A check on our forecasts
Time for another mid-year check in on our predictions for the housing market that we make on this site every year. Predictions were based on the number of sales for the year, what median prices would be in December of 2018. and the Bank of Canada rate.
For sales, predictions ranged from a low of 4850 to a high of 8650 for the year. So far we are at 3901 sales from January to June which is down 22% from the same period last year. To hit the lowest estimate the market would have to collapse to 150 sales per month for the rest of the year, and to hit the high target we would need almost 800/month. Neither is particularly realistic so we can already throw out those outliers.
The proportion of sales that happen in the first half of the year has ranged from 47% when the market was accelerating in 2014, to 67% when it was collapsing in 2008. With a slowing market like we have now, we should expect that more than half of the sales for the year have happened already, perhaps even significantly more than half. Given that, the average guess of 7300 and my guess of 7500 will come in higher than the final total unless the market stabilizes.
If I had to update my guess, I’d say we’ll be closer to 6600 sales for the year.
On prices, this year we guessed on what the median price would be in December. Although medians do fluctuate, it is easier to pick a single number of where prices will end up rather than an annual average as we have done in previous years. In June our single family median price was $770,000 (partially pulled down due to sales mix) while for condos it is $400,000. Taking out the outlier on either end of price guesses (because they were so wild), we estimated from $530,000 to $850,000 for detached homes, and $270,000 to $460,000 for condos.
It’s a bit early to tell whether prices will decline going into the fall, or just kind of trundle along approximately flat like they have so far this year. I’m OK with my guess of slight decline in both single family and condos to $750k and $385k respectively. Given the medians are especially volatile in December due to low sales, we’ll have to draw a best fit line to see who is closest to winning.
Here are all the predictions made in January:
| User | Annual Sales | SFH Median | Condo Median | BoC Rate |
|---|---|---|---|---|
| Leo S | 7550 | $750,000 | $385,000 | 1.0% |
| Caveat Emptor | 8000 | $735,000 | $350,000 | 1.25% |
| Cadborosaurus | 8650 | $530,000 | $270,000 | 3.0% |
| swch25 | 8650 | $775,000 | $450,000 | 1.25% |
| Local Fool | 7600 | $690,000 | $400,000 | 1.5% |
| Barrister | 8300 | $710,000 | $360,000 | 1.75% |
| Marko Juras | 7400 | $755,000 | $365,000 | 1.25% |
| Michael | 8200 | $840,000 | $460,000 | 1.75% |
| AG | 6800 | $730,000 | $380,000 | 1.5% |
| Dasmo | 7500 | $795,000 | $355,000 | 1.25% |
| oopswediditagain | 4850 | $415,000 | $220,000 | 1.25% |
| Luke | 7750 | $805,000 | $415,000 | 1.25% |
| LeoM | 6000 | $650,000 | $335,000 | 1.75% |
| Newbie | 6950 | $680,000 | $365,000 | 1.25% |
| Penguin | 5900 | $710,000 | $365,000 | 1.25% |
| CS | 6500 | $560,000 | $275,000 | 3.0% |
| Underachiever | 6300 | $666,000 | $333,000 | 1.75% |
| plumwine | 8000 | $850,000 | $450,000 | 1.5% |
| gwac | 7989 | $827,000 | $427,000 | 1.50% |
| Irregardless | 8000 | $690,000 | $330,000 | 1.5% |
| Senta | 7375 | $740,000 | $390,000 | 1.0% |
| RichardHaysom | 7150 | $948,975 | $509,150 | -- |
On rates, the consensus was that rates were going up, with an average guess of two 25bps raises which they’ve now done to hit an overnight rate of 1.5%. There are three more rate setting meetings this year so it could rise to 2.25% but with the cautious messaging from the Bank of Canada and an escalating trade war I suspect we will either stay steady or only see another .25%.
Anyone surprised by what has happened this year?
Here also are the weekly sales numbers courtesy of the VREB.
| July 2018 |
July
2017
|
||||
|---|---|---|---|---|---|
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Unconditional Sales | 147 | 282 | 790 | ||
| New Listings | 280 | 514 | 1104 | ||
| Active Listings | 2622 | 2628 | 1921 | ||
| Sales to New Listings | 53% | 55% | 72% | ||
| Sales Projection | 620 | 620 | |||
| Months of Inventory | 2.4 | ||||
To reduce DOM new strategy is to put sign of coming soon.
Originally listed at $949, sold for $665k
Monday numbers: https://househuntvictoria.ca/2018/07/23/july-23-market-update/
Andy7,
I see a headline on zolo.ca indicating that 1484 Lang Street was once listed at $799k, but I recall seeing it listed for more than that. I did a quick internet search and it seems all of the previous lists on the property have been taken down, but maybe someone recalls the original list price (or has access to it).
The flip flopper bought it for $532.5K (April 2017).
Looks like a really nice week ahead for weather.
Forgetfulness is not uncommon in someone your age.
I seem to remember someone recommending a roof moss removal company awhile back, but I never noted it. Need that and gutter cleaning. I can’t really tell from websites since the reviews don’t seem reliable.
I see I left for a bit to look at this polo park stuff – I seem to remember people commenting on them disparagely – so I never looked
So I only see one house for 799 and most of the remainder at 850 to 920. Are you saying that’s these use to be 999 to 1120k?
As for the changing of trim ie rejigging – they have a brochure outlining the trim provided on each model – has that booklet changed as well?
I see other newer homes in the admiral hemlecken part of town and I find for the most part thT new homes in that price range are not coming down but I will wait until the fall to see how things play out
If I went to Saanichton I would have to bus downtown and it’s seems pretty straightforward
Anyways I appreciate drawing these locations to my attention
That’s not what’s happening at this development. What I’m understanding you’re claiming is, what is being sold there now is suddenly a new set of cheaper houses that weren’t on the market before. Except they’re not.
The same lots that they were offering before are the same ones they’re offering now. The prices of those unsold lots have dropped; they haven’t switched lots to a lesser tier. How do I know?
The list of available lots and their prices are accessible to anyone on polovillage.ca. There are ones that are unpriced, listed as “coming soon”, and lots that are listed as sold. At writing, there are 7 and 5 of these listings, respectively. 8 remain, and have the price listed. And those 8 are the prices that have changed.
Even if what you’re asserting was actually true, it wouldn’t logistically make any sense. There are only 20 homes in total – they’re not going to have prices to half the homes listed, then subsequently switch to the other, lower priced half of homes later, while simultaneously retracting the higher prices of the more expensive batch from viewership (ie, “coming soon”) to make it look cheaper.
A developer is not going to drop prices $200k when he or she is sitting on unconditional contracts that haven’t completed with deposits <$100k. The buyers would simply walk and reality is no developer wants to spend years in court going after the defaulting buyers for specific performance.
Here is how reality works. You are a developer and you have a 20 lot subdivision. 10 lots are on a quiet lane with south facing yards and the other 10 are on a busy road with north facing yards. You throw up a sign "starting at $995k," and you get zero bites. Bank wants to see unconditional contracts so you call up the set of initial interest and offer the best lot and the best house to someone for $895k. You sell one house and next week you drop prices to $895k. You get a few more sales but things still aren't flying off the shelf so you re-market the busy road with north facing yards with more affordable level of finishing and you drop the price to $795k. In the end the first purchaser in the development isn't out 200k. They picked up the best lot and best house fully loaded in terms of finishing. The 200k drop is a matter of optics.
If the deposit is 100k the developer might drop prices 50-80k due to market but crossing the deposit threshold is a receipt for buyers defaulting.
When it comes to condos when you see blowouts it is typically on completion as you want all the pre-sales to complete first.
“Switzerland, Australia, Denmark, the Netherlands, Norway, and Canada all have household debt levels higher than the US during the peak of the Housing Bubble..”
http://thesoundingline.com/swiss-households-are-now-the-most-indebted-in-the-world/
LF, my thoughts exactly.
I have a feeling we’re going to see more of this kind of “creative explaining” as time goes on. Either the price has dropped, or it hasn’t. I get the argument, “but they haven’t dropped the price, because they aren’t selling the same product”.
That’s a bit like the restaurant that lowers their prices because they’re suddenly using garbage ingredients instead of the quality they were using before. And that reasoning begs the question too – why do the developers feel the need to lower the price by degrading the product in the first place? Would they do it if the market was as hot as the developer expected it would be when they bought the land?
I don’t think the people that just paid full pop for those homes would be comforted by your reasoning, knowing that while they just functionally lost ~200k, at least their finishings are a bit better (unless of course – the developer credited them with the change ex post – but I don’t think most devs are that charitable).
This is what we see: This development started their askings at 975k. At first it fell 105k dollars after almost all of the lots sat for months unsold, now they’re taking almost that much off again, after even more months have passed with about 75% of them having no buyer. This is also consistent with the growing weakness in the RE market province wide.
