forms of taxation and fees. Taxes never go down once imposed. Property purchase tax is a good example, the government will never lower the rate and the PPT is cumulative, meaning it keeps adding to the price of property with every transaction. After four sales (~25 years) the PPT adds about $200,000 to the cost of an average SFH.
Barrister you hit the nail on the head.
For me to makeup the difference between a house in 2015 to 2018 is around $300k for what we are looking at.
That requires me to make 500k more to pay off. This is why I think government workers have it pretty well. They pay little tax on 70k, they get 75% of their income for the rest of their lives in retirement. In the private sector if your doing well your paying 50% tax and have to save millions for retirement.
Yes I can take a massive mortgage out and still buy the same house for a million dollars but I’m not going to. I just can’t see how much further this can go on. I currently see all the 500-700k places being gobbled up but million plus SFH are not.
I agree with franc the real issues are
“restrict foreign ownership, kill the QIIP, track beneficial owners, clamp down on money laundering and permitting lawyers to circumvent FINTRAC”
Josh and Vic it’s interesting to think we all saw this going to school here.
” I even know of some whose kids apply for bursaries due to claimed low income status. Why would they set up a business here when the making a killing in their home countries?”
I remember multiple friends from Hong Kong in Uvic that would get free government grants. Around 10-20k a year because on paper their parents made no money in BC. They then used that free money for whatever. Some bought stocks and it was crazy to me that since both my parents worked and paid tax I couldn’t get the same grants.
How ####ed is that?
That was 17 years ago and I bet it is still happening. I great statistic would be to see how much of our tax dollars went to students abusing that system. They were Canadian citizens then the father or parents would go back to HK.
This has been happening for ages as explained on those pod casts. The interesting party is we pay for that. We subsidize the schools and universities and health care with our tax. This year I’ll pay more in tax than I made when I graduated from uvic with my first job. Why should I have to pay such a crazy amount of tax when 28000 people sit in BC and countless others that abuse the system yet probably own a huge amount of BC s real estate under primary residences making a fortune and paying nothing.
Beautiful sunny day out there.
Has it occurred to anyone that one of the reasons that the average guy cannot afford a house is because we are being taxed to death already? The average working guy is a lot worse off than he was in my dad’s day. What percentage of the jobs in BC are either directly or indirectly from one level of government or another?
Exactly Franc, no BS. Instead we get a tax the poor and rich land owner scheme and who can best afford the tax? Meanwhile the real issues are skirted. AirBnB negotiated just in time to stop that issue. A trip to a foreign country put an end to the other. What was left to make the voter base happy?
The tell tale job stats the pumpers ignored were the job losses in the real estate and support sector. No wonder the crash warning went out last week. This sucka is done like dinner.
Great stats Andy. Coming soon to Victoria.
“Losses were felt in finance, insurance, real estate, rental and leasing jobs (-6,400); and business, building and other support services jobs (-4,200).”
Tax changes are always going to be contentious, so rather than start there I’d prefer that Canada stop pussyfooting around and address the issue head on: restrict foreign ownership, kill the QIIP, track beneficial owners, clamp down on money laundering and permitting lawyers to circumvent FINTRAC, etc. We should send a message — loud and clear — that ours is not a country for wealthy unethical parasites. Want to build a life in Canada? Great. Want to steal from us? Intolerable.
That should stem further abuses. Addressing existing ones might be more tricky, but a clear crackdown on the input should make existing transgressors reevaluate their schemes.
We could also consider taxing them on the way out by making the principal residence exemption contingent on proving that funds used to purchase their property was subject to Canadian taxes.
8,653 Sq Ft lot; S.W. Marine, Vancouver – SFH
*looks like a nice, well kept family home built in the 80s.
“Just sold for ~$1 million under July 2017 Assessed
Sold for $2,580,000
28% below July 2017 assessed of $3,571,000
27% below July 2016 assessed of $3,538,000”
Coming up on 30% below assessed…
Vicinvestor1983,
Depends on what you are looking for in quality, but the standard corner cabinets can be had at any big box stores such as Home Depot/Lowes for less than $400.
SweetHome,
Standard distance between the studs should be 60″ to 60 1/2″. or install the studs sideway (gain 2″) so that it will fit the tub, however the wall must be frame around the tub to accommodate it. Or, at least mount a small section the regular way to accommodate lights/fan switches and door frame.
The other way is to reframe the opening for 54″ bathtub (cost more because not really a common size), or reframe for 54″ drop in tub then tile the left over if there is a separate shower.
Barrister,
I’m not sure as well, and I agree that it would be very interesting by the middle of the summer if those addition homes are added to inventory.
Local Fool,
Leo S,
I know it hard to trust an old immigrant with broken English, but IMHO as many others on here is that it make sense to buy whenever you can afford.
@ Once and future:
You might have noticed that the capital tax that I advocated (at a rate of one to one point five percent as levied in Switzerland) would be applicable to all assets. So, yes, my view remains what it was. As for elderly people with a disproportionate amount of wealth tied up in their own homes, it would seem reasonable to allow deferral until death, as with the existing property tax.
And what you are missing in you view of the property tax is that without the existence of the state, with its parliament, its courts, its police, its army, its navy, its air force, its security services, its hospitals and schools and all of the other infrastructure that it creates, there would be no hope for most people elderly or otherwise to enjoy the benefit of property: they would simply be booted out or have their throats cut by local war lords or feral immigrants out for plunder.
…. But now I see that Patriotz said that, but more pithily.
Should have waited on the early renewal of the mortgage. Competition is pretty fierce for renewals as volume is reduced. Banks are going to get more competitive for business.
Slow sales week. We had several weeks there where sales were 220ish. Last week 172.
The ratio for quite a while was 3 new listings, 2 sales, 1 price change.
Now it’s 3 new listings, 1.5 sales, and 1 price change.
Sales still supposed to be increasing, not decreasing, but maybe it’s just a blip.
““We haven’t put our house on the market again and we need to close in seven weeks. There is no point. We are watching the market so closely with our realtor and we can’t afford to take the amount of money that we will get offered right now. If we got a delay in closing then it would be fine. I’m sure the market will recover in time,” Darren Evans told the Star.”
” So ingrained is this idea that generating real estate wealth has become an industry in and of itself, with entire cable channels devoted to flipping and equity building, and get-rich-quick experts offering classes, workshops and conferences; A recent Real Estate, Bitcoin & Wealth Expo in Toronto included bizarre and rambling inspirational speeches by Sylvester Stallone and Pitbull.”
The wake-up call for a generation of wide-eyed home buyers
http://www.macleans.ca/news/canada/the-wake-up-call-for-a-generation-of-wide-eyed-home-buyers
Good Morning:
Looks like a beautiful day out there. Hope everyone gets a chance to enjoy the sunshine.
Yes in theory it is more worthy, going all the way back to Adam Smith. Why? Because it’s not ultimately the product of labour and saving, like true capital. It’s just there. Ultimately its ownership is based on force of arms, not production. You can tax it as much as you want, and it does not affect the incentive to save or work. Nor can it be moved or hidden like other assets.
So, your solution is to punish every land owner in BC because we have screwed up our immigration and foreign ownership policies? I agree that the US has other significant wealth disparity problems, but that is another issue.
It concerns me that many smart people see a short term problem in BC and decide to alter the fundamental fabric of our economy to fix it. We have simple tools to deal with this problem, even if we have waited too long to use them. In fact, they may turn out to be more “effective” than people want.
While I am not a fan of Hawk’s continual doom posts, there is a significant chance that real estate is in for a sizable correction.
In theory it isn’t more worthy, but in the current socio-economic environment the rules are kinda messed up and as a result we have some very acute issues with land ownership. Owen Bigland is bang on that allowing immigrants to bring cash to buy property, pay low property taxes AND gain the principle residence exemption is a big problem. Because nothing had been captured from them. It’s like a big neon sign – BUY OUR PROPERTY, PAY LITTLE IN TAXES, GAIN PRINCIPLE RESIDENCE TAX EXEMPTION IN A STABLE FIRST WORLD COUNTRY WITH FREE HEALTHCARE!! When you think about it, is amazing the problem isn’t bigger.
Similarly the US has a huge problem with a lack of taxation on wealth – and a disproportionate amount of on taxation of labour. That one is slowly eating the country alive, and here again while taxation on wealth isn’t inherently more deserving, the rules in the US have been setup such that, disparity is so bad that now wealth IS more worthy of taxation.
To clarify my statement about land taxes being “evil,” I think that most of what we call property taxes are just reasonable fees for local services (roads, fire, police, etc). They are essentially glorified strata fees. However, going beyond that requires caution.
As a counter-thought, let me take it to another level. Let us define “property” to include all the assets you own, including all you high-earners who have salted away your savings in sensible ETFs, or own a nice car (or two). Are you so keen now?
I am of the opinion that local housing issues are solvable using tools like “building homes” and “taxing foreign ownership.” If housing goes through a correction (which it always does), why is land ownership so much more worthy of taxation than any other kind of “property?”
They are neither necessary, nor evil.
Not necessary, because revenue COULD be raised by other taxes instead.
Not evil unless you take the view that all governments are evil, taxation is theft and the services government provides are useless or worse.
31 x 134 lot; Kerrisdale, Vancouver
“Vancouver Special”
Just sold for $1,900,000
24% below July 2017 Assessed Value of $2,508,900
26% below July 2016 Assessed Value of $2,562,500
I hope you like the idea of never ever being able to retire.
Taxes on land are a necessary evil, but evil nonetheless. Just because we have a mess created by corruption and poor central bank planning doesn’t mean we have to destroy everything in the province to fix it.
Rather a myopic view on immigration because of RE.
We live in interconnected and global economy. It isn’t the world of 30, 20, or even 10 years ago. Everything and literally every product/service requires teamwork/collaboration from another country.
People who efficiently facilitate efficiently and innovate are the winners in the global economy OR any economy for that matter. The senator is ABSOLUTELY CORRECT, we have to leverage this ASSET.
If all we are going to do is TAX THEM, rather than saying, how cay you turn my wood to furniture? Salmon to Processed products, minerals to metals? ideas to products? That is stupid. The wealth gap will even get larger and what values of RE are inconsequential.
People fail to realize, China and Asia in general are ahead for some reason…I would call it sacrifice and lots of elbow grease. Drive on Friday night in any large city in Asia…and do the same in Vancouver or Toronto…what is the difference? The lights are still on…
People around the world are outworking us plain and simple. This is not corrupt money, it is money earned. Only the anomalies make it to the news, anyone who has been there and worked there will tell you something entirely different.
Focusing more on taxing land and less on taxing income has another great advantage other than the ones discussed here. Very easy to avoid or minimize income taxes. More or less impossible to avoid land taxes.
Not likely to happen though in a province full of land rich income poor seniors.
The senator makes no sense. Data shows that investor immigrants pay less income tax than refugees! I even know of some whose kids apply for bursaries due to claimed low income status. Why would they set up a business here when the making a killing in their home countries?
Josh I think that is one of your best posts, except for those last 3 sentences which are really loaded statements – let’s skip those for now 🙂
In a low property tax environment (like BC) it is madness at the worst and foolish at best to allow ownership by anyone who isn’t contributing to the local economy.: Either by operating a business that employs people or by paying income tax. Vacationers are a really really tricky situation. Yes they may show up 2, 4, 12 or however many weeks per year but even if they spend like bandits while in town they place more of a drag on the economy then they add to it in comparison to locals.
So as that one gent on the CBC podcast said, we need to also encourage foreign owners to bring their business HQ to BC. Now, here’s the rub – a lot of Chinese businesses (and their owners) are wealthy precisely because of the “competitive advantages” that China offers. Lax environmental controls, dirt cheap labour, exploitation of IP etc. So as good an idea as it sounds, even if Mr Chinese Business Man wanted to move his company it may not be viable in BC. So now what? This leads back to the discussion of shifting the tax burden to property owners and lowering the income tax burden. Now the foreign owner is hit regardless who lives on the property or not. Let them have it be empty, the taxes will flow in! BTW this is exactly what Texas does. No income tax, and property taxes that certainly get your attention. And property is cheap as a result! The bad news is to do this in BC a lot of people would lose a ton of equity in the transition. So the BC government is trying to band aid the situation. Will they invent a good band aid? Drum roll please…
Another quote from our lovely Senator:
“I totally think we should focus much more on how to create a welcome environment for high net worth families, who are already landed here anyways, they’ve bought the big house and they got their fancy cars”
Yuen Pau Woo
podcast-a.akamaihd.net/mp3/podcasts/s…
#vanre
The millionaire migrant program that BC ran (IIP) began as a political idea. If the applicants had actually immigrated, it would have done what politicians were hoping to accomplish – stimulate the economy. Instead, they spend all their time in Hong Kong, keeping their high income, and then pop over to Vancouver (HK2 as they call it) for healthcare, safe RE investment and send their kids to UBC with no foreigner tuition while paying no income tax. I went to school with those kids. They bragged about how good a deal it was. Targetting missing income tax and working with China on capital control violations is how we fix it, and we’re doing that.
Quebec’s millionaire migrant program has no requirement to stay in the province and everyone hates it, including them. I don’t know why they’re still running it.
The lesson here is don’t cater to the wealthy. They’re no one’s friend. Cater to workers.