But not in this case, you say…it’s the finishings? Well, what do I know. It’s not like I’m the developer or something. Kind of wonder what you’d say though, if the price dropped again…
Marko, thanks for explaining the Polo Park pricing strategy. So, no more price drops at Polo Park. Got it.
There is rhyme and reason to the price drops at Polo Park if you’ve been through the development. Prices haven’t dropped 200k they re-jigged the finishing on some of the homes and probably realized that the homes right on East Saanich needed to be adjusted to bring them in line with the Eaglehurst development.
Developer buildouts like Polo Park and Eaglehurst are always a bit tricky until you get 50-60% sold as you are sitting on millions in vacant land. Eaglehurst is 99 lots at high 300s for the lots so you start sitting on 35-40 million in land. Until the money starts rolling in from completed houses I imagine it is always a bit nerve racking, but as each house completes you pulling in the land value plus profit on the build as well.
If you lied on your income to get your mortgage I’d be very worried.
Exclusive: Canada housing agency pushes for better income checks to catch fraud
TORONTO (Reuters) – Canada’s housing agency has asked the country’s tax authority to take a “more direct and formal role” verifying income claimed on mortgage applications, part of a two-year plan to tackle mortgage fraud, documents obtained by Reuters show.
“The industry’s current detection tools have not kept pace with the increasing sophistication of threat we face,” says the plan, adding that paperless transactions, pressure to close deals quickly, rising prices and new regulations “create strong incentives for individuals or mortgage professionals to engage in opportunistic – or criminal – fraud.”
“The CRA is currently exploring different avenues in which to improve how it delivers taxpayer specific information in a secure manner, including the feasibility of securely sharing tax information with financial institutions upon client consent,” the tax agency said in an emailed statement.
https://www.reuters.com/article/us-canada-housing-exclusive/exclusive-canada-housing-agency-pushes-for-better-income-checks-to-catch-fraud-idUSKBN1K81BF
Reverting to zoning bylaws and property prices, it is clear that restrictions on subdivision hurt first-time buyers by restricting the availability of lots and thus raising the cost of house prices. However, once a first-time buyer has bought, restrictive zoning to limit subdivision is in their interest, as it protects the value of their investment while preserving the tranquility of the suburban environment.
The question that must be considered, however, is whether, as a civilization, we can compete with the resurgent Asian nations that are building cities with densities not of dozens per acre but hundreds, and where costs of long-distance commuting (including the cost in time and in tax-funded transportation infra-structure) represents a substantial proportion of family income.
And even in comparison with the US, our housing costs seem crazy, if this is anything to go by:
What a $250,000 home looks like in the biggest city in every state.
That’s just the starter homes – all the other, higher prices ones are being axed too. I drove by there again the other day. Many are only having the foundation being laid ATM, so it seems the developer might be trying to get ahead of a slowing market.
Just a little. They may have actually paid even more than that at the time, if they bought a pricier one. Can you imagine saving up 200k over the course of years, only to have it vaporize in less than 3 months? Or, if you were a cash-out from Vancouver, and just took such a massive hit on your net worth? Welcome to Victoria. It’s different here™.
Yeah, no thanks. Plus, it’s not really a good sign if you’re developer that bought the land. Reminds me of this horrid little gem:
https://www.thestar.com/business/2018/04/04/they-bought-their-prebuilt-homes-at-the-markets-peak-now-they-face-financial-ruin.html
Also, I can honestly say that if I were elderly, had seen my house go up hundreds of thousands of dollars, and was in a good financial situation, I would consider who was making the offer in addition to the dollar amount.
Problem is everyone is BSing in their letters that you don’t really know who you are selling to anyway.
The first buyers at Polo Park must be a little pissed at paying 200k more than what the places are going for right now.
Polo Park in Central Saanich slashed another $100K. That’s $200K total from $999K to $799K. Ouch!! Looks like a crashing market to me.
Intorotroll,
Regulars here know your the self described asshole too. Still waiting for those contradicting articles.
I would consider who was making the offer only if it was someone that I knew well. Otherwise any letter could just be humbug. (I have been waiting years to use the word humbug; thank you Charles Dickens)
@Marko
Overall, this is surely the case. However, there are different situations. We were told we were not the highest offer on our house. I believe that, but I think it is due to two factors: 1) we stated a high dollar amount for inspection-found deficiencies to void the deal and 2) the seller had a long possession date that we were okay with. So, no letter, but other factors.
Also, I can honestly say that if I were elderly, had seen my house go up hundreds of thousands of dollars, and was in a good financial situation, I would consider who was making the offer in addition to the dollar amount. For sure up to $10000. Also, we have no kids, so no interference there.
HHV same.
“Twitter CEO Jack Dorsey admits platform not a place for nuanced discussion”
It is likely that the ramp up will take a year or two from now, but I’ve heard rumors from a welder that boots will be on the ground this October.
I also grew up in the Soviet style communist Vietnam after the Vietnam War, and we played outside on the street pre communist and during communist as well as walked to school alone well over 3 km each way with out parental supervision since third grade with out fear of accident, crimes, or drugs (and had to be self sufficient when the communist government take my parents away to work on labour projects). However, the culture and social condition in Croatia and Vietnam (no free needles, drugs from the government, among many other free things) are much different than the culture here in Victoria where low income and social class differences contribute to the crimes in high density areas.
Buyers turn to personal letters to seal deals in Canada’s hot real estate markets
Hilarious myth. If I am the listing agent and we have five offers
800k
820k
825k
830k
875k – with letter
I am not going to call back the buyers agent and say congrats your clients overbid by 45k and you got the house….more along the lines…..”my clients [sellers] absolutely loved the letter, it means a lot to them that a family will be moving into their home, congratulations they went with your offer.”
The buyer goes to his or her work and tells everyone how the sellers loved the letter and they got the home.
I’ve submitted lots of letters for buyers over the years and I know they don’t work. In 2016 I had a young local couple with a newborn offer 990k unconditional on a home. The sellers were original owners (25+yrs) and had raised a family in the home. My clients submit a nice letter but they lose out. We see the price reported as pending at 995k (also unconditional) and the house is on craigslist and usedvictoria for rent three weeks later.
I’m on a five-year fixed.
Regulars here know that I occasionally post articles that contradict my personal views.
I generally just try to post stuff that’s interesting.
The side effect of high density housing is the lack of open space for children to play.
Just at an open house….already two HHV readers have come through in the first 37 minutes 🙂 How many people read this thing???
Growing up in a communist style soviet block in Croatia I had a great childhood. Met my friends outside and we played in the park/soccer field next to the apartment towers.
Certainly doesn’t impact sports. Croatia is 4 million population with a poor economy and poor resources (you won’t find many public tennis courts, for example) and we pump out an insane amount of top tier athletes….soccer, tennis, NBA, etc.
I play tennis at the four Oaklands courts and very underutilised. The soccer field is used like 2% of the time based on my observations. You would need some insane density for children not to have open space to play.
CS:
You are right, south Oak Bay is a real hot bed of crime. Language has become a barrier to thought.
I hope the fancy papers/statistics that is manipulated by the authors to prove their point is correct, because I’m jaded and concerned (see, View Towers). And, look no further than the statistic/lies that the Victoria City councils cited to justify bike lanes as an example of manipulation.
Housing Study: High Rise =High Crime — https://www.nytimes.com/1972/10/26/archives/housing-study-high-risehigh-crime.html
Exactly, where will the low income/handicap people that currently living in Nigel Ave. go during construction, and are they going to be able to get another place that is close to services for $450 a month? On a positive note, the Gateway Village Welfare Office located across the road from Nigel place is going to be an easy access for homeless/ex tent city people, once they settle in Nigel Valley. (And, it is unlikely that low income recipients going to use private transportation to travel to and from work, hence it is not going to alleviate the congestion).
I hope so for the sake of the tax payers, because the political/decision/design clowns that involved in building the Teddy award wining Johnson Street bridge also managed to screw up the roads with bicycle lanes making it unsafe as well as unsafe sidewalks that stick out into the road among many other wasteful projects.
Looks like the foreign buyers’tax has shifted all the Chinese hot money back home – should end well..
“So 69 per cent of homes purchased in the first quarter of this year were a second or third (or fourth, fifth, sixth…) home. Compare this to 2008, when 70 per cent of homes went to first time buyers. It is clear the Chinese market has evolved to depend much more on property investors, rather than owner occupiers.”
https://ftalphaville.ft.com/2018/07/19/1532000702000/Chinese-real-estate–chartered/
Trump wants to blow up all your houses/retirements. He doesn’t give a shit about you and your feel good articles. This is the real world.
Trump says stock market gains since election give him opportunity to wage a trade war: ‘We’re playing with the bank’s money’
https://www.cnbc.com/2018/07/20/trump-were-playing-with-the-banks-money-on-markets-gain-since-el.html
You’re hilarious Intorovert. You know nothing other than you are scared shitless this is all going to blow up at anytime. Who locked in for 10 years and missed out on cheapest rates in history ?
Your daily pump articles in a falling market shows you’re the desperate one who needs to keep scanning all those HGTV articles.
Best get on your knees and pray to the almighty but that won’t help the inevitable crash psychotic Trump is unleashing on the world. Interest rates have a higher risk than ever of going parabolic. Bond/credit markets are looking very very shaky.
Prolonged Slump in Bond Liquidity Rattles Markets
Investors are finding it harder to buy and sell bonds
July 22, 2018 7:00 a.m. ET
Many bonds around the globe are becoming harder to trade, prompting some investors to shift to other markets and raising concerns about a broad decline in liquidity.
https://www.wsj.com/articles/prolonged-slump-in-bond-liquidity-rattles-markets-1532257201?mod=hp_lead_pos1
Reminds me of your monthly letters to Stephen Poloz: “Please crank interest rates because I need real estate to tank because I sold just before prices increased 40%.”
Looks like the flippers are long gone when the reno projects on busy streets get slashed. 3313 Shelbourne slashed $55K to $595K. That’s a healthy 10% cut.
How can it be hot when sales are tanking ? Sounds like an agent needed a pump article. You can’t fix stupid.
1424 Simon Rd in Mt. Doug slashed $150K to $1.5 million after a second listing and previous slashes. Maybe they need a letter writing campaign. “Please Buy My Shack Cause I’m Desperate”. Could be a new trend coming. 😉
@ Barrister:
“Thank you for the article on the City of Cologne. You may want to reread it again very carefully. … The issue at hand though is how wise is it to have a high concentration of disadvantaged in one high density area.”
You, too, may want to reread it again very carefully. You would then see that the author speaks not of the “disadvantaged”, but of the “socially disadvantaged,” a term that has been defined thus:
“Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias … because of their identities as members of groups and without regard to their individual qualities,” which is not what is normally understood by those spoken of as simply “disadvantaged.”
Indeed “socially disadvantaged” sounds descriptive of those Anglos behind the Tweed Curtain in South Oak Bay.
I noticed Abstact’s Cadboro Bay project with a massive sign begging for carpenters. Another scary sign the end is nigh. Quality goes down bigtime like last time around.
Buyers turn to personal letters to seal deals in Canada’s hot real estate markets
https://www.theglobeandmail.com/business/article-buyers-turn-to-personal-letters-to-seal-deals-in-canadas-hot-real/
CS:
Thank you for the article on the City of Cologne. You may want to reread it again very carefully. In essence, the article concludes that the high density commercial core of Cologne has a lower rate of crime than the high density areas of “disadvantaged” that are found outside the core in Colognes housing projects.
The issue at hand though is how wise is it to have a high concentration of disadvantaged in one high density area. To be continued.
Michael, you mean “Make America Crash Again”. Debt bombs in previous high inflation periods were half current debt loads.
Another point or so and the whole shiteroo blows up. Trump doesn’t care he just said. He’s “playing with houses money”. If that isn’t the scariest statement ever.
Michael,
Interesting choice of end dates (Vancouver lots 1900-1912)
“J.J. Miller and his brother William made their fortunes in real estate, and built giant houses in East Vancouver in 1908. They then lost everything in the crash of 1913.”
Major Chinese Real Estate Buyer Preparing to Sell Billions in Overseas Real Estate
China’s Anbang Insurance Group Co. Ltd. has reportedly decided to sell US$10 billion in international assets, starting next month, potentially including major properties in B.C.
Many of the international assets were amassed in a buying spree by Anbang’s then chairman Wu Xiaohui who was known for his flashy bidding style before he was sentenced by a Shanghai court in May to 18 years imprisonment for fraud and embezzlement of more than US$10 billion. He has been charged with using funds made off of mom-and-pop retail investors, who thought they were buying insurance products, to scoop up trophy assets.
In B.C., Anbang owns prime office towers and retail space in downtown Vancouver at the Bentall Centre, which it bought in two controversial transactions for over $1 billion in 2016. It also spent $1 billion-plus to purchase Vancouver-based Retirement Concepts, a seniors’ care company in 2017. These were made using Vancouver-based companies that Anbang wholly owns. Anbang is also believed to own the Fairmont Vancouver Airport hotel and other Canadian hotels through a Hong Kong-based holding company called Bluesky Hotels and Resorts Inc.
https://vancouversun.com/business/commercial-real-estate/chinas-anbang-poised-to-sell-billion-in-overseas-properties-report
@ QT:
Ian seems to have disposed of the concern about crime. And if you want some specifics, here’s a short paper on the risk of violence in relation to urban density.
The high-density Nigel Valley development in Saanich proposed by Housing BC takes care of those in need of low-cost housing.
As for open space, consider what would be the situation if a city with the population of greater Victoria had the density proposed by Housing BC for the Nigel Valley (i.e., about 178 persons per acre). Such a city would have an area of 3.2 square miles, or 2048 acres. If the city were circular, every resident would be within a 15 minute walk of open country, and most within a 5 minute stroll. But if the city were doubled in size to a 6.4 square miles to a diameter of just under three miles, there would be room for 2048 acres of parkland/playing fields, skating rinks, and duck ponds within the city. Such parkland could include a 1000-acre central park plus five parks the size of Beacon Hill Park.
Were you and Intro in the same math class by any chance?
“Hey, Mister, got any change?”
“Help! Police!”
High density vs crime rate
If you’re getting into this subject, please tell the whole story.
Higher density usually leads to a slight decrease in per capita crime rates however because there are more people in a high density neighbourhood there is a corresponding increase in the number of crimes per neighbourhood.
Don’t try to sugarcoat the truth; if I go for an evening walk in a high density neighbourhood then I have a much higher probability of being the victim of a crime compared to me going for an evening stroll in South Oak Bay.
I get very annoyed at people who spin the truth to hide reality.
Don’t bother asking for “links”, you can use Google just like everyone else; or simply ask any retired beat cop; or walk around any established high density neighbourhood after dark; go ahead, I dare you. How brave are you? I walk around my normal SFH density neighbourhood daily, and most evenings without any problems.
RenterInParadise
Urban planing and crimes aren’t in my field of studied or occupation, but based my judgment from past experience of living in Vancouver. However, it is well known that social and economic class are some of the main contribution of crimes rate, and high density housing often geared toward low social/income residents unless it is an upscale neighbourhood in large/advanced/commercial city which Victoria is neither a large, advanced, nor commercial oriented. And, below is a paper that indicated high density housing linked to violent crimes.
SPEA study shows links between land use and violent crime rates — http://newsinfo.iu.edu/news/page/normal/13030.html
Hey QT –
How about some links to backup these claims?
Here’s something to read – Myth #4 – “People sometimes associate density with crime, even though numerous studies show that no relationship exists between the two. ” A well integrated, high-density development can actually improve a neighborhood.
http://uli.org/wp-content/uploads/ULI-Documents/HigherDensity_MythFact.ashx_.pdf
I think it’s a step in the right direction for Saanich. They are looking at a mix of housing – some supportive, some at market rate. This is not some back-of-the-napkin development but one with a thought towards multi-use and an awareness of the amenities nearby that would make this a walkable community.
An example of investment, Lauretian Bank currently offer HELOC at 4.20% and stock (LB.TO) is priced at $45.52 with dividend return at $2.56 (5.67%) per share.
https://www.laurentianbank.ca/en/rates/mortgage_loans.html
https://ca.finance.yahoo.com/quote/LB.TO/
Our inflation rate did just hit a 6+ year high. The stars are aligning for a Nixon/70s repeat. (Even if your home were to rise 900% again, you won’t feel much wealthier at the grocery store)
Sounds great in theory but rarely successful in practice. The side effect of high density housing is the lack of open space for children to play, displaced present low income residents, promote crimes, and lack of privacy among many other negative things.
I believe that density is a necessary thing, but Victoria/Vancouver Island still have lots of space for its residents. IMHO, it would make more sense for government to spread offices farther out of the core to promote “live where you work” mantra and to lower congestion. Open up useless land for development in the peninsular and Metchosin, remove useless obstructions such as planters in the middle of the median, remove street parking, and remove useless bike lanes on main arterial roads.
The TC reports that Saanich is considering a proposal led by BC Housing for a 9-acre development that would provide 796 housing units on 9 acres. Assuming two persons per housing unit, that would mean a population density of 354 per acre, or about 50 times the population density of Oak Bay.
The reason for the high density is no doubt to minimize the land cost per unit for what will be mainly for “affordable-supportive” housing. But it would also minimize environmental costs, as measured by road space, other infrastructure, and environmentally damaging long distance commuting.