Well, Mrs. Fool and I are off on vacation for a week and a bit.
Catch ya’ll later, and stay out of debt.
Well it is in the data, and anecdotally I know a number of people that got increases in the last year. Michael even posted the constant dollars, too. The question is why are the hikes so substantial and are they sustainable.
A hot housing market causing a shortage of labour can be inflationary to wages. Looking at the BC numbers contrasted to other regions makes me wonder if that’s at least in part what we’re seeing.
A slumping housing market would probably exert a downward impact on those numbers, so I kind of think it’s a bit early to say if it’s a broad inflationary trend.
“The year is 2030… oil $300”
12 years ago oil was $40, now $70. So 12 years from now will be $300 when newer tech is finding billions of barrels more daily along with renewable energy ? Man, reality for some must be fricking scary.
“Next up, double-digit wage growth.”
No one here has fessed up to getting a 5% plus wage hike this year after multiple requests. Anyone thinking big wage hikes are coming are asking for mass unemployment, and either will tank the real estate markets even faster.
The year is 2030… oil $300, lumber $1500, mtg rates double digits, LF’s gross income 350k/yr… yet everyone is still somehow confused how rates & prices tripled together since 2018.
Okay, so along the same lines as the “average Canadian owes $1.70 for every dollar they earn” isn’t really true, (ie 30% have no debt and a small portion have enormous debt), 8% of people having 350% or more becomes alarming.
I wonder what that 8% would look like if you broke that segment down.
Ah debt. I just paid off my credit card, too. Owed about $220 on it from a few little things. Now back to zero-point-zero. Gloating, but no house. Guess it’s a wash?
The devil is in the details. 350% …. Or More.
8% of households would be 1,125,766, which means on average they’re carrying a mortgage of $373,079 – about 3x the rest of the average of households. That’s not great, but that is also the average of those 8% across Canada.
In particularly expensive cities, well …..
Already been noted on this thread. A massive crash can happen with only 1% of owners in trouble at a given time. The tail wagging the dog, so to speak.
That’s not a bad point, and it’s one I don’t really understand. The two things I think of right away is that the CB is alarmed, so they’re obviously seeing something I’m not. Secondly, the mortgage debt levels in the USA were not as high as ours are now, and yet look what happened to them.
So I’m missing something here…anyone?
Damn NDP and their economy killing
$100K gross household income, $350 K mortgage? Is that alarming? I agree it would be very alarming if more than a sliver of that was high interest debt.
caveat emptor: “But IF it was true you could argue it is good news:”
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<
… and of course, conversely, you could argue that it is going to be a debacle with over-leveraged homeowners facing higher rates because their bank understands that they can’t shop around without incurring the stress test.
https://www.bankofcanada.ca/2018/05/canada-economy-household-debt-how-big-the-problem/
“Notice that the 170 per cent figure represents an average across Canadian households. It includes all those who have little or no debt, which means, to make the average level of debt so high, it also must include some very highly indebted Canadians.
In fact, about 8 per cent of indebted households owe 350 per cent or more of their gross income, representing a bit more than 20 per cent of total household debt. These are the people who would be most affected by an increase in interest rates.”
…. and where do those 8% live???
https://betterdwelling.com/cmhc-finally-says-vancouver-is-too-expensive-for-local-incomes-toronto-overvalued/
Canadian Real Estate Is Highly Vulnerable
The CMHC believes that Canadian real estate is highly vulnerable in April, with moderate evidence of overvaluation across the country. Analysts noted prices are high compared to “fundamental factors such as income and population.” They specifically called out Vancouver, Victoria, Toronto, and Hamilton as the markets having a broad impact on national numbers.
I don’t believe the 47%.
But IF it was true you could argue it is good news:
47% of folks will be renewing at still fantastically low rates (3.25-4%) and if historical trends hold a lot of them will be locking in for five years.
Heck you could lock in for 10 at under 4%
Victoria Mill Rate is out:
http://www.victoria.ca/assets/Departments/Finance/Documents/2018%20Property%20Tax%20Mill%20Rate.pdf
Introvert: Fake News
I guess, Introvert, that it’s a matter of who you believe and what sounds more plausible.
http://nationalpost.com/pmn/news-pmn/canada-news-pmn/nearly-half-of-existing-mortgages-face-renewal-in-2018-cibc-report
“A CIBC Capital Markets report suggests an estimated 47 per cent of all existing mortgages will need to be refinanced in 2018, up from the 25 to 35 per cent range in a typical year.
The increase is an unintended consequence of various rounds of regulatory changes in the past few years aimed at reducing risk coupled with rising house prices that made it harder for homebuyers to qualify, said Ian Pollick, CIBC’s executive director and head of North American Rates Strategy in a report released Tuesday.
“Over the past two to three years, as home prices have risen unchecked, you’ve had people trying to get into the housing market unable to afford longer term mortgages and taken out short-term mortgages,” he said in an interview. “And in 2018, everything is falling on top of one another.”
Next up, double-digit wage growth.
https://www.bnnbloomberg.ca/bad-for-everybody-magna-ceo-says-nafta-ontario-both-need-to-help-auto-industry-1.1075795
Really good interview. Especially the last minute. Very blunt. Very accurate.
So I checked back, and in 2015 there were 3758 active listings in the first week of May, in 2014 there were 4404. So in reality it’s only the latest run up in prices that have been caused by lower inventory (among other things). The rest of the run up seems linked to the increase “affordability” through decreasing interest rates. So why wouldn’t the reverse happen as interest rates go up?
Less than that, foreclosures only exceeded 1 million in two years. That’s out of about 100 million private dwellings. Total over 2006-2012, which is generally considered the full duration of the bust, looks like about 6 million.
https://www.corelogic.com/research/foreclosure-report/national-foreclosure-report-10-year.pdf
These overtures seem crazy to an introvert, I guess.
🙂
Actually, it was about a third less than that if we just look at 2008, and that was enough to create the momentum down. I think the ratespy article is a case of splitting hairs. The risk wasn’t from the renewals per se, it’s more to do with highly leveraged borrowers whom would be subjected to rate hikes over the next little while. However, the biggest risk for those people isn’t simply that, it’s a declining and illiquid market. I don’t really think the risk landscape has materially changed.
You do seem to like to call out ordinary social overtures to others. I don’t know why. You know, I would grab a coffee with you just as well as almost anyone else on here. I have a feeling you’re probably fairly quiet and mild mannered in person.
As someone who appreciates retarded jokes, that was great.
“As for renewers this year, “Our staff estimates that roughly 25% of mortgages will be renewed this year, in line with historical norms,” says Bank of Canada spokesperson Josianne Ménard.”
It matters not, it only took 10% to crash the US housing market, and more and more will have to renew over the next years after that. People will look ahead and see they can’t afford the higher rates and will be forced to sell. Been there.
I see listings only increasing bigtime from here on out. We’re not even touching on the increasing amount that won’t qualify, now 1 in 5 to 2 in 5, etc. The freighter is beginning it’s massive turn and can’t be stopped now.
Leo as matchmaker!
gwac,
What are you crying about ? Victoria job rate is better than last month. Christ, the rate has been in best the past year in decades and you greedy Liberal pricks still want more. Unreal. It’s no wonder this pig is going to blow bigtime. The trough is overflowing and is never full enough.
“After four consecutive months of being on the rise, Victoria’s unemployment rate dropped three-tenths of a per cent in April.
Statistics Canada released new job figures Friday morning and Victoria unemployment sits at 4.2 per cent, compared to 4.5 per cent in March.”
“Stats Canada says wages were up 3.6 per cent last month compared to a year ago, the biggest jump since October 2012.”
https://www.cheknews.ca/unemployment-drops-in-victoria-climbs-in-b-c-stats-canada-449320/
Hey Cool. As a computer-y person in the health informatics field we should connect (Leo has my deets). A major player is looking to setup AI for breast imaging analysis in the BC digital supercluster.
Or even 10 years out for that matter, but it is not a huge leap to suggest that some knowledge jobs will be replaced by AI over the next decades. Of course there will still be lots of employment in health care in 50 years. The demand for healthcare is huge and ever-growing.
“In 50 years or less I suspect many healthcare professionals will be replaced by AI. On the other hand I am quite confident that fixing your wiring or pipes will still require a human being in 50 years.”
As a healthcare professional who is currently completing a health informatics degree, I find this claim laughable, completely speculative, and based on zero evidence. I have a few comments. First, no one can predict the future with any degree of accuracy 50 years out. Second, the structure of a house could be so radically different in 50 years that trades people may no longer be required. Third, if healthcare professionals in the very complex world of medicine lose their jobs to AI and robots, it is very likely that most of the workforce will also be unemployed. This could result in a dystopia or utopia depending on how things pan out.
For now, healthcare professionals are amongst workers with the highest job security. IT in healthcare is moving very slowly. Just think about the iHealth project on the island that has had a failed implementation and massive cost overruns. Medicine and healthcare are very complex with many variables and moving parts. Anyone who thinks otherwise is very ignorant.
I’m glad you at least admit the past is relevant. The world of economics and real estate in particular is filled with year over year comparisons, so someone forgot to send your memo that only last month is relevant. I guess we can’t compare the economy under different leaders as that would exceed your one month rule.
Check out the graph I linked to. Unemployment climbs month over month dozens of times. It isn’t the blips that matter it’s the trends
I avoid shipping my goods with the worse shippers.
When I look back in Canadian history I see that what happens in Canada mirrored quite a bit of what happened in the US and Europe, so a lot of the up and downs were outside our leader’s control. Still I agree bad government can definitely make things worse and good governments can slowly make things better.
I wasn’t alive then but Louis St Laurent seems like some sort of high point of Canadian governance. Socially progressive (for the day) and fiscally conservative. Mind you he had economic tailwinds.
https://www.ratespy.com/47-of-mortgages-will-not-renew-this-year-05116120
http://www.bcstats.gov.bc.ca/Files/a92991a6-fa62-4c3f-be77-b9e849be3cee/LabourForceStatisticsData.pdf
Unemployment for Horgan’s first year is below any point in Clark’s term. That said it is pretty much pointless trying to give any one leader credit for this. Globally unemployment has been on recovery since 2008. The list of countries at or near record low or cycle low unemployment is long: Russia, Germany, France, Canada, US, Mexico, Spain, Poland, Netherlands, the list goes on.
@ CE:
“In 50 years or less I suspect many healthcare professionals will be replaced by AI.”
Let’s hope it’s much sooner. AI systems already perform better than the average GP, and if properly programmed, they won’t dole out unnecessary prescriptions for opioids and other dangerous drugs.
Caveat last mouth is relevant as a basis not last year as was in Leo Post. Unemployment is a leading indicator of your future economy. You NDP worse shippers really need to look back in history through Canada and realize what happen to an economy when the government is not business friendly. Enjoy the ride down.
@ Patriotz
“Yes there is [ effective way to completely stop foreign investment in housing], but it would also involve torpedoing domestic investors.”
You mean that raising property taxes while reducing income taxes would reduce property prices, i.e., it would be good news for Canadians looking to purchase a home, but bad news for speccers and flippers, and old folks sitting on windfall RE profits.
Sounds like the best strategy. And it’s consistent with Adam Smith’s contention that property should be the basis on which taxes are assessed because without state protection there would be no private property beyond what the individual is able to defend by the strength of their own right arm.
True, today the state does more than defend the rights of property. But still no great accumulation of wealth is possible without the state, therefore, wealth should be the chief basis of taxation.
So if the present Provincial Government wants to do something both smart and principled, it should institute a capital tax, applicable on world-wide possessions, with confiscation of all Canadian property the penalty for evasion. An annual tax of one to one point five percent on all assets, as in very conservative Switzerland, would seem a reasonable plan, with an exemption on the first $1 million.
If all you care about is present and future then please explain why last month is relevant.
Ding ding ding! 100 points for Barrister.
However I don’t think the political parties are ignoring the elephant, rather it would be political suicide for them to publicly say they still want these immigrants and their money. Instead they will nibble at the edges in an effort to cool the market. And it’s actually likely to be pretty effective, as perception often is more important than reality. (The exception is it looks like Eby and the gang will go full bore after the money laundering.) But shutting off the spigot of foreigners arriving with their money would be very bad news for the RE market and the economy in general – the politicians might as well sign their own death warrants in that scenario.
Then I guess anyone can view the numbers from whatever instance in time suits the narrative one wishes to convey. We already know you don’t like the guy. 🙂
Tensions high on the construction site. No need to worry about handguns up here, worry about the guy building your house.
Worker shot with nail gun at Colwood construction site
http://www.timescolonist.com/news/local/worker-shot-with-nail-gun-at-colwood-construction-site-1.23298322
In 50 years or less I suspect many healthcare professionals will be replaced by AI. On the other hand I am quite confident that fixing your wiring or pipes will still require a human being in 50 years.
Leo you can twist it all you want its still up .3 from last month. Present and future I care about. The NDP has done zero for jobs and businesses and only made things worse with the 2% tax.
A letter in this morning’s paper echoes my thoughts:
Victoria can’t add more families
http://www.timescolonist.com/opinion/letters/victoria-can-t-add-more-families-1.23299456
Down from 5.4% Same month last year.
“Horgan doing a great job. From 4.7 to 5%. Need people working to pay for your freebies Mr Horgan.”