With a total area of 166,000 acres, it would be good to see Saanich approve maybe another 1% of its land area for eventual development at such high density, thereby providing scope to accommodate several hundred thousand newcomers to Victoria without further urban sprawl. The impact on house prices would large and highly beneficial to those seeking a home, i.e., the apparent target audience of this excellent blog.
Sylvan Lane was on the market for a lot more than 18 days. Restarting the counter is so common that the stats for average days on market is completely unreliable.
When the discussion was about how unsustainable the market was the bulls were jumping up and down wanting to know when the market will change. But real estate isn’t measured by a stop watch, it’s measured by a calendar. The market can stay irrational for long periods of time but it will always revert back to normal conditions.
At this point, I don’t think we have much to worry about in the way of declining prices that is until construction workers are laid off. Then the real shit will hit the fan. You can’t live in this city on employment insurance.
It’s telling how, in hindsight, the market conditions last year were “unsustainable” , but during the run up it was the “new normal”. Funny thing is most lay persons don’t even catch on to the rhetoric and spin.
@AZ
AZ, what was the asking price?
Re: 66 Sylvan Lane
https://www.youtube.com/watch?v=HUkyhi1bfXQ
I love the contrast of the local media rag that can’t produce a single word of caution in any of their real estate articles over the past many years. Advertisers dollars matter and no wonder it’s struggling to maintain credibility outside of crime reports and local enviro movement news.
A balanced market is an indicator of stable prices. A sellers market usually represents rising prices and a buyers market typically is associated with declining prices.
These are the median prices for houses in the core that show a balanced market.
Month Sale Price, Median
Feb $889,000
Mar $884,000
Apr $898,778
May $879,000
Jun $862,000
And for condominiums in the core, the median price appears to be stable too.
Feb $410,900
Mar $427,000
Apr $411,000
May $415,000
Jun $412,500
The problem with the article is that the Sales to Active Listings ratio (which is the inverse of Months of Inventory) is not the ONLY indicator of a balance market. There is also the Days on Market illustrating how fast properties are selling and the sales to new listings ratio showing how fast properties are being added to the market. One of these indicators could show a balanced market but the remaining two might still show a buyers market.
Then there is buyers and sellers confidence in the marketplace. At this time sellers have strong confidence that prices will remain stable or at worst decline marginally. Prospective purchasers however, don’t show this same confidence and are holding back from purchasing which has lead to a dramatic decline in sale volumes. And this may cause a lag or a soft market (yes another term) where the indicators show a buyers market but prices have yet to decline.
Balance, sellers or buyers may be misleading terms to a lot of people. As a buyers market does not mean people are now finding it favorable to purchase real estate. The terms bear and bull markets may be more accurate. For example we may be entering into a bear market for detached houses in the core by the end of the summer as prospective purchasers hold off from buying. Calling this a buyers market infers that it is a good time to buy which it may not be at all.
1484 Lang St:
Sold $665K
Introvert’s post is useful:
Most BC Real Estate Markets now Back in Balanced Conditions
(Except Victoria and Vancouver, of course.)
The headline is accurate, but actually a bit deceptive when you consider the audience’s probable interpretation of it. Balanced could be taken to mean stable, even, not frantic – safe. Sustainable. In balance, like yin and yang.
Except that’s not what it means, at all.
Sales to active listings ratio, or market absorption rate is a measurement that essentially depicts the rate at which properties on the market are selling. The greater the ratio, the more robust the sales and the more upward pressure on prices. Below a certain point, is conversely, downward pressure.
When that ratio is in between a buyer’s and seller’s market, it’s referred to as balanced, or neutral. The deceptive part is to think that “balance” means it stays like that. It doesn’t. It’s a moving ratio that’s almost always trending towards either a buyer’s or, seller’s market (ie, basically like the RE cycle).
In Victoria, we are seeing a drastic drop in that ratio, from nearly 70% to a still impressive ~35%. While that’s important, what’s just as important is how fast that has dropped and, that it continues to fall. Any market that goes from an extreme seller’s market into a (potentially) buyer’s market, must by definition, cross through this “balanced” stage. It doesn’t mean things are levelling out, stable, or smooth sailing here on in. It’s just another stop along the ever moving trend line.
“It’s like we’re dragging an anchor from this real estate ship and just waiting for it to catch hold.”
My prediction is we’ll see sellers lowering their prices gradually through to the end of August, chasing the market downwards.
And then in September, those determined to sell this year will drop their prices as much as needed to make that happen.
September could be good time to buy.
Nine-acre development would transform Saanich’s Nigel Valley
http://www.timescolonist.com/real-estate/nine-acre-development-would-transform-saanich-s-nigel-valley-1.23375392
Not all of B.C.’s real estate board regions followed the same trends. In Victoria, the sales-to-active-listings ratio is 34 per cent, which is still a strong seller’s market – as is Vancouver Island’s 31.2 per cent.
Although Victoria’s ratio has eased dramatically from its unsustainable 68.8 per cent a year ago, and it was the area to see the biggest annual jump in available listings, market conditions are still tight with not enough home inventory for buyer demand.
http://www.timescolonist.com/real-estate/most-b-c-real-estate-markets-now-back-in-balanced-conditions-1.23370942
Yep, don’t listen to me because I predicted well over a year ago that it was the was THE time to take the easy money and run while idiots were paying $200K (30%) over ask on a $600K shack in need of $100K in renos with zero inspections.
Or when the fools were lined up around the block and stuffing your mailbox and on local TV pleading for your house like a whiny baby. Where are they now ?
Or that interest rates were heading up bigtime via US, but many including the local salesman said economists got it wrong 4 years ago so it won’t happen people, so keep on buying.
Or maybe that credit will tighten bigtime as the NDP new rules and Feds stress test will squeeze the shit out of new and FOMO buyers.
Now the inevitable larger price tankings will begin this fall as the slashes continue to stack up and price hits escalate like they are in Van.
Or that the China HAM money flow was being cut off to a dribble and now zero. Yep, I know nothing. 😉
Anyone know what the houses on Lee Avenue sold for?
Here’s another one for your list Hawk:
66 Sylvan Lane
Assessed at $1,287,000
Listed Price: $1,299,000
Sold after 13 days: $1,050,000
Sold for $237,000 below assessed
Located in South Oak Bay on a quiet tree lined lane, one block from the beach with beautiful gardens and glimpse of distant mountains and ocean.
@VB:
So to summarize, VB, what you advise is the Will Rogers investment strategy:
It looks like a beautiful day and I hope everyone can get out and enjoy it.
Marko, may want to sell that Zagreb condo..
Populations shrinking most quickly from now to 2050
1 Bulgaria -23%
2 Latvia -22%
3 Moldova -19%
4 Ukraine -18%
5 Croatia -17%
11 Japan -15%
16 S Korea -10%
Axios/UN
“Actually just as much money went into the market as out. Think about it”
http://www.tradersnarrative.com/equity-mutual-funds-show-outflows-after-60-rally-3040.html
I was talking about retail investors(that are swayed by emotion) not institutional(pensions plans etc.). Retail investors were selling equity mutual funds/EFT’S in 2009 and buying bond EFT’s(ie locking in there losses at the worst time).
One of TD Waterhouses IA(advisor channel) source of business is people moving from direct brokerage because they are: tired of the burden of managing there money, have done something silly(like trying to out smart the market), or need help with tax and estate planning.
Well it looks like this real estate prediction was spot on.
Victoria Born:
This is a serious question which I have asked a number of financial advisers without ever getting a really satisfactory reply. Considering the share structure of Facebook why are Facebook shares worth anything more than a very nominal amount.
To the best of my knowledge Facebook has never paid a dividend to its common shareholders and there is a very good prospect that it will never pay a dividend. The special class B and C shares held primarily by Zuckenberger can out vote the common shareholders so their is no way to force a dividend payout to the common shares and therefore no way for the common shareholders to ever see any of the companies profits.
Leave aside the fact that people make money by finding a greater fool to buy the shares, that still leaves me with the question of why buy a share if you are not likely to ever see a penny from the company regardless of how much money the company is making?
The only answer I ever get is that you make money by reselling the shares at a higher price to someone else (the bigger fool argument). But that still leaves me wondering what are the intrinsic value of the shares if you never get any of profits of the company.
What am I missing?
…
No, you note it and carry on with life as usual. It’s the same reaction when prices are rising steeply, BTW.
Sorry – didn’t see your request. MLS 391103 – 5097 Cordova Bay Rd. Asking $2.75m and now pending at $2.25m. Yes it’s above assessed. I threw that out as oceanfront Cordova Bay has been hot hot hot these last few years. This listing took me by surprise.
Seriously… “fake news”? please insert eye roll emoji here….
BRK has an entire energy division.