Can’t blame Horgan taking over as the bubble peak is popping. Happens to every NDP government. They get blamed for the Libs/Cons reckless spending, and Libs mysteriously shutting down the money laundering watchdog so the corrupt foreign money could run wild with zero repercussions. Now it’s time to pay the piper.
Patriotz, you’re referring to a Tax Information Sheet, not an actual piece of legislation. How things like “satellite family” actually get defined is going to make a big difference. Perhaps they will craft something that is relatively loop hole free, but we have to wait and see.
$90M for rentals in Victoria: http://www.cbc.ca/news/canada/british-columbia/greater-victoria-funding-rental-units-1.4657379
Great job numbers. Our governments are doing a fabulous job at building the economy.
Horgan doing a great job. From 4.7 to 5%. Need people working to pay for your freebies Mr Horgan.
Same thing was said of Vancouver’s empty homes tax. Wasn’t true then but we’ll see how it goes with the spec tax
But unless those owners move out of town or it is their secondary property then it’s just a big game of musical chairs. Lots of commotion but someone is still not gonna have a place to sit
Patriotz:
Wont apply if there is a separation agreement between the parties. But lets see how the draft legislation reads.
Yes there is, but it would also involve torpedoing domestic investors. Increase property tax drastically and in proportion reduce or eliminate provincial income taxes. Our low property tax / high income tax regime is an open invitation to foreign tax evaders, as the SFU/UBC analysts have pointed out.
That is precisely the definition of satellite family. Read what I posted. Satellite families will be levied the speculation tax even on their primary residence.
The most recent data shows 28,000 of these millionaires are living in B.C. The spec tax does not effect these people since they are legal immigrants. Victoria may not get a lot of them directly but when that 50 year old postal worker sold his Vancouver house for three million and bought in James Bay it means that Josh is left wondering why he is out in the cold. Incidentally there are a half dozen other programs that account for the 300,000 net immigration every year.
All of the political parties simply ignore this elephant in the room.
My family doctor (who moved here a few years ago from the USA) is closing up his downtown Victoria practice this summer to move his practice up island. The reason is he says he cannot afford to live in Victoria.
He was a great doctor, so it is very sad. His office staff let me know by pointing with a finger to the sign in the treatment room & then leaving the room. Other notices repeat over & over again that there will be no replacement & that there is no system in place to follow him up island, so do not try. It is distressing even for healthy people – I can’t imagine how distressed people who are ill must feel about not being able to access care.
BC should have family health teams like ontario (doctors with nurses & multi-disciplinary team)
Leo. With all do respect, you should be able to see that what he really is telling Vancouverites to do is ‘surrender’.
Regarding Woo, I would also like to point out he refers to CMHC, an entity that also had a large part in creating the mess we see before us.
Also, CMHC admits that they can not estimate the impact of satellite families/tax evaders on the demand of properties.
Woo is a hack who from lobby group pushing Asian buisiness in Canada. Because he somehow bought the title Senator does not mean we should give him audience, especially regarding Canadians homes.
I don’t necessarily agree with his point, but I did think the idea was an interesting one. He may be right that there is no effective way to completely stop foreign investment in housing so why not figure out how to make the best of it? Set up big ambitious new projects to fund affordable housing for the middle income earners financed by the investments made by the wealthy rather than trying to get rid of the investments completely.
Kinda like the question of whether BC is better off collecting $200M in foreign buyers tax per year or are we better off if there were no foreign buyers at all? I’m not sure what the answer is, but seemed like an interesting way to look at it.
Leo,
“To the extent that foreign buying is a factor in #Vancouver house price increases, it is because locals BELIEVE it is a major factor and bid up prices!” – Woo
Woo is the former CEO of the Asian Pacific Foundations – “Its mission is to be Canada’s catalyst for engagement with Asia and Asia’s bridge to Canada.”
Of course he is looking to further buisiness with Asia. Do you think he cares about Vancouverites struggling to find homes in the city? He is in power to further ties with Asia, period. His op-ed is despicable in my mind.
An interesting thought from the most recent episode of Sold (http://www.cbc.ca/radio/podcasts/current-affairs-information/sold/) Senator Woo suggests that instead of thinking about how to keep foreign investors out, we should accept that they will come to BC and then the question becomes how you attract their more productive investments.
“How do we get them to make BC their business HQ now that they’ve made BC their family HQ?”
His op ed is here: https://www.theglobeandmail.com/opinion/foreign-capital-is-part-of-the-housing-solution/article38017421/
@ Vicinvestor 1983\
“GP practice just isn’t worth it. Why go through so much education and stress just to make as much as a trades person. It’s a joke.”
A joke most be people would be quite content to accept.
My GP grossed well over $300K in 2014, so assuming a 30% overhead he cleared well over $200 K, which is quite a bit more than most tradesmen(with a seven year apprenticeship) are earning even in today’s overheated market. And surgeons and other specialists mostly do much better.
Many female doctors, it is true, earn less, but then many of them work only part time, providing perhaps a poor return on the public investment in their education.
Patriotz”
These are not foreign owners; they are being let in as landed immigrants through the Quebec program.
They move here often with millions. A close friend of mine who is an immigration lawyer in Toronto has whole bunch of multi-millionaire Romanian families. How they got millions is a question no one asks.They are not caught by the spec tax but they are buying expensive homes.
Only 43% of Vanvouver condo presales sold in April at peak time of year versus 94% in January. The sheep have been sheared and now the pain begins.
As a victoria healthcare worker, I can tell you that office family medicine in BC doesn’t pay enough to attract enough doctors. Most go to work in higher paying juristiciations and positions. There is even less incentive with the Liberal tax changes. GP practice just isn’t worth it. Why go through so much education and stress just to make as much as a trades person. It’s a joke.
“Foreign owners and satellite families — households with high worldwide income that pay little income tax i B.C. — will be captured by the (speculation) tax and will not be eligible for a primary residence exemption.”
Only the NDP and David Suzuki’s disciples can reach these alpine heights of fatuity.
The family will continue to pay not one dime of tax in BC or anywhere else in Canada as the $40,000,000 the husband made last year in China is off the CRA’s event horizon. He isn’t a Canadian citizen, his Point Grey wife is.
She is most certainly eligible for the the primary residence exemption as the house is (drum roll) her primary residence.
She will pay not one dime of the “speculator” tax because she resides in her home.
@ Cam and @ Introvert Re: GP shortage
Generally it seems that not enough of the doctors who are trained are opening up family practices. This is due to financial reasons (i.e being hospitalists or specialists pays more). Also, Victoria is an expensive place to live if one starts with almost $200K of debt.
I would like to see some sort of forgiveness of tuition fees in exchange for a graduate going into family practice.
Below is a link to a comment written by local Dr. James Houston. Maybe we all need to write some letters to politicians. People complaining about housing got the government’s attention. Medical care is at least as important.
http://www.timescolonist.com/opinion/op-ed/comment-ask-candidates-how-they-will-improve-health-care-1.17498911
Thursday has been the traditionally largest day getting the house listed for the weekend. Compare it to last Thursday. That will give u a sense of what is going on. Inventory is definitely on an up trend though.
“So far today has had the largest number of homes listed in a single day (for my criteria) that I’ve noticed. Anyone else notice this? Hope it’s a trend…”
Mine too – I have SFH up to 800K and today marks the most I have seen … i think all year. Do any realtors out there know if there are more popular days of the week to list or is it totally random?
“Foreign owners and satellite families — households with high worldwide income that pay little income tax i B.C. — will be captured by the (speculation) tax and will not be eligible for a primary residence exemption.”
https://www2.gov.bc.ca/assets/gov/taxes/property-taxes/publications/is-2018-001-speculation-tax.pdf
@ CE
“CS – LMGTFY”
Ha! So you don’t know. Thought not.
@ Barrister
“Are the ferries going to be using “D” cell or “C” cell batteries?”
Triple Z, probably.
To drive one of the big ferries, would require a battery of at least 8 to 16 thousand KWH (the existing diesel units are 21,444 horsepower), assuming the batteries could be fast-charged after each crossing, which means that they would compete for power at times of peak demand.
Production of batteries of that size would involve carbon emissions probably in the order of 15 to 30 thousand tons (CO2 equivalent).
CS – LMGTFY
http://www.wsdot.wa.gov/NR/rdonlyres/AF8C5114-E659-4FF0-B339-4924D1550779/0/TIGERIIIHyakHybrid102811FINAL.pdf
“I strongly suspect that WSDOT HAS done some analysis and found that the new ferries will (a) improve air quality …”
You strongly suspect, while chiding me for not knowing.
LOL.
But in fact, I have already given a reference to the prime reason for the electrification of Washington State ferries and it has to do with nitrogen oxide and particulate emissions not energy efficiency or carbon emissions.
Sure there may be some marginal benefits of other kinds but what evidence do you or anyone else have that such benefits would justify Introvert’s apparent belief that BC Ferries should be electrifying our ferries?
Most probably electrifying our ferries would turn out to be an ill-conceived boondoggle. But if you have the numbers to prove otherwise, let’s have them.
Pot meet kettle. CS – What analysis have you done on the cost or benefits of WSDOT’s move to hybrid ferries. I strongly suspect that WSDOT HAS done some analysis and found that the new ferries will (a) improve air quality, (b) reduce lifecycle GHG emissions.
They may even save money in the long run. Several of their boats are over 50 years old and probably need to be replaced soon anyhow
“Have you done even the slightest bit of research on that? Lifecycle analysis is done on these projects before they move ahead and someone that knows a great deal more than you on this topic found it favourable.”
The argument was made that BC Ferries should electrify their ships. Has that person or anyone else done the slightest bit of research to justify such a demand? If so, perhaps you will refer us to the relevant papers.
And do tell us, since you apparently have done the math, what proportion of the energy consumed in propelling a ferry from Swartz Bay to Tsawwassen coould be recovered through regenerative braking.
Josh:
So when is the NDP going to take a stand against the flood of millionaire immigrants that we are letting into the country who are buying up the houses that you can not afford? And no we dont need more labour in the future at the rate technology is eliminating jobs.
Wat? I’m an NDP’ite.
Have you done even the slightest bit of research on that? Lifecycle analysis is done on these projects before they move ahead and someone that knows a great deal more than you on this topic found it favourable.
Do some napkin math about how much energy it takes to accelerate a ferry. The Coastal Renaissance maximum displacement is 10,034 tonnes. A hybrid ferry can recover a huge portion of that energy.
That’s weak, Soper.
@introvert
As good as you too, since you were dead wrong about the latest increase.
Is that BC Hydro’s forecast? Because BC Hydro is about as good at forecasting as ol’ Hawk.
So far today has had the largest number of homes listed in a single day (for my criteria) that I’ve noticed. Anyone else notice this? Hope it’s a trend…
Thankfully 1484 Lang listing is now a cancelled listing, see what it gets relisted at.
Here is another gready seller, 4103 Quadra St, listed at 949k. Looks like they bought in 2016, subdivided the lot and are selling the existing house(albeit, partially renovated, but nothing special) for big $$$. Can’t find the original sale price in 2016 but was listed at $725k.
Despite all the efforts the various levels of Gov’t have made in the last 2 years to try and reduce house prices on the West Coast, it’s not working. House prices in Victoria have not come down one bit (according to the May 1, 2018, report from the VREB).
One of the main culprits is a lack of inventory. There’s some recent signs that inventory may be climbing a bit, but it is still way too low; historically low. And that’s helping to keep the prices pumped up. So how do you get a city to increase its inventory?
How about if the City of Victoria offers a financial incentive to get more home owners to list their homes for sale? They could eliminate the seller’s portion of the property tax for the year. The BC NDP could offer a tax rebate on the sale expenses (say 1/2 of the real estate commission, or the full lawyers fee and the movers fee). The Feds (or is it the provincial Gov’t) could offer a reduction in the capital gains tax for those homeowners who sell in 2018.
Thus far, the Gov’t has only taken the stick approach to the real estate problem: penalize everyone (buyers and sellers alike) with additional taxes and expenses. But maybe they need to offer a carrot as well. I know some will say: What? Offer a carrot to homeowners who purchased 10 years ago for $400K and are thumbing their noses at $900K now? But what the heck? Victoria needs more listings and it’s become a real problem.
I’m sure that realtors would like to see more listings (cause they don’t get paid unless they get a sale). I also read somewhere that there’s more realtors in Victoria than listings. Whew, I’m glad I’m not a realtor.
Anyway, if the goal of the Gov’t is reduce house prices so that ordinary Canadians can afford to buy one, why not look at these additional steps? Yes, they will lose money in their coffers for offering the incentives, but look at much money they will have to spend on public housing if the average Canadian can no longer afford to purchase a house.
Are the ferries going to be using “D” cell or “C” cell batteries?
“So they are replacing ferries powered by fossil fuels dug up in Alberta (carbon emissions), refined in Washington (more carbon emissions) and burned with 25% efficiency (more carbon emissions) with ferries powered mostly by falling water converted to electricity.”
Well I can’t argue all points simultaneously.
The question was whether hybrid ferries saved energy. I maintain that they can save very little. It’s not as if ferries are driven like a Toyota Prius in stop-go urban traffic. They are mainly driven at a relatively constant and presumably, therefore, most energy-efficient speed.
And while presuming to take issue with me you confirm my point that the so-called hybrid ferries are merely semi-electric ferries. Which relates to my earlier point that an electric ferry needs power from somewhere, and unless from Site C or other alt energy projects it will be generated thermally, with little if any net saving in carbon emissions.
Of course if we had a surplus of electric power from no-thermal sources, electric ferries would then contribute to reduced carbon emissions. But right now we don’t, and therefore they don’t, and it is simply a misunderstanding to assert that Washington State Ferries are electrifying ferries primarily, or at all, to reduce carbon emissions.
But Greens love to tell everyone what to do without bothering to do the math or provide any logic at all.
Can’t wait for the next moves to kill the flippers and money launderers. No wonder the Chinese have left BC and the bagholders are selling for $1 million under assessment on the West Side. Done like dinner.
The BC NDP’s housing moves are so popular, even BC Liberal supporters like them: poll
https://globalnews.ca/news/4196524/bc-ndp-housing-bc-liberals-poll/
“Maybe it’s because the Greens don’t enjoy $10B tax-payer-funded boondoggles, the way the BC Liberals—and regrettably the NDP—do.”
You have to make up your mind. Either you want to replace fossil fuel with alternative energy, e.g., by powering ferries with hydro power, in which case you will need Site C or something equivalent, or you don’t.
In fact, Greens are mostly about virtue signalling. That is evident from remarks here about electric ferries. Washington State Ferries are turning to electrification not, primarily as suggested herel, to reduce carbon emissions but to reduce nitrogen oxide and particulate emissions:
As for Site C being a boondoggle, in what way? Are you suggesting corruption in contracting? Obviously no one here is for that, but where’s the evidence.
As for your claim that no one will need the power, that is nonsense. The power will be used in BC or sold to other jurisdictions more dependent on thermal power. But mostly it will be used here. Vancouver, for example, projects a 50 to 75% increase in electric power use in the next 32 years, so unless that power is generated thermally, Site C and other alternative energy sources will be necessary.
“Here’s my favourite graph, which has the added benefit of being grounded in reality:”
The reality is you’re bullshit is so stuck in fantasy land you’ll be seeing multiple shrinks as the abyss swallows you whole.
Your graph matches perfectly with the blow off top. It’s the 1981 ride all over again. Enjoy the terrifying trip down to a dark place.
Dateline May 2018 in the real world:
“Realtors, developers brace for crash”
https://www.youtube.com/watch?v=hqOn5XEm86A
Maybe it’s because the Greens don’t enjoy $10B tax-payer-funded boondoggles, the way the BC Liberals—and regrettably the NDP—do.
Or maybe it’s because overall demand for power was flat between 2005 and 2016* (even though the population increased) and demand is projected to be relatively flat for a while due to increased conservation measures.
*Interestingly, BC Hydro projected demand would rise 20% in that time; it rose zero percent. Hmmm.
LOL
if you combine that one with Hawk’s porn, maybe we’re approaching the bear trap right now…
I apologize. Some of your screeds are so long I fall asleep while reading them.
Atta boy!
I see that Victoria Born has attended the Local Fool School of Verbosity.
I’ll save reading this entry for right before bed…
The abyss that never materializes. And the ride that has trouble going down.
Here’s my favourite graph, which has the added benefit of being grounded in reality:
https://www.vreb.org/historical-statistics
So sayz the Brownie.
If we read the actual article we find out that:
So they are replacing ferries powered by fossil fuels dug up in Alberta (carbon emissions), refined in Washington (more carbon emissions) and burned with 25% efficiency (more carbon emissions) with ferries powered mostly by falling water converted to electricity.
Not only does this reduce overall carbon emissions it reduces local emissions of health damaging diesel particulate matter.
“There’s still a lot of benefit to a hybrid ferry. There’s plenty of inefficient regimes a diesel ferry runs through that can largely be avoided with hybridization. ”
As always, there are lots of hand-waving arguments from the Greenies.
“If we replace a natural gas power plant with hydro, electric ferries get cleaner. Can’t do that with Diesel.”
Yes but the Greens don’t want more Hydro power. They wanted to cancel Site C, remember?
And in any case, any hydro that is produced in BC will be used, either in BC or elsewhere, with or without electric ferries. So using hydro instead of diesel or liquefied natural gas, or whatever, to fuel ferries won’t have any broad environmental impact. It will reduce carbon emissions locally, while making them higher than they would otherwise have been elsewhere.
There it is! been a while since ‘the graph’ made an appearance. Hawks partner is getting lucky tonight!
The pumpers squawk louder as the roller coaster heads over the peak into the abyss. Enjoy the ride down. 😉
“Realtors, developers brace for crash”
BREAKING NEWS: BANK OF CANADA RAISES 5 YEAR MORTGAGE RATE.
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BREAKING NEWS: BANK OF CANADA RAISES 5 YEAR MORTGAGE RATE. This is significant and raises the bar for qualification for a mortgage in Canada, and yes that includes Victoria as well. The authorities, including the BOC, are intent on deflating this bubble – don’t kid yourself. Fascinating that the BOC is following the Chartered banks. Read further:
TORONTO — The bar is now higher for homebuyers to qualify for mortgages in Canada after the central bank raised a key metric used in stress tests that determine borrowers’ eligibility.
The Bank of Canada raised the conventional five-year mortgage rate from 5.14 per cent to 5.34 per cent after all Big Six banks raised their posted five-year fixed mortgage rates in recent weeks.
The central bank qualifying rate is separate from the actual mortgage rates offered by banks to borrowers, but is used to assess homebuyers who are seeking loans.
Homebuyers with less than a 20 per cent down payment seeking an insured mortgage must qualify at the central bank’s benchmark five-year mortgage rate.
And as of Jan. 1, buyers who don’t need mortgage insurance are required to prove they can handle payments at a qualifying rate of the greater of the central bank’s five-year benchmark rate or two percentage points higher than the contractual mortgage rate.
“Mortgage borrowers will be qualifying for less than they were able to earlier this year,” mortgage broker Samantha Brookes said in an email. “With all the new rule changes, we’ve definitely noticed the effect on the market with home purchases, renewals and refinances.”
The higher rates come as an estimated 47 per cent of all existing mortgages will need to be refinanced in 2018, up from the 25 to 35 per cent range in a typical year, according to a recent CIBC Capital Markets report.
The increase is an unintended consequence of various rounds of regulatory changes in the past few years aimed at reducing risk coupled with rising house prices that made it harder for homebuyers to qualify.
Borrowers who find the bar too high for the home they want can make some adjustments in order to make a purchase, she said. Those options include purchasing a smaller home and taking on less mortgage, or purchasing where prices are lower, added Brookes, who is founder of Mortgages of Canada.
The jump in the mortgage qualifying rate comes after Canada’s largest lenders raised their benchmark posted five-year fixed mortgage rates in recent weeks as the cost of borrowing rises.
In late April, TD Bank was the first of the Big Five lenders to raise the benchmark rate, increasing it from 5.14 per cent to 5.59 per cent, due to factors including the “competitive landscape, the cost of lending and managing risk.” Royal Bank of Canada, Canadian Imperial Bank of Commerce, National Bank of Canada, Bank of Montreal and the Bank of Nova Scotia followed suit, but with smaller increases.
The slew of bank moves was preceded by a rise in government bond yields. The yield on the Government of Canada benchmark five-year bond was 2.16 per cent on Tuesday, compared to 1.01 per cent a year earlier. Fixed-rate mortgages tend to move with government bond yields of a similar term, reflecting the change in borrowing costs.
In that case, you’re not reading what I write. In fact just the other day I called his views on interest rates “simplistic”. I still think that’s the case. Nevertheless, I’ve actually commented on your topic of question several times, but I’ll post this one part here for you. This is what I think about that “trend”.
As a market densifies, lower density units become more expensive due to increasing scarcity yet enduring desirability. The principle is common sense, and common to any housing market that grows. That’s not inherently unsustainable, or necessarily even problematic IMO. It’s also not a new dynamic in this city. You can expect that given the significant bias towards building multi-family units that we’ve seen over the last 40 years, it will continue. Now how much deterioration in affordability is too much? That’s much harder to say, because in that microcosm, you could have purchasing that relies more on equity relative to other segments or locations. I don’t think that equates to bungalows that will continue to command multiple millions, while condos will go for 300k henceforth. That’s only intuition on my part, though.
Any argument that says that the prices in the market writ large can continue to outpace inflation and wages forever is false. Our economy simply doesn’t generate enough production and income to keep pushing prices ever higher from current valuations. People getting mortgages at 450% leverage or greater is madness. Raiding HELOC’s at the pace we’re doing is daft. A provincial GDP that’s biased to FIRE as much as ours is lowers real production, impoverishes consumption and magnifies inequality. I am further arguing that a lot of the dynamics that have enabled the kind of appreciation we’ve seen have either passed, or, the market has now priced it in. – April 18, 2018
Yes. But the last time I did that I got ABBA stuck in my head for 3 weeks straight. It was horrible. There are some things you can’t unhear Introvert, and endless re-loops of the horrific “Dancing Queen” is one of them.
I didn’t. There are full electric ferries and they’re pretty amazing: https://electrek.co/2018/02/03/all-electric-ferry-cuts-emission-cost/
There’s still a lot of benefit to a hybrid ferry. There’s plenty of inefficient regimes a diesel ferry runs through that can largely be avoided with hybridization. If there was no benefit, they wouldn’t be built.
https://guthmann-estate.com/marketreport/real-estate-report/#me-2
Berlin real-estate
“Berlin’s districts are developing in a heterogeneous degree. The lower price segment almost completely disappeared in the districts Mitte, Kreuzberg, Charlottenburg, Wilmersdorf, Friedrichshain and Prenzlauer Berg. At the same time the upper price segment continues to grow. Our district reports show a detailed price evolution of Berlin’s districts from 2007 until today”
Rising prices, higher complexity
Berlin is one of the top locations for investments thanks to the dynamic development of the real estate market and the ongoing demand.
“Housing shortage will continue to dominate the market in the coming years. Increasing scarcity and rising prices, however, do not mean that any price will hold its own on the market. The complexity of transactions is increasing and so are the requirements of buyers with regard to the feasibility of an acquisition. The locations are differentiating and sellers have to recognise and exploit unexploited potential in order to exploit opportunities under difficult political conditions”
@LF
Perhaps not (or at least not yet), but when you consider:
– The enormous (and expanding) gap between rich and poor
– When we recognize how large of an impact that disparity has on growth
– When we look at the coming wave of AI and destruction of jobs that may result
– When we see how much of the middle class is getting hollowed out as jobs and industry are shifted to developing countries
– When we look at how global markets are now, with money easily flowing to and fro
– When we have ample examples around the world of how the world’s most desirable cities are all facing enormous pressures of the local populations being unable to afford real estate
– When we recognize that the Federal governments own immigration plans are for nearly 1 MILLION new immigrants to come to Canada during 2018-2020 …
Well, perhaps our old models of predicting what will happen are quickly losing relevance, or at a minimum require a serious overhaul? This doesn’t mean there won’t be cycles, this doesn’t mean local affordability won’t also greatly impact RE markets. But to think cities like Vancouver or Victoria are going to escape the global trends is pretty silly. And it’s not just those cities. I’ve got my house listed in Calgary. Last 4 out of 5 groups to see it were all Mandarin speaking, I couldn’t believe it.
Local Fool, what do you think of Leo’s analysis here? You never question Leo’s assertions (like you do others) when he says that, basically, prices for Victoria SFHs are gonna generally keep rising and getting less and less affordable.
Is Leo off-limits, or do you just ignore his assertions you don’t like, or do you plug your ears and sing a song to yourself? I’m curious.
Great, but we’re locked in to 55-year contracts.
Maybe they should look into breaking some contracts. Even after a court awards the IPPs damages, it’d probably be cheaper than honouring the contracts.
What a shit-show the BC Liberals have left us. And this is only one of many shit-shows.
They’ve already suspended IPPs going forward. Short of breaking contracts they can’t do anything else.
And if there was damage done to residential solar adoption it was done by the misleading coverage by the Tyee
So maybe you should try to buy there, eh, Soper?
For single family I agree and it shows in the long term trend of decreasing affordability. For condos I’m not so sure. At the very least the trend is much milder.
I do understand the fallacy there; however, going after the nickel before the $1000 bill is insane. And if you can’t see the insanity of that, I can’t help you.
I hope that is true. The optics of it are bad. I hope uninformed but good-intentioned prospective home solar buyers don’t view this policy change as a reason not to install solar panels.
I’ve often wondered why GPs wouldn’t want to live in Victoria.
The only explanation that makes sense to me is that they wish to avoid the disproportionate number of geriatric patients they would inevitably see.
Another thing is that GPs don’t usually earn as much as surgeons and other specialists.
I can’t believe you can logically hold the belief that IPPs are bad and the exact same thing on a smaller scale is fantastic. If you don’t understand the fallacy there I can’t help you.
This change will have zero impact on residential solar deployment in BC so you can save yourself the outrage.
Based on… ???
Look at Berlin. High demand, and affordable.
If they continue then they’ll be flushing more $1000 bills down the toilet. How does one bad decision make another one better?
Personal Solar shouldn’t be used as a money making endeavour. It’d be foolish for a power company to rely on rooftop solar for future forecasting of power needs.