Only because he doesn’t see IBM and APPL as tech companies anymore. He also completely fucked up on buying IBM which anyone in the tech industry could have told you before hand(they are the scum of the earth, competing hard with Oracle on that one). The main reason for buying both companies is that they were buy back their own stock.
Patriotz – a contrarian investor does the opposite of the crowd, In 2009, as retail investors were selling and running, contrarians were buying. As John Templeton said, buy at the point of maximum pessimism. Buy when everyone else is selling and sell when everyone else is buying. Buy when there is blood in the street – that was 2009 and that is what we did. Oh, did we ever.
CS – take a wild guess what sector Warren Buffett holds the least of? Answer: resources. The highest: finance [insurance and banks]. He has now warmed up to technology (he is late and this is why his returns have lagged for us shareholders in his company) and has taken a large position in Apple. I am not equating past and future returns – I am looking at the current market and the future [not some old dying industry]. Example: with interest rates rising, the life-cos [GWO, SLF, Manulife and IAG] look attractive and pay juicy dividends, same for the big 6 banks (the best large cap businesses in Canada going forward). I can’t lay out a paper on investing in a blog chatroom – you would not understand it anyways. Your comments show a complete lack of understanding of the current global economic situation, just as your lack of knowledge of global trade [strike 1]. Iron ore will be in the dumps for many years to come [why? – over supply and China is slowing down]. Oil price swings with OPEC’s mood – but the problem is that we live in an oily world and fracking increases supply further – the downward pressure on oil price is too great such that the risk outweighs the reward. The coming of the masses buying electric vehicles [a $30,000 pure electric vehicle is just around the corner – do you think the demand for oil will rise?] will depress demand further. But you should buy oil and iron ore companies. Full disclosure: I own SU, IMO, XEG, ZEO, PD and some small caps like Birchcliff. You don’t know anything about my thinking and could never understand because you lack the education and experience. I would rather own Amazon and Facebook than Imperial Oil, Exon or Labrador Iron Ore; but you should buy all of them and double down on your way to insolvency. If one is looking for a global stock index ETF – VT is it. Your reply shows just how clueless you really are. I would recommend that you consider taking the Canadian Securities Course through the Canadian Securities Institute [educate yourself] before you venture in to a field that you know nothing about, as your responses to this [just like with trade] have demonstrated. Frankly, I found your response astonishing and perplexing (thought thoroughly entertaining in a comic book sense). Strike 2.
CS states: “The best investment for many is a small business, with many actively managed businesses returning better than 100% year after year”. What? The subject matter was passive investing, your comment here is a non sequitur [defined for you: a conclusion or statement that does not logically follow from the previous argument or statement]. Your comment is the Trump pivot. Strike 3.
VicInvestor: “No educated and enlightened person would put all their $$$ in one sector of one country”. Nor am I advocating that. I simply used them as an example. I favour a diversified portfolio of blue chip stocks taken from all 5 economic sectors [as the core] employing a buy and hold strategy with a global footprint [favouring developed markets with some emerging market exposure], which strategy has done well for me over the last 30-plus years of investing. There is a big divide between being an investor and being a speculator. I don’t speculate. I use ETFs for “sectors” – such as ZID [for India], ZCH [China], or SOCL [social media], or VGT [information technology], or EEM [emerging markets] or ZUB [US banks, C$ hedged] or one of my favorite sectors ZUH [US health care]. That said, I do own some indexers too: SCWB, ZDJ, ZUS, ZCN, XIU, XIC, VOO, VTI, ZQQ……
CS – knock your socks off cutting this up. It is really entertaining for me reading your comments because it makes me thankful for the education that I have. I mean no disrespect and welcome sparing with you.
LeoM…probably an underappreciated post there. His poking the Fed as he’s doing is foolish and even dangerous. I think it crosses a critical line that a lot of people don’t appreciate or understand. IMO, the only thing worse than the central bank system we have, is that same central bank being unduly influenced by the president, especially one who personally derives such a benefit from low rates. Left or right, it’s just wrong and I think Canadians should be concerned about it – what the Fed does directly effects us, and bigly.
How do these MOI numbers compare to typical seasonal variation between those two time periods (ie historically)?
No, Grant. Just because someone challenges something you said, it doesn’t mean it’s a knee-jerk reaction or an expression of contempt. Cheers.
&
LOL. I must be hitting a nerve? I’ve never claimed to know what’s going to happen. Never claim to be perfect. Always willing to listen to the other viewpoint, discuss it, change my viewpoint. I also always point out the elephant in the room.
I’ve explicitly stated that I think I possibly bought at or near the top of a cycle. I wish things were different but as I said, I’m not going to put my life on hold. Over time, everything is going to work out fine because that’s the way the rules of this game are currently set up. So, where is the bias there?
The average days to sell a house in the core is now 35. Active house listings in the core are likely to break 700 this month and the months of inventory will probably be around 6. In just 3 months our MOI has gone from 2.5 in April to most likely 6 this month.
What a change! It’s like we’re dragging an anchor from this real estate ship and just waiting for it to catch hold.
This month there have been some high priced sales in the $1,250,000 range that has skewed the average and median higher. As for the middle income market of around $850,000 the mode seems to be stable but with fewer sales occurring. But with half our usual or only 68 house sales in the core so far this month, how low can sale volumes remain low before the market becomes dysfunctional?
If price is mostly psychological, I wonder what it would take to shake sellers confidence in the market?
Imagine living in Gordon Head in your $850,000 castle and a similar home on your street goes into foreclosure or a divorce and sells for $775,000. Would that cause a crack in sellers’ confidence? Or would they make excuses to justify such a low sale? Or your neighbor puts his house up for $800,000. Do you go over and try to talk him into raising his price as his sale will bring down the value of other houses in the neighborhood?
I’ve heard all the excuses before of home owners trying to justify a higher price for their home in a soft market. Oh you can’t use that sale because it was a foreclosure or a marriage break up or the person just wanted a quick sale.
I’d suspect most of the general public has no idea what that cycle even is, and even fewer understand it. Just a hunch, though.
Grant, since you’ve appeared on this site as a prospective buyer and then decided to buy, you have been one of the more unrelenting posters arguing your position, at points using unsubstantiated arguments to dismiss or mitigate what the market is doing or what that market movement actually means. You’re right, no one knows. We can only look at the data from today and yesterday, and the most comparative, if imperfect, examples from history.
Bias is inherent to human beings. So are agendas and cognitive dissonance. You can criticize people for having any or all of these, as long as you realize your own writing demonstrates you’re just as human as everyone else here.
Weren’t you one of them?
Amen. The phenomenon of individuals on the internet unrelentingly harping on the same narratives, for years on end, is really interesting. Back in the early 00’s Peak Oil was a very popular topic and I spent a fair bit of time on peakoil.com researching and learning quite a bit about resource depletion, alternative energies, ecosystem issues etc. Whereas here on HHV we’ve got our “bears”, over on peakoil.com it was the “doomers”. These were folks who were convinced the peak in oil production had been passed, the Saudi mega fields were on the verge of collapse, technology would not “save us”, there were no readily available energies that would be able to scale big enough and fast enough to replace rapidly dwindling oil supplies etc. etc. As a consequence, society was about to implode and many talked (and some carried out!) steps on how to go completely offgrid in preparation for the coming shitstorm. Of course in the last 15 years we’ve had the explosion in fracking, US oil production swung up and surpassed it’s previous highs, the Saudi’s fields haven’t collapsed, the oil price crashed and we continue to see strong strides being made in alternate energies.
The funny thing is the underlying theory about Peak Oil isn’t wrong. It’s a finite resource and production will eventually peak and decline, whether that be by running out of the resource or whether (more likely IMO) it becomes economically, or politically an un-viable resource. But WHEN or HOW that’ll happen, absolutely no one knows. It’s similar to the discussion here at times. Most recognize RE markets go in cycles. Those with an interest can research what has happened in the past, try to make causal links and then extrapolate current data now to try to predict the future. But again, no one knows what’s really going to happen because there are a dizzying number of variables in this equation and the past never repeats exactly the same way.
I think it was great when Leo put out his post on bias but it completely went by the way side with some of our posters here who continue to be heads down at the computer, banging away on their message like a priest preaching their sermon from the mount.
Local Fool #46510
Just for fun, top drop in Vancouver BC today is…
… and just so it doesn’t seem like an anomaly … courtesy of Sebastien (-80% bear) | 12 June 2018 at 6:58 pm on the vreaa blog site.
504 590 Nicola Street, Vancouver
Feb 6:$1,398,000
Jun 11: $1,099,000
Change: – 299000.00 -21%
Assessment: $1,079,000
725 7008 River Parkway, Richmond
May 29:$718,000
Jun 11: $549,000
Change: – 169000.00 -24%
Assessment: $587,000
1295 Duchess Avenue, West Vancouver
Feb 20:$3,700,000
Jun 11: $2,800,000
Change: – 900000.00 -24%
Assessment: $3,720,000 (WTF!!!!!)