To my mind, this rings true.
re doctor shortage:
No idea why we have one. Med schools across the country only let 1/10 applicants into med school- and not because the rest aren’t qualified! If they doubled enrolment and streamed 30% into a GP stream, the problem would be solved.
So flushing a nickel down the toilet is the same as flushing a $1000 bill down the toilet, because both are bad decisions. Got it.
You realize they’re talking about HYBRID ferries right?
“if we don’t have a major volcano create land or major population decrease good luck with prices making any substantial decrease. 5 or 10 or pause but that is it. So back to 2016 prices maybe.”
gwac,
Arizona had major population growth leading up to the crash and even after the crash started and it didn’t save prices. Population growth didn’t stop the crash. Lack of credit to borrow did. That’s what’s happening here and now.
“In the lead-up to the crash, Phoenix’s economy was booming. New jobs were being added at a fast pace and per capita incomes were growing strongly”
Sound familiar ?
“With confidence riding high on the back of seemingly solid fundamentals and rising asset prices, along with easy access to credit, Arizona households borrowed heavily. Per capita debt accumulation surged in the mid-2000s to levels far in excess of the national average”
“However, despite there being ample developable land on the urban fringe to accomodate this population growth, the actual quantity of land available for development was heavily restricted on two counts:
The State of Arizona passed statewide planning laws in 1998 and 2000, which included the implementation of high impact fees on new development and urban containment devices. In a 2006 study of land-use policies in the 50 largest metropolitan areas of the US, the Brookings Institution ranked Phoenix as ‘growth management’, which is the same ranking as Florida and California.
The overwhelming majority of potential developable land in Arizona is either owned by the state and federal governments, preserved for conservation, or otherwise off-limits to development.”
Restriction on land doesn’t guarantee prices will never crash. Throw in massive personal debt, and credit tightening and calling for 5 to 10% is a joke. Try 30 to 50%.
http://www.newgeography.com/content/002517-how-phoenix-housing-boomed-and-busted
Electric ferries in B.C. may not be a bad idea and I am beginning to maybe change my mind about Site C with the obvious trend to converting to electrical vehicles of all sorts.
I’m familiar with the long tailpipe argument. It’s largely a fallacy. It definitely doesn’t apply in BC. We have a very clean power mix and a political climate which will have it get cleaner over time. If we replace a natural gas power plant with hydro, electric ferries get cleaner. Can’t do that with Diesel.
https://en.wikipedia.org/wiki/The_long_tailpipe#Carbon_footprint_in_selected_countries
Solar panels ‘consume’ an effectively infinite fuel source while producing no operating emissions. So 15-20% efficiency ends up being pretty good if the price is right. Consider the efficiency of making fossil fuels with sunlight…
Elderly acquaintances being scammed by one of those real estate investor groups. They are actively encouraging them to raid their RRSPs to invest in real estate and of course pay exorbitant fees for seminars to learn how to invest in real estate. Disgusting
No it does not. A bad decision is a bad decision. Also the people generating vast net positive power balances under net metering are not solar, but rather small hydro projects. The coverage of this on the Tyee and other sites has been actively misleading.
Local
Understanding the dynamics of population growth and limited property is what I am referring to with reference to comparing to other cities who have gone through this. Prices go up if demand keep increasing. East 4 provinces not huge demand. Not huge population increase. Toronto/Vancouver/Montreal and Victoria are seeing rising population and demand. if we don’t have a major volcano create land or major population decrease good luck with prices making any substantial decrease. 5 or 10 or pause but that is it. So back to 2016 prices maybe.
Local
Look at Victoria Historical prices. Really never fallen except for 1980/81. pauses goes up and so on.
I am not sure how you interrupt our historical prices but it is one huge uptrend since 82.
367k from 344k in 5 years.
https://vancouverisland.ctvnews.ca/census-population-of-metropolitan-area-of-victoria-outpaced-national-growth-rate-1.3278184
This is a bit of a “new paradigm” argument and is the opposite of what is demonstrated in all of Victoria’s historical data. We build too much, then we under build, then build too much etc. In the end, it comes out in the wash meaning the supply generally keeps up with the population. The intervals in between are (roughly) the transitions between upward and downward cyclical trends. Our population isn’t growing at any unusual rate here in Victoria; people are just nuts for real estate.
Mentioning European markets with completely different societies and social histories is a bit silly and I don’t think it helps anyone here to understand what this particular market is going to do next. I had said to another poster here some time ago, feudalism isn’t coming to Canada any more than it’s coming to the USA. The sister argument is similar, “prices will go up because we’re cheap compared to Hong Kong”. No.
Look to the Netherlands. Row houses that are sold unfinished. They can finish them as per your request or you can finish them. Everything is just roughed in.
To understand where Victoria and other major cities are going. Look at high demand areas in Europe and other places to understand what happen and who will be able to afford and so on. Realestate does not come back to the mean when supply is limited and populations increase. It can go down but on a upward trend. Demand areas are taken over by the top who can afford and than the dispersion happens to condos and to commuting and this just keeps going to smaller condos and bigger commutes.
I don’t see what difference this makes. If the capital is pouring in, whether they fill out a Juwai survey that says they’re doing it for “education”, to be “free of pollution”, or to get it away from Comrade Xi’s sticky fingers, the effect on the target market is the same. You and I understanding their motivations won’t make a piddles worth of difference. What is curious, is the aggressive capital flight happened to coincide with China’s clampdown on corruption and over-intervention in their stock market.
Some still is, as it always has. But the inflationary tidal wave of cash isn’t. Money chases opportunity, and a lot of people haven’t figured that out just yet.
We have to consider this comment in the context of what has happened in the Vancouver real estate market. If servicing housing costs consume 85% of a household’s income (a level of unaffordability never seen before in Canada), then the next cycle is…what? 90%? 100? 120?
What will it be in 50 years? 300% income? You can see, at some point this line of reasoning breaks. On the other hand if this is actually just an asset bubble, then a reset would mean that you wouldn’t require the use of mathematically vacuous logic.
Leif,
You forgot the headline to that Western Investor article. I couldn’t post link at the time on my phone. Looks ominous with even the condo market taking a major hit on presales.
The pool of sheep eventually runs out just like it will here in due time.
“Realtors, developers brace for crash”
Oops indeed….Via Steve Saretsky:
Mortgage Stress Test Benchmark Set to Move Higher
“However, with the United States continuing to move rates higher there is little the Bank of Canada and Stephen Poloz can do to put a lid on things.
Perhaps none better than David Rosenberg, the chief economist and strategist at Gluskin Sheff + Associates, to summarize the Banks rather unpleasant situation “there is little the bank can do to control the importation of higher interest rates from the United States. It reminds me of Mary Shelley’s Frankenstein, we built the monster and then oops.”
http://vancitycondoguide.com/mortgage-stress-test-to-move-higher/
@Grant
“2017, even with the improved Chinese capital controls, 1 in 10 homes in the Richmond suburb of Vancouver went to foreign buyers. The money is still coming.”
Money WAS coming. It sure doesn’t look like it still is now.
That was 2017 have you read Steve starskys latest quarterly report? Richmond is at its lowest sales record to date!
” The affluent city of Richmond registered just 63 detached home sales, marking a 59% decline year over year, and the worst April on record.”
http://vancitycondoguide.com/vancouver-record-low-home-sales-april/
Another article that came out yesterday
“Vancouver lawyer Richard Bell, executive vice-chair and founder of Avesdo Inc., told a real estate seminar May 8 that the Vancouver new home market has seen an “incredible run over the past 10 to 15 years.” But, he added, “We all knew it would come to an end and the end is nigh.”
“I have been seeing more and more price reductions in the detached housing market,” said Michelle Yu, a top-producing Vancouver agent with Coldwell Banker Wesburn Realty. Yu, known for her eight-figure land assemblies, said investors should not expect a quick return on investment if they had bought recently.
“All you can expect is capital gain. However, as long as the NDP is in power, I strongly believe the double-digits gain honeymoon is over. On top of that, there are many different new taxes, stricter rental rules,” Yu stated in a missive to clients this week.
“This would be the seventh cycle since I got into the business in 1992,” she said. “The fact is when the market swings back up again, the next peak is always higher than the previous peak.”
Meanwhile, she is “looking for U.S. investment opportunity for many of my investors.”
http://www.westerninvestor.com/realtors-developers-brace-for-crash-1.23297002
“The advantage is you’re not wasting 3/4 of your energy producing heat”
Yes but where do you think the electricity comes from? Mostly it will be generated with a heat engine, either coal fired (max. efficiency 40%) or natural gas (max. efficiency 60%). Otherwise it will be generated by Hydro dams such as Site C or a million highly inefficient roof-top solar panels.
http://vancouversun.com/news/politics/bc-hydro-halts-new-independent-power-project-deals-pending-review
New government has put new IPPs on hold. Killing IPPs that operate under the guise of net metering is consistent, especially because it has no impact on most net metering applications
The family doc situation is deplorable here.
If you use this https://medimap.ca/Location/Victoria you can usually at least avoid showing up at a closed walk in clinic.
Scale matters here, Leo.
Buying power from IPPs = $58 billion over 55 years.
Buying power from 250 people who are net-positive with their solar panels = $280,000 a year.
Why put a found nickel in your pocket when you’re setting $1000 bills on fire every day?
https://biv.com/article/2017/03/bc-racks-58-billion-independent-power-producers-co
http://www.cbc.ca/news/canada/british-columbia/bc-hydro-excess-power-payout-solar-1.4645851
I fully acknowledge Victoria’s family doctor shortage. It’s a significant problem. But I don’t think that makes Victoria a “medical backwater.”
@sweethome
FYI there is a shortage of doctors in Calgary as well, and a quick google seems to show it is a problem nationally. I was without a doctor for a couple years. I have one now but boy is he green and I’d switch if I could because he’s made a couple dubious suggestions already.
I was going to say something but this James guy seems like a Richard Dawkins type.
The advantage is you’re not wasting 3/4 of your energy producing heat. ICE’s are ~25% efficient in terms of motivation on a good day and electric motors are over 90% efficient for motivation. It makes way more sense to use gas for heat production over moving something (bio-ethanol is even better).
“Washington state is converting its ferries to hybrid-electric. Will BC Ferries follow suit?”
What is the supposed benefit?
A hybrid car makes sense because it allows the gas engine to operate at a speed that maximizes efficiency, thereby improving gas mileage. But a boat just chugs along at a more or less constant speed, with the engines presumably running mostly at optimum speed and therefore at maximum efficiency.
As for a 100% electric boat, what is the supposed advantage?
A thermal engine is still required to generate the power, but instead of driving the prop directly, it drives a remote generator that delivers power to the ship’s battery that then powers an electric motor that turns the screw. The only advantage in terms of carbon emissions would be if the ship’s battery were charged with renewable electricity, such as surplus power from Site C. But the Greens hate hydro power and in any case, for the foreseeable future, electric cars will soak up all the spare renewable power produced in BC.
Well, it appears Introvert doesn’t believe me when I say Victoria has a challenged medical system. Maybe “backwater” is not the correct word, but I used it to parallel Barrister’s statement that Victoria was an economic and cultural backwater.
Anyway, I think it is important for people considering moving here to know that there is a critical shortage of family physicians. I won’t get into the issues with more rare diseases because there is enough to say on just the G.P. topic.
Remember, family physicians are the gatekeepers to the rest of the system and many chronic conditions can not be managed adequately by walk-in doctors (who are also now in short supply). This is a Canadian-wide issue, but Victoria seems to be hit particularly hard (considering it is not a rural area), and it is getting worse.
Here are a couple of links to illustrate. The first is from 2016; the second is from a couple of weeks ago.
http://www.timescolonist.com/growing-shortage-of-family-doctors-a-crisis-1.2238283
Excerpt: “Anna Echols said when she found herself at a cocktail party politely grilling a physician about how to become a patient of another family doctor in his practice, she realized how desperate her search had become.”
http://www.timescolonist.com/opinion/op-ed/island-voices-b-c-has-wrong-approach-to-primary-care-1.23284224
Excerpt: “Suppose I am 75 with severe hip arthritis. I need anti-inflammatory medication and painkillers. My GP just retired, and her practice folded for want of a replacement, a common situation in Victoria.
I go onto Island Health’s website and click on “How to find an FP in Victoria.” I am then informed that: “No FP are accepting new patients in the Victoria area.” No explanation. No assurance that the situation (which has been unchanged for years) is expected to improve.
I know that I can’t make a prearranged appointment at a walk-in clinic, so I take a taxi to the nearest one and arrive at 11:30 a.m. A notice is pinned on the door: “Closed today” (due to patient volumes). I am upset. The receptionist tells me that there is another walk-in clinic five minutes’ walk away.
For me this is a painful 15-minute walk. When I get there, an identical sign is on the door. Would anyone in the Ministry of Health or Island Health advise me what I should now do? This type of situation must be frequent because as many as 30 per cent of Victorians don’t have a family practitioner, and I saw two simultaneously closed walk-in clinics in the Hillside-Shelbourne area last week.”
Question unrelated to the discussion below:
Anyone have experience with houses built on exposed bedrock (like where there is an outcrop in part of the basement)? Are they prone to moisture/drainage problems?
Thanks.
Choke on it pumpers. Game over.
Realtors, developers brace for crash
‘Perception and fear trump fundamentals’ in pre-sale condo market
“High-profile real estate developers, marketing executives and real estate agents are bracing for a sustained downturn in the housing market after sales in April – usually one of the most active months of the year – plunged by double-digits across Metro Vancouver.
Vancouver lawyer Richard Bell, executive vice-chair and founder of Avesdo Inc., told a real estate seminar May 8 that the Vancouver new home market has seen an “incredible run over the past 10 to 15 years.” But, he added, “We all knew it would come to an end and the end is nigh.”
Generally, at the bottom of the bottle’s label. Just beware of the brands that advertise or accentuate it – always trying to compensate for something. Also, anything over ~120 is uncivilized, paraded or not.
Where’s your proof?
Church, Mosque, Monastery, Shrine, Synagogue, Temple, whatever. Sorry if I picked on your religion specifically.
Ah James, the polemicist manque…
“When you factor in how many people attend church”
Nice soft target there for your razor-sharp writing skills.
Why don’t you run that post again using “are Muslim” or “are gay” and equate those with bestial stupidity. You’d get more of that validation you crave in exchange for your dreary sophomoric efforts.
Ok so your logic is that since BC Hydro made bad deals in the past with IPPs they should continue to make bad deals in the future.
You’re an impoverished person, on a couple of levels.
“Where I am from you live with your parents until they die and that is how you get into real estate.”
Over here they say: You have a problem.
“The change in the Bank of Canada five-year benchmark rate not only means Canadians will pay more per month for their mortgage”
Why would they pay more for their mortgage? This is just for qualifying purposes, no?
“Pretty sad when you’re a boomer who foolishly sold, thinking the crash was around the corner, but—oh no!—prices rose another 40%. Guess you’ll be working till you’re 80 to make up for that little booboo.”
What’s real pathetic is when a clueless tool can just make up shit about someone’s life and act like an arrogant POS day in and day out on here.
Maybe you should back to the crime pages and see what else I did besides falsely accusing me of being a child killer. Garbage like you will soon be rewarded.
Bank of Canada’s mortgage ‘stress test’ rate climbs higher
Central bank’s rate for deciding if you can afford a mortgage is raised 20 points to 5.34%
“The change in the Bank of Canada five-year benchmark rate not only means Canadians will pay more per month for their mortgage, it also means the amount Canadians can qualify for has diminished,” James Laird, co-founder of Ratehub Inc. and president of CanWise Financial, said in a release.
http://www.cbc.ca/news/business/bank-canada-mortgage-stress-test-interest-rate-1.4655460
It’s so sad what you consider education.
its for the parties also….
It’s so sad that many think education is just for work.
LF – I agree. But, I would rather buy shares in the big 6 Canadian Banks [earn a rising dividend of 4 to 5%, get the dividend tax credit, making it equivalent to 6.5% interest; and let the share price rise as interest rates rise] than buy RE in Canada, be it Victoria or elsewhere, at this moment. Just saying……….I don’t go to church and my 2 university degrees are not in English.
Washington state is converting its ferries to hybrid-electric. Will BC Ferries follow suit?
Washington state has learned lessons from Norway, which uses 100 per cent electric ferries to ply waters that look strikingly similar to B.C.’s coast.
https://globalnews.ca/news/4196265/bc-ferries-electric/
People have to remember that banks have one interest they cater to: their shareholders. Banks care about your interests only when doing so serves the former. That sweet, friendly gal on the other end of the RBC/CIBC/HSBC/whatever/ customer service line is not your friend.
Mortgage originations are declining, and resales are as well. If you have declining sales volumes and hungry shareholders, you can bet the banks will attempt to milk every last haypenny from their clients they possibly can. At the same time, they will tell us how things are fine, risks are contained, the worst is over, the bottom is in, etc etc. Don’t listen to any of it. Watch what they do, not what they say. Unlike the general populace, the banks aren’t foolish; they see perfectly well what’s coming in Canadian RE.
BMO’s discount vis-à-vis the other banks is very much a move to become a bigger fish in a shrinking pond: accept a reduction in profits from each individual mortgage in the hope that it could be offset by larger volume/market share (similar M.O. to Amazon, Wal-Mart).
The banks are looking out for their interests. Are you looking out for yours?
Canada’s mortgage growth falls to lowest levels since 2001
https://www.mortgagebrokernews.ca/news/canadas-mortgage-growth-falls-to-lowest-levels-since-2001-242139.aspx
B-20 causing housing immobility
https://www.mortgagebrokernews.ca/news/broker-networks/b20-causing-housing-immobility-242195.aspx
When you factor in how many people attend church, and take english degrees, it’s hard not to believe that there are a lot of them (idiots with money).
To illustrate how much that mortgage burden will increase, a $500,000 mortgage at 2.5 per cent, with monthly payments of $2,300 would take 24 years to pay off. The total interest cost would be $166,540.
The same $500,000 mortgage at 5.5 per cent, with monthly payments of $2,300 would take 102 years to pay off with total interest payments of $2,327,000.
Can’t completely ignore inflation and other factors. My variable has gone from 2% to mid 2% which means my principal repayment every month has dropped (as total payment doesn’t vary), but I could offset that by throwing the increased rental value of approx. $400/month of my suite in the last 3 years towards the principal so on a monthly cash flow nothing changes and on a prinicpal repayment it is a wash.
Those at greatest risk are people buying today buy if you bought 2,3,4,5,6 years ago the only way you run into trouble is you are an idiot with money (i.e. you ATM your house to buy your dream boat) or unfortunate circumstances (poor health, etc.)
There a lot of Sub-prime debtors out there and these alternative lenders are at risk. Don’t kid yourself. I have a realtor who has set up a PCS site for me [many of you likely have one] and I see a lot of new “luxury” listings in Victoria – 3 to 5 per day – in the $1.0M to $3.5M range. Everyone in Victoria thinks their home is “worth” over $1.0M. No one thinks about the “willingness to pay” – someone on the other side of the ledger has to agree. Few are, we are seeing. Nothing between $2.0M and $3.0M is selling in Victoria, that I am seeing. So, take out the foreign money [dirty or clean], hike the lending rates [spring selling season or not], include a 2% stress test [2% above 5.15% = 7.15%, whether insured or not] and have real wage rate growth of 0% [nominal rate minus inflation], and what this all adds up to is a buyer with his or her back turned. Just consider a $500,000 mortgage and what a rise of 300 basis points could do [and that does not even bring us to historical average rates]. BNN reports today:
In just a matter of months the burden of borrowing to own a home has multiplied.
The big banks have hiked their posted benchmark five-year fixed mortgage rates to well over five per cent. Some of the smaller lenders are still offering five-year fixed mortgages at less than four per cent, but with central banks hiking their benchmark rates it’s just a matter of time until nearly every home owner with a mortgage pays more.
Variable rate mortgages are still available at 2.5 per cent for borrowers who are prepared to be exposed to the full force of rate increases, but there’s no denying you can’t buck the trend.
To illustrate how much that mortgage burden will increase, a $500,000 mortgage at 2.5 per cent, with monthly payments of $2,300 would take 24 years to pay off. The total interest cost would be $166,540.
The same $500,000 mortgage at 5.5 per cent, with monthly payments of $2,300 would take 102 years to pay off with total interest payments of $2,327,000.
It’s hard to know how high mortgage rates will go, but looking back fixed rates hit 14 per cent in 1990. That’s something to think about.
Oil above $71 US today and CND isn’t moving with it much which creates for a $90 CND+ barrell. If Alberta gets going we are totally screwed in terms of tradespeople in Victoria.
My parents are almost 90. If I had to live with them until they die either they or I wouldn’t have made it.
Different cultures…..in Croatia you have generations that live under the same roof. Not like here where a multi-gen buys a home together but literally the same home is in the family for 100+ years.
A waterfront home we have in Dalmatia has been in the family for 70 years now and literally zero interest from any of the 3 parties in cashing out their portion. We even keep our grandfather’s 1954 fishing boat moored in front of the home in great shape and he passed away 18 years ago. Families are a bit tighter and a bit more sentimental.
Part of the reason income ratios don’t work in Croatia is you have no inventory secondary to real estate hoarding through generations facilitated by many factors including no annual property taxes.
Bill 25 – 2018: Real Estate Development Marketing Amendment Act, 2018
Amendments to assignment reporting requirements, and consequential amendments to PTT and Income Tax.
https://www.leg.bc.ca/parliamentary-business/legislation-debates-proceedings/41st-parliament/3rd-session/bills/first-reading/gov25-1
My parents are almost 90. If I had to live with them until they die either they or I wouldn’t have made it.
Pretty sad when you’re a boomer who foolishly sold, thinking the crash was around the corner, but—oh no!—prices rose another 40%. Guess you’ll be working till you’re 80 to make up for that little booboo.
They wouldn’t accept less than ~220/sq. ft. for my permit a year ago. BP fee was ~25K.
Pretty sad when you have to wait for granny to die to get in the market at the top. The slashes just doubled this morning on my list. So much for the sellers market bullshit.
Where I am from you live with your parents until they die and that is how you get into real estate.
https://www.timeout.com/croatia/blog/its-official-croatian-men-are-europes-biggest-mummys-boys-102516
Meanwhile in the big town where the real money is, the bloody horror show of 90% going under ask is tilting the market down danger road.
https://www.myrealtycheck.ca/
Pretty sad when you have to wait for granny to die to get in the market at the top. The slashes just doubled this morning on my list. So much for the sellers market bullshit.
Produce power for BC Hydro on a grand scale, and BC Hydro will buy that power for way more than it is actually worth, for decades; produce power for BC Hydro on a minuscule scale, and BC Hydro will shut your ass down!
I would expect at least a few months for on the ground buyers to be effected due to pre approvals.
I think absolute rates (your actual monthly payment coming out of your bank account) is way more important than the qualification rules. So many ways to get around qualifications.
I don’t think I’ve lost a client so far secondary to qualifications restrictions being implemented. Had a young couple that got hit with the <20% down stress test when that came out (2 yrs ago?). Didn’t hear from them for 3 months and then they called me and it was along the lines of “grama passed away, received $60,000, good to go again.” Or they will borrow from parents or something similar.
It has to come down to people simply not being able to afford the payment versus not being able to qualify. There is a spread between the two.
@Leo
If i’m reading that right then the 2% stress test puts the “affordability” into the same levels as the early 80s?
There is a house north of Victoria being constructed for $104/sqft. I know this because I found the building permit and divided the total by the sqft…
Common knowledge that everyone lowballs the BP as much as possible to save on costs. Also, if you are building for yourself BC Assessments pulls the BP numbers so you are off a good start on property taxes too. I don’t think City of Victoria will accept anything much lower than $200 a square foot anymore.
Same in Saanich. I called city two weeks ago for possible window work (to increase size), the permit fee is based on estimation of project cost: $xx for the first $5K, and then $15 for each additional $1K. I asked if the real reno cost is much more than the estimation, do I need to pay more after the work is done? The answer is no.
I can only imagine there’s a big chunk of these in Victoria. Higher priced areas create the highest risk borrowers which would be the 10% that could crush the market like in the US crash. Wouldn’t want to be ya. 😉
For the 3.4 million Canadians with subprime loans, Poloz can’t go slowly enough on rate hikes
Higher interest rates could be disastrous for subprime borrowers, piling costs onto already tight budgets
http://business.financialpost.com/real-estate/mortgages/for-3-4-million-subprime-canadians-poloz-cant-go-slowly-enough
Scotia raised their posted rate – last of the big 6 to do so. BMO cut the 5 year variable rate to 1% below prime. This is their Spring special. This is very low. They say they did this because mortgage originations have tumbled [people are taking out new mortgages – few buyers] and the renewal market is very competitive. This is fine and well, BUT all new borrowers still have to meet the stress test [2% above the greater of the contractual rate or the BOC 5 year rate]. It is said that HSBC has the best rate right now.
Canada’s Big Six banks have all increased their benchmark fixed-rate mortgage rate, a move analysts say could trigger a rise in the Bank of Canada’s qualifying mortgage rate as early as Wednesday, making it more difficult for some to take on home loans. The Bank of Canada uses the posted five-year fixed mortgage rates at Canada’s biggest banks to calculate the rate used in stress tests to determine whether borrowers can qualify for both uninsured and insured mortgages. The central bank’s conventional mortgage five-year rate, which is updated weekly, was 5.14 per cent as of May 2. It posts the rate every Wednesday.
Supply of listings is rising and buyers are not buying [mortgage business drying up]. The peak in housing prices is in the rear view mirror – bye, bye.
Eww. 🙁
True, bias must be taken into account. However the same CEO also said more money may start flowing to Montreal due to perceptions of the RE market in Montreal having more value for the $ as compared to Vancouver. The problem is Montreal doesn’t have the historical appeal to the Chinese like Vancouver does. So my point is, it’s not like these guys at Juwai only vomit roses and sunshine. My main reason for bringing it up is there is a steady flow of “the sky is falling” from some posters on HHV; to extend the analogy they only vomit blood and cockroaches. (You guys know who you are.) An increase in mortgage rates (to still below historical averages) is looked at as the coming of the blessed rapture.