248 N Gamma Avenue, Burnaby
Feb 23:$1,759,000
Jun 11: $1,499,000
Change: – 260000.00 -15%
Assessment: $1,460,800
Ph5 6198 Ash Street, Vancouver
Jan 8:$1,880,000
Jun 11: $1,380,000
Change: – 500000.00 -27%
Assessment: $1,153,000
What US Homebuyers polled in 2003 believed drove housing market prices. A lot of these arguments will be deja-vu for some of you.
Have a look at the section at the bottom – whether or not psychology drives RE markets. You will note that people will blame anything but themselves for prices that rise beyond all reason. Market melt ups, and melt downs, are in fact, almost entirely driven by psychology. No one wants to accept the notion of getting suckered into a FOMO mania.
Canada rates will keep on chugging higher as credit squeeze tightens.
“Canada’s annual inflation rises 2.5% thanks to boost from higher energy prices”
OTTAWA – The country’s annual inflation rate rose to 2.5 per cent in June as consumer prices grew at their fastest pace in more than six years, Statistics Canada said in a report Friday.
The federal agency’s latest inflation number received a boost from higher energy prices, especially gasoline, fuel oil and other fuels. It followed a 2.2 per cent reading for May.
Other big contributors behind last month’s stronger inflation figure were pricier airline tickets, restaurants and mortgage interest costs. The downward pressure on prices last month was led by cheaper costs for telephone services, travel tours and digital equipment and devices.
The June pace lifted inflation to its highest point since February 2012 when it was 2.6 per cent. It also moved the number farther away from the two per cent mid-point of the Bank of Canada’s target range.
Is it indeed? Perhaps coincidentally, the market data seems to be saying the same thing. 😀 If this decline is seasonal, perhaps waiting till spring is a good move. If the decline is not merely seasonal, waiting till spring could cost those sellers a bundle.
For anyone interested, here is a piece of data collected by Karl Case and Robert Shiller (yes, that Case & Shiller) in 2003, when they were probing whether the US was entering into a housing bubble. This is from a poll that tried to ascertain seller behavior in the event they could not sell their home for the price they wanted:
Looks pretty solid, doesn’t it? Almost no one would be willing to lower the price until they found a buyer. With hindsight we know now that ironically, the cities in which sellers were the most adamant they would not lower their prices, are the ones that experienced the largest cratering of values. Oops.
Yup. Developing the ski hill definitely put the town on the map. But I’d say society in general is much more into what these towns have to offer. For example, there’s always been great mtn biking opportunities in Revelstoke, but 20 years ago it was a niche sport. Now everyone has a mtn bike.
Revy prices finally surpassed their 2007 peak this past year with the recent market upswing. A Gordon Head box equivalent up there was selling for mid to high 500k range in 2007. Interestingly word is that the market has just stalled with offers falling through and interest waning. Some sellers have given up and plan to relist next spring.
“In the late 1990s, a neuropsychologist at Duke University, Scott Huettel, was puzzled by an old finding in psychology that people seem incapable of accepting that anything is random. For example, if people are approached in the right way, they can be quickly persuaded to bet on whether a coin flip will be heads or tails. Furthermore, it will not take long to get a betting pool started because people think that if they watch the coin long enough, they can get the hang of its behavior. (Come to think of it, this may explain why there are so many active managers in the investment management industry.)”
Cut and paste from here http://jasonzweig.com/lessons-and-ideas-from-benjamin-graham-2/
Read it and retire wealthier.
Re: index vs stock picking: the empirical evidence is clear that for the average person, indexing wins over the long term. Professionals don’t do better either. Hedge funds, for example, have vastly underperformed the indices.
@ Victoria Born: the problem with your assertion that simply buying big banks would have beaten the market is that you are judging the matter in hindsight. No educated and enlightened person would put all their $$$ in one sector of one country. If we apply your argument to RE, the best investors were those who bought Vancouver RE using massive leverage from 2000 onwards. I know family members with zero financial education who did this (they don’t even know what stocks, ETF’s, bonds, interest rates, etc mean) and beat any investment strategy by a long shot. Also think about early bitcoin investors who were uneducated teens having fun. We can either follow empirical evidence or choose a speculative strategy. Some speculators will get very lucky and beat the rational investors. That’s life. Lotteries happen. But don’t bet on it.
Having said all this, I do agree that ETF’s have some problems. First, those who buy them on their own without advice will likely fail because of misbehaviour. You need a solid fiduciary advisor to hold your hand for long term success. Second, everyone is piling into ETF’s, thus creating a herd mentality. It’s possible that the market may become less efficient, creating opportunities for active investors. I invest with Odlum Brown and am happy to pay my 1.25% for hand holding + buying/holding very high quality companies in this age of overvaluation.
With regards to RE, Victoria and Vancouver are amazing long term bets. I plan to hold onto my primary residence and will buy a second investment property if the market softens a bit. This is an amazing place to live and more and more people will continue to come here. Don’t let Hawk get you depressed with his negativity and pointless market predictions. He’s been wrong for years and years, and we cannot give him credit even if the market softens a bit due to the fact that a broken clock is right twice a day.
I am a bit surprised that there are not more price reductions at this point. On the other hand while sales are slow a lot of the actual sales still seem insanely high.
Anybody interested in getting together at the Penny Farthing next week for a beer and pub grub. Last time we got together together was a real success since absolutely no blood was shed.
@guest_46414
That is because its nice weather and prices are coming down 😉
Lots of PC’s on my filters.
LF, haven’t the time these days to track them all but there’s a few interesting ones.
4-909 CAROLWOOD DR a nice townhouse in Broadmead being slashed twice for $124K to $824K
1508 Brooke St in Fairfield slashed $126K to $1.049K
High end condo in Mt Doug, 3982 Livingstone Close slashed $70K and $120K UNDER assessment.
Reading the posts, you can tell that the housing market is boringly quiet. Just took a walk through the LG’s gardens and I am envious of the rose gardens. Hope everyone here gets to enjoy the day.
@ VB
You are equating past and future returns. On that basis, if it were valid, we could all beat Warren Buffet.
No doubt the idea that what went up last year will go up next year explains why market trends do not follow a perfect random walk, but rather show extended ups and extended downs, the result of VB`s type of thinking.
But in fact, it is probably better to assume that what has gone down for a long time may begin a recovery, iron ore for example, or oil, since last December, whereas what has gone up for a long time, e.g., Amazon with its 222 to one PE might hit a snag and undergo a painful correction.
That’s certainly not correct: VT is a stock index fund, so it misses out on pork bellies and copper wire, the boom in Leonardo paintings, and the price of a condo in Outer Mongolia.
The best investment for many is a small business, with many actively managed businesses returning better than 100% year after year.
Actually just as money went into the market as went out. Think about it. 🙂
Yeah-Right – respectfully, you miss the point. But, let’s go with your theory. I did the same analysis for the each of the core holdings I listed below [these are not outlier holdings] for 10, 20 and 30 years. I only shared the returns for 5 years. The returns for 10, 20 and 30 years are outstanding and beat the main indexes handily.
Here is where index investing fails: the index is “representative” – be it a market cap (such as the TSX or S&P) or price weighted (such as the Dow-Jones Industrial) index. The index will hold sectors that can under-perform for decades or are too volatile [like resources]. This is why the TSX is a laggard [30% approx. is resources]. If you remove those sectors / companies and focus on where the growth is: Technology. finance and consumer discretionary sectors, you will beat the index. There is no magic in this – it is demographics and science.
For a conservative / safety conscious investor, if you simply bought the big 5 banks [RY, TD, BNS, BMO and CM] and added along the way (or not), you would have beat virtually all indexes [including the juicy and rising dividends] and have an annual compound rate of return of 18 to 20 + % per year over the last 30 years. Forget the 7% noted below. All with lower volatility / risk.
Leo – Both of those ETFs are clones of Vanguard’s US ETFs. Check it out.
CS – “there is no index in the world with everything” – not correct. See VT [Vanguard Total World Index Fund].
I also see that Canada’s inflation numbers are higher than forecast. There are now calls for another BOC rate hike – perhaps 2 – by year end. Add to that the full speculator tax in 2019 and thinks are not looking so great for the RE market.
The biggest issue with index investing is the investor. In early 2009 everyone was pulling there money out of the market when it was the best time to buy. In 2011 everyone was pulling there money out of the US as no Canadian had made money there over the previous 10 years. Humans “get smart” after following something for a short period of time(case in point I become an expert in gymnastics after watching the Olympics for 1/2 hour). This happens with investing, there are so many voices giving information that one starts to think they have become “smarter” and “more knowledgeable” and that is when they get in trouble(this usually happens after a big drop or run up). If you are index investing, a must is stopping watch the daily news and for sure don’t listen to BNN.