We all look at the world through our own bias and some are more educated on certain topics than others. Worse, some have an agenda to push either for their own monetary benefit or just as a result of wanting to feel “right”. Many on HHV have a serious lack of understanding of the motivations of the Chinese foreign buyer – I include myself in that group, but I’m working to educate myself on it. We also often underestimate just how many of them there are and how strong an impact on the market they have. Here are some facts from the CBC SOLD podcast:
China’s foreign exchange reserves declined by 1 TRILLION in 2014-2016 alone. (3.8Trillion over the last decade). Of importance, this isn’t a total value of money out the door, rather it is the difference between inflow and out.
Vancouver consistently ranks in the top 3 for RE investments by the Chinese. In 2017, even with the improved Chinese capital controls, 1 in 10 homes in the Richmond suburb of Vancouver went to foreign buyers. The money is still coming.
So sure, some of the high end Vancouver properties are declining in prices, sales are dropping etc. Does this mean the market is going to correct by 30, 20 or even 10%? You can’t assume that and we’ll only know by looking in the rear view mirror.
Oh they will be, and far below 2013. This is the last gap by the panicked sheep trying to get in the door before rates head up way higher for good. The hipsters won’t know what hit them and they’ll spill their vegan coffee all over their new Doc Martins. 😉
So no comment on the fact that it’s a complete non-issue? Existing people are grandfathered, and 99.99% of residential solar installs will not be affected in the slightest.
Banks are getting desperate but who will qualify for the limited time mortgage rate under 2% stress test ?
Financial Post:
“Bank mortgage growth is the slowest since 2001, yet there is serious and intensifying competition from players like HSBC and online brokers,” McLister said Tuesday in a phone interview. “BMO felt that they had to do something, clearly, to maintain a market share and grow in a slowing housing market.”
@gwac
Good to know! You’re right, I found a Nanaimo online building permit fee calculator and the fees are a % of the building permit value.
I don’t think the “class” includes enough people for this to work, but I like the idea.
The number of BC Hydro apologists out there is unbelievable. Any criticism at all and the entire army mobilizes in a nanosecond. I’ve never seen anything like it.
Yup, inverse indicator.
Luckily, Victoria has such mild climate and natural beauty that it doesn’t require much culture or economy to attract people (the way shittier places do).
Oh puhleeze.
Sure. And at lower rates it would have been even more so.
Yes, yes, I know, way overpriced for a house, but that’s a pretty big drop – almost 1M under assessed value.
Common sense says I’ll believe the current stats to tell me if the foreigners have left versus a MSM outlet with a local bias.
Grant I could be wrong but most BP are low balled because of the cost to obtain the permit. BP costs usually based on the cost in the permit application.
Grant, this “Juwai” topic has been raised several times before you got here. They always say that, it’s always “going to break new records next year”, and “millions more are just itching to buy BC homes”.
In this case, what matters is what we see the market doing, not what “Juwai” always says is right around the corner. And so far, reality is appearing very different globally. Zooming in, when we think of wealthy Chinese and BC, what do we think of? West Van? Luxury homes in Van?
Those market segments are cratering to some of the lowest levels on record, with some areas nearing a decade of inventory. A fair bit of press on this recently. Is it because of the foreign buyers tax? Very unlikely. It’s more to do with them not getting their money out of China and, those that do have long since moved to greener pastures (“greener” does not mean BC’s secondary markets). It’s not like Vancouver has a lot of price growth potential in RE moving forward.
The market may finally be starting to cool, but the foreigners have certainly not left BC. I recommend listening to the CBC podcast SOLD that Leo S recently linked, this last Monday they added the remaining 3 chapters as well. It gives a lot of insight into why foreign buyers, particularly the Chinese, are so attracted to BC and Vancouver in particular.
Regarding those foreign buyers, the CEO of Juwai has stated that the stricter mortgage requirements and increasing interest rates may cool the market enough that “aspiring homebuyers – particularly the Chinese – who have been sitting on the sidelines could possibly be tempted to get back into the fray”.
and “From our point of view, the raised foreign buyer taxes is likely to have minimal impact on wealthy Chinese buyers seeking to purchase in Vancouver or elsewhere in the B.C. province.” … “Of course, if these families can obtain permanent residency in Canada, the tax does not apply to them.”
RE: new home construction costs
There is a house north of Victoria being constructed for $104/sqft. I know this because I found the building permit and divided the total by the sqft… BTW this is builder cost (labour and materials) on a very basic spec house. Based on the lot value and list price of the house, the builder is looking to get 1/4 million profit. That would bring the buyer cost $/sqft up to $177/sqft
Sweetholme:
You make an excellent point. it really helps to actually know and befriend a couple of doctors.
@marko
The rates only just went up. I would expect at least a few months for on the ground buyers to be effected due to pre approvals. Then we have the people renewing which could move to variable rates and keep chugging along until boc starts to raise those. I think it will take until later into the year, once more renewals have issues and summer time for the new inventory due to renewals. That might really take into the start of 2019 for people to start to feel the additional few hundred dollars a month they need to come up with.
The stress test levels are just starting to move now since banks are around 3.5% +2% =5.5% but you can still qualify for around a 3% 5yr on rate hub. I think we will need to see those lenders go up before it becomes more of a problem.
75 x 123 lot; SW Marine Vancouver – SFH
Sold for $3,080,000
21% below July 2017 Tax Assessment of $3,916,200
* looks like a well kept older home
Yes, yes, I know, way overpriced for a house, but that’s a pretty big drop – almost 1M under assessed value.
Were bathtubs shorter than 60″ in the last 40 years?
Marko’s bathtub link brought up a question that is bugging me and maybe someone will know the answer to. Our house is late 70s vintage. We removed our bathtub without measuring it, assuming it was a standard 60″. However, when we measured the opening (down to the studs), it was only about 58″ from wall to wall. If a 60″ tub is actually 60″ (the one Marko linked to is 59.8″), it definitely won’t fit.
I can’t believe they would make a tub a couple of inches shorter in addition to the standard length, but maybe this did happen in the past. Anyone know? We plan to get a small freestanding tub to be safe, but that is going to be way more expensive.
I did just Google this, but there is only an explanation if the the inner walls are 58″, not the studs.
@ Barrister
The other thing that popped into my mind is that it is also a medical backwater. I’m not sure if you’ve commented on this before, but since you have admitted to being an “old man”, what were your impressions of any dealings you have had with the medical system?
I consider the shortage of family doctors to be a major drawback to moving here. Specialists are also in short supply and access to services for less common conditions is nonexistent.
Caveat:
The fact that Victoria is on the hipster index is an additional strike against. thanks for reminding me.
and when it comes to materials everyone is using the same crap.
I’ve literally seen this bathtub in more than 5 condo developments and more than 50 houses (also used it in my home in two bathrooms). Super cheap and looks great ->
https://www.costco.ca/Maax-New-Town-Soaker-Left-hand-Drain.product.100009370.html
It’s funny I’ve seen it in a very high-end development and my clients note “very nice tub,” and then two days later saw it in crappier development and clients didn’t mention a thing.
I am always wary of squeezing people too hard, since the quality of the job can quickly go bad if they stop caring about their work. I am curious if we will have a new version of the “leaky condo” crisis in 15 years when it turns out thousands of condos were built with serious flaws.
Quality of tradespeople and labour is only a part of the equation. You could have the best tradespeople but if the design sucks it won’t help. Same applies for materials.
My gut feeling is that you are less likely to have problems with a lower end traditional home with some solid roof overhangs than some fancy modern box. A crawl space is more comfortable and expensive but carries way more issues with it (moisture, rats, etc.,) compared to slab. Exterior cedar might be more attractive than hardie plank but it will be way more maintenance long term.
Same applies to condos. When I am buying investment condos some of the higher end quality stuff can actually be a liability, this being one of them -> https://www.youtube.com/watch?v=c42HU8Myz_4
Also of all the condos I own one of them, the Promontory, has A/C and every year the building post a remainder to change the filters on the air exchange unit and every year my tenant contacts me to get it down and every year I have to go down to the building and deal with it. My baseboard condos no such issues to worry about.
I will continue in my quest for someone who will do quality work for a reasonable price.
This is super complicated as very few builders do any significant work themselves. You’ll find tradespeople one day working on an Abstract Development and the next day they are at some no-name builders site. It isn’t like the top builders have exclusive people that work for them.
So the market slowed more than it would have without it.
Still a seller’s market.
@Vicinvestor198
try leevalley.com
or retrofit ikea pullout unit?
https://www.ikea.com/ca/en/catalog/products/40265649/?cid=ps|ca|shopping|201804041739217864_1
We have the older version of ikea pullout unit, loaded it with cast iron pans and dutch ovens. It is as smooth as we installed it 10 years ago.
Look on the bright side we are the only Canadian city to crack the top 100 on the hipster index https://www.movehub.com/blog/the-hipster-index/
I am in cranky old man mode. Prices in the core are wildly overpriced. Most of the houses are next to garbage and the renovations are third rate. While Victoria is a cute little city it is a cultural and economic backwater.
Prices should be dropping by at least back to 2013 for it to be a reasonable place for younger people to live.
Does anyone know a good place to purchase a blind corner cabinet replacement set? The “Magic Corner ii” set or something like it? We were quoted $1500 by a local store, but it seems a bit steep esp when you add in the $175 installation charge! .
All the scenarios above use rates increasing gradually to the given level by 2025. If they jumped up immediately it would be:
Current rates: 56%
+1 %: 62%
+2%: 68%
+3%: 75%
I wouldn’t put too much stock in the peak unaffordability of 1981. That was due to a spike in interest rates which brought the measure from 43% to 68% in one year, so doesn’t really reflect a realistic level for any length of time.
Haha. I didn’t look too closely. There is certainly a hard floor on lot price, since it costs real money to level the land, build roads and put in utilities. However, I would suspect that whoever is selling that house didn’t pay 400k for the land.
I appreciate the sentiment, but I am not as sure of this anymore. You are right about paying themselves twice for some things, and paying a premium for Victoria, but some material costs have certainly gone up.
I am always wary of squeezing people too hard, since the quality of the job can quickly go bad if they stop caring about their work. I am curious if we will have a new version of the “leaky condo” crisis in 15 years when it turns out thousands of condos were built with serious flaws.
I will continue in my quest for someone who will do quality work for a reasonable price.
You’re telling me you don’t see the difference between the market back then and now? The increase in rates deteriorated affordability faster than it would have without it. So the market slowed more than it would have without it.
@ Marko Juras
Thanks for the insights, very fascinating!
@Leif
Interesting about your wealthy friends. But I don’t know how relevant it is to the general population. Just doing some back-of-the-napkin math to suffer 200k in new spec/school tax their house sold for around $8.8m in south oak bay this spring? I just checked, there’s literally one property in core victoria for sale that’s up for more, and only three on the entire island. If they owned their property in cash and only lived there 6-8 weeks a year then they were already spending 100k/week in foregone investment income. Or what? 40-50k/week on mortgage interest?
that makes the presidential suite at the St Regis in Bora Bora sound like a steal.
@lore:
“Would someone mind doing me the favor of explaining in simple terms why the provincial government enacted a “Foreign Buyer’s Tax” instead of simply clamping down on the games being played with multiple title transfers? Why not simply make that process of multi-party title-transfer-flipping a crime under the criminal code, and charge the parties involved with fraud? I perceive that the government agenda is less to do what it can to create a stable, ethical market, and more to increase the size of its “piece of the action.””
a)the previous government enacted the foreign buyer’s tax, not the current.
b)multiple title transfers? I’m not sure to what you’re referring. multi-party title-transfer-flipping? What is that as well?
The transactions that people hate that we generally hear of are:
-rich evil foreign people hiding their stolen money in BC real estate
-transfer of shares are not taxable. so you can buy and sell a holding company that owns land without triggering ptt.
-bare trusts/beneficial ownership/prevalence of 99/1s –> ways to avoid the PTT.
a lot of this is just the province trying to deal with a problem they only kind of have jurisdiction over. The truth is that property transfer tax SHOULD play second fiddle to the CRA and capital gains tax. But the truth is also that the CRA is grossly understaffed, underfunded, and inefficient. This obviously is on their radar, but often times by the time they get around to building their case the money trail is long cold.
As far as why the foreign buyer’s tax and not something more. Well, that’s a complicated answer.
IMO one of the reasons why Canada works is that the vast majority of people pay their taxes voluntarily. If we went harder it’s likely that it would drive money underground. This argument is used often for income tax. Recent studies in some countries has found that increasing income taxes on the rich rarely brings in as much as it should on paper, because on paper the greatest effect increasing income tax on the rich has is that it reduces the paper income of the rich. The higher you tax people the more likely people will put work into paying less taxes.
Secondly, I think it’s actually smart to start low and go bigger over time. a 15% isn’t that bad in the grand scheme of things. But it will drive out some buyers and drive underground a few more. You can then inch it up over the years slowly squeezing out foreign buyers until it’s not a problem or until you bring in enough money that allowing foreign buyers is worth it to the people of BC.
Finally, I don’t think the government has the capability to enforce any half measure besides an outright foreigner ban(which would cause a market crash and would end the NDP government). Make anything land oriented that isn’t outright theft(already illegal) subject to jail terms and you’ll spend 10 years in court. Any draconian tax would drive the money underground. And I do not believe that the government has the resources, jurisdiction, or will power to chase it.
For example, some builders will have a mini-excavator that they will use for various tasks around a new build (drain tiles, backfilling, landscaping) but if they are doing a custom home for you they are billing the mini-excavator per hour + their management fees.
but it points to a per-square foot construction costs closer to (or even below) $250/sqft.
If you aren’t in the industry it will cost you $250/sqft-$350 sq/ft for a custom build.
A builder can build a spec home for $150/sqft outside of Saanich and Victoria which kill you with their bs.
If you are savvy you could do an owner-builder for $150/sqft but most people aren’t that savvy. I had a $15,000 kitchen installed for $1,000 (got the showroom kitchen from the Duet condo development in James Bay for pennies on the dollar before they demolished the showroom). When I buy pre-sale condo I write into the contract that I want the showroom kitchens for $500 when the salescenter closes and the developer agrees to make the deal happen otherwise they are gifting the kitchen to an employee or similar prior to demolition. A ton of other savvy tricks/factors is how you get to $150 a foot.
Hmm. Empty lots in the area seem to be listed for 300k+. I would hope the builder/developer did not pay that price
More like 400k+
https://www.realtor.ca/Residential/Vacant-Land/19211178/6-Elevation-Pointe-Terr-Victoria-British-Columbia-V9C4K7
Hmm. Empty lots in the area seem to be listed for 300k+. I would hope the builder/developer did not pay that price, but it points to a per-square foot construction cost closer to (or even below) $250/sqft.
Interesting listing. I notice that it was built by Philco, who DuranDuran mentioned earlier. Marko, what is the value of the bare lot for that property?
At 3187 sqft and a wild guess of $275/sqft that would be $875,000 for the building. Leaving a little over $100k for the 7233 sqft lot. Do any of those numbers seem plausible?
You could lower the house value and raise the lot value, but I don’t really know Royal Bay at all. It is not a spec house, but that seems to say that building costs are not as crazy as some people hint…
Working with a few buyers right now and these are my on the ground impressions…
If you have a house in the core that is livable, the floors are not slanted, and you aren’t on a crazy busy and you aren’t out to lunch on the price stills seems to go over asking and I’ve noticed the number of offers picking up again to 4-5 on something semi-attractive…maybe because it is spring?
Some crazy sales today….2909 Irma listed for $775,000 and sold for $900,000.
I feel teardowns/poor condition properties in the core are starting to see some resistance. For example, a teardown on Oliver sold a few days ago for $1.010,000 and a teardown two houses over with identical lot size sold 18 months ago for $1,050,000.
Westshore still hot up to 800k but starting to see price reductions and slow sales above 950k. Some nice homes (IMO) are coming down below a mill now -> https://www.realtor.ca/Residential/Single-Family/19213197/544-Ridge-Pointe-Pl-Victoria-British-Columbia-V9C0M3
Starting to see a bit of condo inventory building in the one bed and 700k+ categories. Still tight supply of the 500k/core/rentable/2bed 2 bath/insuite laundry.
On the topic of interest rates how come the increase from 2.49-2.64% 5-year fixed rates to 3.34-3.59% has had zero impact on prices? I always thought 4.5%-5% would tank the market but having second thoughts now. Maybe the market could hold flat at 4.5%? That is assuming we get there before inflation/wages have a chance to improve affordability.
Would someone mind doing me the favor of explaining in simple terms why the provincial government enacted a “Foreign Buyer’s Tax” instead of simply clamping down on the games being played with multiple title transfers? Why not simply make that process of multi-party title-transfer-flipping a crime under the criminal code, and charge the parties involved with fraud? I perceive that the government agenda is less to do what it can to create a stable, ethical market, and more to increase the size of its “piece of the action.”
@ Grant re: 29 April: Thanks for the response to my comment about lax lending. I’m sorry for directing my anger at you, whom I’ve never met. My anger stems from the fact that I have several young newly-married relatives who appear to have been actively encouraged to take out the largest possible mortgages to which they are eligible in order to move into local SFHs. Of course, it can argued that grown men and women make their own decisions, and no-one else should be held to account for their potential irresponsibility (since when did it become a requirement for newly-marrieds to own a house right out of the starting gate, anyway?), but on the other hand, I shake my head at all these loans being approved, particularly where income and debt seem hair-raising to me already. In the lender’s place, I could not approve such applications in good conscience.
In the meantime Scotiabank subsidiary Tangerine continues to offer 5 year fixed for 3.59
So far every time Hawk says that the market climbs another few percent.
Bank of Montreal is wooing homebuyers with a variable mortgage rate with the biggest discount ever by a large Canadian bank
http://business.financialpost.com/real-estate/mortgages/mortgage-wars-heat-up-as-bmo-offers-variable-rate-at-biggest-discount-ever
End of an era. One for the history books kids.;)
Scotiabank becomes latest of the big banks to hike mortgage rate
Scotiabank raised the posted rate for a five-year fixed-rate mortgage from 5.14 per cent to 5.34 per cent, effective Tuesday
Stick a fork in it. The rich have stopped buying big, the foreigners have left, the downhill descent begins sector by sector. 😉
Party’s over for Vancouver’s luxury property market — it’s now the worst performer on the continent
Prices at the top end of the market plunged 7.6 per cent in the six months to March, making it the world’s second-worst performer during that period
“Those capital flows have shifted now,” Dinani said.
http://business.financialpost.com/real-estate/vancouver-luxury-property-is-continents-worst-performer
@LeoS
Would still like to see what affordability currently looks like at +1% +2% +3% interest rates. Currently it’s at what 57%? What does it bump up to at different rates? How much of a difference do we need to get us to the early 80s peak unaffordability?
Thanks
You’re basing your prices on a chart that won’t matter when inflation spikes much faster than predicted as it did in 1981 and it only took 2 years to see 40% to 50% slashes when debt levels were only 100%, now they’re over $170%.
This is a whole new ball game where expect the unexpected. No one saw the last .45% hike on the 5 year coming. Free money days are over.
Slashes keep on stacking up, a whole whack today all in so called “hot” areas. Buyers must be balking as the last of the greater fools get roped in.
Wow! Thanks Leo S.
30-Jun-2016 $689,000
A difference of $218,000 in 2 years!
Still a little hot market out there.
Harp Echo, a “tip” to the authorities that a certain house is empty and should be taxed as such
@Garden
Bingo!
“Empty Homes Tax enforcement tip”
http://vancouver.ca/home-property-development/get-help-with-a-property-concern.aspx
@Average Commenter
Regarding paying another $50/100k on a house that they already spend a lot of money on for a few weeks of vacation. I think it might just be an added thing that would push someone towards selling. I know it was the reason we had family friends sell their place since this year the bill was ~$200k spec and luxury tax. (South OB Waterfront) But that might have also been because the wife never really liked it here to begin with.
WHAT someone who lives on the water in Oak Bay in a mansion and doesn’t like Victoria. But it is the best place in the world (Canada) they say… especially to those people who have never lived anywhere else.
Sold. Huge over ask at $907,000
I guess California and BC Hydro see things differently.
“California moves closer to becoming the first state to mandate solar panels on new homes”
https://www.cnbc.com/2018/05/08/california-may-soon-require-solar-panels-on-new-homes.html
@Introvert the current customers that were being paid back at the rate level should create a class action lawsuit to BC Hydro asking why BC Hydro will pay private corporations higher than normal rate for power contracts we are stuck with for decades but not pay them anything.
255 Government St has come down $289k from the original price and 277 Michigan has come down $120k from original. Both are still absurd and nowhere near selling. It’s nice to see examples of the hyperventilative idiocy of 2017 no longer being present.
On interest rates, you tend to focus on the Bank of Canada as the rate setter – Leo, it is the bond market that sets mortgage rates and lending rates. The BOC overnight lending rate is what banks charge each other. Yes, it does impact general rates, but nowhere near the weight you suggest. Look at the bond market over the last 10 years – look at bond prices – that is what we call the bull market in bonds – it forced rates down for a decade. As bond prices rose, interest rates fell to what we have now – historically low mortgage rates [even with the 3 hikes], and now rising.
Nice analysis, Leo, on the sales and listings. Unlike you, I do expect rates to rise substantially, but over a longer time frame – a 3% raise over a 3 to 5 year time horizon is certainly probable. That said, as I have noted many times, I look at the luxury market as a leading indicator. I see the peak of the market in the rear view mirror and we will grind down for the next 12 t0 18 months. Many have said that luxury homes in Vancouver are selling for big bucks and those folks are buying in Victoria and pumping up prices here in our fair City. So far, the Vancouver luxury market for 2018 has been a dud. Here is what was reported today on BNN:
“The party’s over for now for those sitting on Vancouver’s most expensive properties.
“Prices at the top end of the market plunged 7.6 per cent in the six months to March, making it the world’s second-worst performer during that period, according to the latest global survey of prime properties by Knight Frank LLP. Only Stockholm did worse, falling 9 per cent, while Toronto rose 6 per cent and the top gainer was Seoul.
“The findings — based on the top 5 per cent of the housing market in each city — lend support to anecdotal evidence of a slowdown in Vancouver’s luxury segment following the hike of a tax on foreign buyers to 20 per cent from 15 per cent in February, the introduction of a speculation tax, and rising interest rates.
“Vancouver’s slower rate of growth is likely the outcome of British Columbia’s “macro prudential measures” and the rising borrowing costs for investors, said Kate Everett-Allen, Knight Frank’s head of international residential research, in an emailed response to questions. In Vancouver, the study looked at properties starting at about $3.5 million, she said.
“Just two years earlier, Vancouver had topped global rankings in the same survey after surging 26 per cent over a 12-month period and before the provincial government first imposed a foreign buyers’ tax in August 2016.
“At the height of the market, foreign money had flowed mostly into the million-dollar-plus segment of detached homes, according to Adil Dinani, a realtor with Royal LePage, a unit of Brookfield Real Estate Services Inc.
“Those capital flows have shifted now,” Dinani said. “It’s actually refreshing — you have some time to breathe, to negotiate like a regular transaction.”
Does anyone have information for Wychbury Ave B Victoria, BC V9A 5K9? What did it go for?
A ~$650k SFH would be excellent, but 2024 is a long time to wait.
I have done that before, but it doesn’t make a substantial difference. The percent of mortgage payment to income shifts, but the pattern doesn’t change. I use averages because I have average house price data going back to 1960, but medians only after about 1990.
I guess it depends on how robust you think the US economy is. I also don’t believe it can take drastically higher rates.
Harp Echo, a “tip” to the authorities that a certain house is empty and should be taxed as such
That’s one point where I continue to disagree with Leo. It’s not that I think they are certain to climb that high, but “they won’t because the economy can’t take it” is just too simplistic. Yes, the housing market as it is right now couldn’t take it, but’s that’s a bit of a different question.
In the end Poloz is only controlling the overnight rate. He has little control over anything else. Besides, if the Feds continue to rise, Poloz won’t really have much choice but to hike the overnight rate as inflation will eventually force his hand.
@ Rook:
” but the BOC only has so much power over rates”
Right.
JP Morgan chief, Dimon predicts bond rates are headed sharply up.
“With the Fed paring back its balance sheet and the federal government increasing its borrowing, the U.S. will have to finance by the end of the year “$400 billion a quarter — that’s a lot, that’s a huge shift from the past,” Dimon also said.
“Thanks for update graph, great illustration. Looks like the price won’t drop below 2014 even in “worst case scenario”.”
Wishful thinking. Going by the inevitable 1981 levels where household debt was just a mortgage, this is going back to 2005 levels. The denial of the debt bomb with historical rising rates off emergency levels is extremely hilarious. It’s like pricking a water balloon. One big splat.
Leo, why use average income and price in your affordability graph? Have you plotted medians?
Thanks for update graph, great illustration. Looks like the price won’t drop below 2014 even in “worst case scenario”.
If the price is log scale instead, will a better pattern emerge?
Thanks for the article. And also agree on buying “cheapest house on the block”.
What kind of tips, Leif
Leif,
What do you mean “websites setup to anonymously send tips on vacant homes”?
Leif – I kind of wonder what it takes to push something into the market. Consider the cost of purchasing and maintaining a 2.5m house to use for a few weeks a year. Is it really that much of a stretch to say that another 50k/year won’t change much?
As well, the provincial government does take tips from the public and does a cursory study of the tip to see if it’s worth pursuing. Nothing is setup yet and I’d be surprised if they ever officially set up anything.
I personally don’t expect rates to increase that high (the economy can’t take it)
I totally agree that the economy can’t take it, but the BOC only has so much power over rates. I’m not saying this is a likely scenario, but I think one that shouldn’t be totally ignored. There are a lot of cracks showing in our financial system with signs of major inflation underway in the US. It’s not impossible for things to get out of hand.
Barrister for sure the spec tax will push them into the market. Paying $50-200k to hold a property you use a few weeks a year will not make sense to most. I’m sure more will sell but at the same time they have made hundreds to millions holding over the past few years.
Is there websites setup to anonymously send tips on vacant homes? I’ve seen fb groups doing this but I’m not sure at the government level.
Depends. Let’s factor out the great recession where most of the quantitative easing and interest rate drops took place. After that interest rates still drifted down in Canada but the federal government did act several times to tighten up credit. In 2008 we had 0 down, 40 year mortgages.
See an incomplete list of those changes here:
The picture is more complicated of course, but at least on the CMHC front the effort has been to pull back the reins for a decade now.