A few people in this blog have suggested that the Federal Government dictate how and when the BOC raise interest rates. I’m not an economist but this quote from a news article today succinctly explains why that is a terrible idea:
*“Crucially, those decisions regarding when and by how much to raise rates are supposed to be made without political interference. The last president to so explicitly call for specific Fed actions was Richard Nixon (who at least did his haranguing of Fed Chair Arthur Burns in private). That episode led to ruinously high inflation and a today’s mantra that the Fed should be left alone.
And, there’s a certain seductive quality to the notion that the central bank should be politically independent: The thinking goes that elected officials will always want the Fed to lower rates because doing so will juice the economy, which makes voters happy, and no one will want to raise rates and thus risk an economic slowdown and the commensurate electoral bloodbath. Eventually, that thinking goes, politicians will push the Fed so much that inflation will run amok.”*
https://www.nbcnews.com/think/opinion/trump-s-criticism-fed-shattered-potent-political-norm-norm-deserved-ncna893101
Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School
By Andrew Hallam
The Portfolio he’s referring to, is in reference to a balanced portfolio for an American. But not unlike the good balanced portfolio advice from Canadian Couch Potato and the like.
Just for fun, top drop in Vancouver BC today is…
2062 Quilchena Crescent. It is a fail sale, was originally asking 6.7M, and was relisted anew with a 2.7M drop.
Now asking $3,988,800, which is just shy of 1m over 2017’s assessed.
http://www.northshorerealty.ca/listing/r2290011-2062-quilchena-crescent-vancouver-bc-v6m-1e3/
True. But ETFs like Vanguard’s global indexes come as close as you’re going to get. They won’t invest in this minute’s crypto startup, but they will invest in all the important equity and bond markets.
What a lot of people do is put 90%+ of their money in a global ETF and then leave the remainder as fun money to bet on whatever stock they happen to think is today’s hot bet to satisfy the gambling instinct while constraining any possible losses.
@ VB
” The critical point to always keep in mind for success, I think, is …”
We remain in suspense!
But anyhow, comparing index funds with particular stocks picked retrospectively, seems hardly a fair comparison. Over the last five years, if you’d picked American stocks over Canadian stocks you’d have had an almost 30% gain denominated in C$ just on the exchange. But over the next five years, who knows. Trump just said a high US dollar was a bad thing. So watch out if you’ve loaded up with US stocks.
The problem with index investing is that there is no index that indexes the world and everything in it. Even though you try to buy the market, you probably have nothing like a balanced investment portfolio, i.e., covering every stock market, commodity market and real estate market. So you may still miss out on the property boom in Ulan Bator or some crypto currency you’ve never heard of.
Two properties sold last week for $300k and $250k under ask. One in Saanich listed for $2.6M, and one in Oak Bay listed for $1.3M
Both funds were created this year. You can’t pull a 5 year return.
Hey. Vic nunbie maybe he gave his tesla 3 away with 1484 Lang Street?
Did it sell?. I didn’t see it pop up on my filter.
Hawk…could you please share the top drop on your slash list? I’d be interested and I’m sure a few others would be too.
Slashes keep stacking up. No area left untouched by the reality this bubble is leaking some bad gas. PU. 😉
We went on a cruise to Alaska and also toured part of northern BC earlier this year, actually. Absolutely gorgeous up there. Very special place. Still end up missing home after a while though. 🙂
See, right there, your not getting it. 5 years is a short term (Lets not forget, in a “Bull” market). Of course you’re doing well in that speculation.
We are talking the long term 15, 20, 25, 30 years… and not having to analyse what companies are projecting over and over again in the coming years.
So what you are saying is that you are going to hold on to those same stock speculations in those years and re-allocate within, never to sell one individual stock?
What ETFs provide, is way better and easier for a novice at heart. Who are patient and don’t want to be all in as a market guru!
“and was eyeing a position in Revelstoke …. but I wouldn’t have thought someone would stay here to escape high housing costs there.”
If Revelstoke’s rental is too expensive for you , come to Northern Rockies (Fort Nelson)
Northern Rockies will embrace you:
1. House price is about 20% of Victoria’s.
2. Beautiful modern recreation center with nice swimming pools, hockey and curing facilities, is almost empty and waiting for you.
3. Natural gas and wood resources are tremendous. LNG will be built. Forestry industry will be rebuilt when the wood in interior is gone. Jobs will be back.
4. Beautiful sceneries.
5. Gateway to Alaska and Yukon.
Which were selling for even higher prices.
LeoS – below you stated that you favour 2 ETFs: VGRO and VBAL. Both are Vanguard products trading on the TSX. Lots of ETF fans on this board. The first is a growth fund and the second is a balanced fund. Let’s look at the returns over the last 5 years [capital gains]:
Are you satisfied with those 5 year returns? My GICs did better. Still like ETFs over individual stocks? Even run of the mill big banks, retailers, phone companies or grocery stores?
Now, let’s compare that to a few of the most conservative companies [stock] in Canada [keep in kind that the dividends from these are subject to the dividend tax credit – but let’s ignore that for this exercise], again the last 5 years:
Canadian Tire [CTR] – Canada’s largest retailer: total capital gain return of 89.75% over 5 years. Average annual capital gain return of 17.95%. This company also paid an annual dividend of 4.2% (based on the price of the stock paid 5 years ago of $83), so the annual total pre-tax rate of return is 22.15% [total 5 year pre-tax return is 110.75%]. However, if you had, as I do, a dividend reinvestment plan, then the annual dividends would have been reinvested in the same stock – the total return over 5 years would be 130%, and this ignores the dividend tax credit.
Canadian National Railway – Canada’s largest railway: total capital gain return of 118.6% over 5 years. Average annual capital gain return of 23.72%. This company also paid an annual dividend of 3.2% (based on the price of the stock paid 5 years ago of $51.55), so the annual total pre-tax rate of return is 26.92% [total 5 year pre-tax return is 134.60%]. However, if you had, as I do, a dividend reinvestment plan, then the annual dividends would have been reinvested in the same stock – the total return over 5 years would be 150%, and this ignores the dividend tax credit.
Canadian Pacific [CP] – Canada’s second largest railway – I won’t bother doing the same anaylsis, but this one did better than CN.
Loblaw [L] – Canada’s largest grocer: well, you get the point.
The 5 companies outlined above are some of the 5 most widely held and largest Canadian companies. You can do the same analysis for other conservative Canadian companies [such as CAE, BMO, BNS, CM, TD, ENB, TRP, T….]. The second point to be made is that the above investments would have returned more than the Victoria RE market [you have to factor in property taxes, water/sewer/garbage, maintenance, etc.]. All for an initial commission of $9.95 and NO annual management fees. And no weekends cutting the lawn or chasing tenants for rent.
If you like ETFs, you could have bought XIU [TSX60] and over 5 years, including dividends, had a total pre-tax return of 50%, all for an initial commission of $9.95.
This is all Canadian – if you went with the big US companies over that same time frame, you would really lose your appetite. I am talking about: technology [Microsoft, Google, Facebook, Apple, Amazon, Netflix, Applied Materials, Texas Instruments, Cisco, Intel, Oracle, Nvidia…..], Consumer sector and industrials.
The companies I have touched on above are household names. You may break the economic sector in to 5 big categories [least risky to most]: utilities, finance, consumer, industrials and resources. I avoid or stay below market weight on resources because they are too cyclical. RE is a place to live, not an investment.
Chop this up if you must. Criticize me if it makes you feel better. The critical point to always keep in mind for success, I think, is
Of course most of the housing in Revelstoke is rather more rustic than those brand new ski townhouses. Think 1910s fixer uppers
Home sharing
https://www.theglobeandmail.com/canada/article-seniors-have-too-much-house-millennials-have-none-and-a-business/
Home sharing
Revelstoke was one of the hot spots of the Southern Interior bubble of 2005-2008, which at the time was even bigger than Vancouver’s. I’m talking million dollar houses. The region than saw a major crash, I don’t know how prices are today relative to then. For example:
https://www.nytimes.com/2008/02/08/travel/escapes/08break1.html
&
Excerpts from:
“Location, location, location: Why our national housing market is a myth”
https://business.financialpost.com/real-estate/the-haider-moranis-bulletin-the-myth-of-a-national-housing-market
Did that crazy reno on Lang Street finally sell? I see a 1484 Lang Street price drop ($104k) on myrealtycheck.ca, but I can’t seem to find the listing on realtor.ca.
I think some time ago most on the blog identified it as a “smoking crack” listing….
It does – the data of the last few years would suggest Hamilton and Brampton are good examples of this. In fact looking at their ascent, almost insatiable appeal would seem to be a better word for it. Victoria certainly deserves the same mention, as do most regions that surround Vancouver or Toronto.
Unfortunately unlike Brampton, Victoria’s sales volumes like much of BC are dropping rapidly. Perhaps Brampton and its illustrious cow fields have been…discovered? 😛
@Jerry: you only really need one ETF: VCNS, VBAL or VGRO
Hmmm, smaller locale with lots of appeal has high demand and real estate prices which are difficult for locals to afford. This sounds kind of familiar.
Ski resort got a big upgrade a few years back from a rinky-dink local hill to now boasting the largest vertical in North America. Lots of other outdoor recreation in the area (national parks, heliskiing, MTB, whitewater paddling and rafting, big lakes.
I haven’t looked at RE in Revelstoke in particular but I have noticed a trend where smaller BC towns with excellent outdoor recreation amenities aren’t exactly cheap.
Kitchen is interesting.
Maybe … maybe not. I’m seeing a number of listings under assessed. It may be that they are hoping for a quick sale. Lots of properties stacking up in areas I’ve been looking and spending more days on market than in years previous.
@ Tomato: That listing is in our $ range and also in a part of town we have been keeping tabs on. My initial thought is it’s priced to induce a bidding war, or perhaps there are some major deficiencies? But its definitely a bit of a shock to see it priced where it is.
A sign of things to come indeed…
MTB in the summer
MTB draws more people to whistler than skiing. All the hills are moving in the MTB direction in the summer to keep things going.
I really had no idea Revelstoke was a thing. What’s even there? I drove through it once years ago. Small, dry, kind of a nothing town. Can ski in the winter. Maybe it’s changed recently, but I don’t ever recall it being like Whistler or something. That’s why I was surprised when she told me that.
@ caveat emptor: Great point. Our experiences frame our expectations. I can’t recall how I came across this link, it might have been posted here or on another finance website but its definitely worth the read.
http://www.collaborativefund.com/blog/the-psychology-of-money/
From the essay:
@Local Fool
It’s like any popular ski town…. they all tend to struggle with affordable housing unfortunately.
Revelstoke has been a difficult place for rental housing for some time. Limited supply & lots of demand. Your acquaintance would have had a better opportunity going to a larger city or looking for employment not in a popular resort town.
https://www.cbc.ca/news/canada/british-columbia/revelstoke-staff-housing-shortage-1.4599813
Listed 61k below assessed. Sign of things to come.
https://www.realtor.ca/Residential/Single-Family/19707813/1172-Oxford-St-Victoria-British-Columbia-V8V2V4
Anecdote:
An acquaintance of mine had moved here recently from out of Province for work. Unfortunately, that hasn’t worked out as she intended, and was eyeing a position in Revelstoke.
She actually went there, and was so sure she was going to move she advised her LL of such. When she returned she decided to stay in Victoria – reason being, no affordable housing over there. I don’t follow that market at all, but I wouldn’t have thought someone would stay here to escape high housing costs there.
CE, it’s a good answer, but it was a rhetorical question and it wasn’t referring to the masses. The masses are the last people to jump into a rising market on speculation, and they’re the last to figure out when the party is over. I mean an analyst or someone reporting on data, having regards to that data with an ability to interpret it, could have a grounded expectation of the market enduring little or no impact. Where that journalist added “below expectations”, as to say “It’s so surprising”, or other analysts opining that B20 would have little to no impact on RE – how is that mathematically possible to defend?
I’m more cynical in that I don’t think a lot of those people really believe what they’re saying, which means their listeners are being duped into making foolish choices by choosing not to think critically about the largest purchase of their lives.
Then again, the reverse has happened when people falsely call chicken little on the market, so I guess it evens out. Pet peeve for me, more than anything. Agree very much on your 2008, “no crash here so we’re invincible” observation, BTW. I think that’s huge.
Simple – people expect the market to keep going up, perhaps with a few fits and starts, because it is all that most have known.
Take someone born in 1968 – now 50 y.o. House prices have been up or roughly flat every year since they were 14 y.o.
Most folks don’t delve into market history or look too hard at examples of housing slumps around the world. Sure, right while the US was crashing people probably acknowledged that it could happen here, but that is 10 years ago and we didn’t really crash. Now that non-crash probably contributes to the expectation that prices will keep rising.
Before the bears jump all over me please note that I am not saying the market will keep shooting up – just trying to explain/understand what people might have for “expectations”.
Seattle Trails Toronto For Most Cranes, S.F. Has Highest Increase
Read more at: https://www.bisnow.com/seattle/news/construction-development/seattles-crane-count-drops-below-50-84826#ath?utm_source=CopyShare&utm_medium=Browser
Seattle has the most cranes in the United States, while Toronto, with 88, has the most cranes in North America. San Francisco’s crane number jumped by 18% in the fourth quarter, the highest increase of any North American city.Feb 12, 2018
Look at our RE market in BC. Look at the fictitious prices, while in contrast look at the economy’s ability to support them. Look at the teetering consumer debt levels, the aggressive policies piling on to repress RE, and the shrinking pool of credit. Almost no one in the market can access affordable housing at the moment and housing is declining on a national level. BC is currently at the epicenter of that decline.
Seriously – what kind of “expectations” would one have?
LeoS, nice to see you get a mention in today’s news:
https://www.saanichnews.com/business/greater-victoria-prices-continue-to-rise-as-market-shows-signs-of-cooling/
Selling out in anticipation of a downturn (as opposed to rebalancing, e.g. going back to 50% stocks / 50% bonds) very seldom works.
When you factor in capital gains and the lowered dividend amounts (as a result of re-investing less after tax) going forward not sure how this can statistically work.
Yes, I agree. The whole point of the parable is that proper investing is not about trying to time the market.
Seattle tops the nation in tower cranes for third straight year as construction reaches new peak
Seattle is the crane capital of America for the third year in a row, as construction across the city has rebounded strongly from a relative lull in early 2018.
Seattle has 65 of the towering construction cranes reshaping its skyline, 25 more than the next U.S. city.
https://www.seattletimes.com/business/real-estate/seattle-tops-the-nation-in-tower-cranes-for-third-straight-year-as-construction-reaches-new-peak/
Yeah you can speculate all you want and WIN!!!, for the “short” term, but index funds is magic for the long term (and usually out performs most advisers index and/or mutual funds).
Index is basically a piece of the whole market and when the stock market moves up in a given year, it means the average dollar invested in the stock market increased in that year about the same. This doesn’t mean everyone made the same. But on average the ones with index funds did go up as they have the whole market in their portfolio (I know this is very basic analogy here, but studies have proven this time and time again).
A good index can on average give you approximately 7% compounded. Imagine that 25k compounded at 7% after 10 years!!!
Or go ahead and pick willy-nilly and hope to beat that 7%. But, geeze, you better know what you’re picking and keep tabs on them thoroughly while owning them (This is because they are not the full market like an index).
Don’t be scared of doing it all (or somewhat all) on your own… educate yourself! (This isn’t overnight learning by the way. But with the power of the internet and the library you can’t go wrong)
Food for thought:
https://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/
It’s not that complicated. Buy in a peak. Buy more in a Market on Sale!!!
…for the long term of course.
Explanation bellow:
https://www.mrmoneymustache.com/2011/06/09/how-to-tell-when-the-stock-market-is-on-sale/
Here is a course on ETFs
http://www.buildwealthcanada.ca/etf-index-investing-course/1-introduction-why-even-bother-2/
…Now go find yourself some more education.
VB
I was merely pointing out that your supposed indicator:
“When the novice steps forward to invest, particularly on his own …. it is time to sell and wait it out in GICs.”
is completely useless. Novices have been investing on their own throughout the last two bull bear cycles in increasing numbers.
“What if You Only Invested at Market Peaks?”
http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/
VB I cannot recall.
Do you own or rent? Did you own? Do you plan to own if you don’t?
Caveat – I never suggested being in GICs in the rearview mirror – never. On the contrary, I had been advocating a 100% US equity portfolio since late 2009 and then a Canadian dividend paying stock additions (such as all 6 big banks,, the 4 main telecoms, 3 pipelines, Canadian Tire, CP, CNR, ATD.b, GIB.A…….I could go on). Look at the Successful Investor site I suggested – I have followed his advice for over 20 years. If you think index funds are the way to go, knock your socks off. However, keep in mind that a TSX index ETF [be it the composite or the TSX60] would have been an under-performer for years and years [because of the 30% or so of resources weighting]. I am confident that the easy money in this bull has been made. The dividends are still much higher than what one can earn in interest – but as interest rates rise, the bull dies. https://tsinetwork.ca
Patriotz – I agree with the “dollar cost averaging” approach you outline. Timing the market rarely works. I can tell you that I was lucky in 1987 and again in late 1999. Now, at 9 years in to this bull market, the bells are ringing again. The retail investor’s interest is acute and that interests me as an exit point. it pays to be a contrarian.
At stage in the cycle, capital preservation outweighs the specter of glory. Also, if you think the RE market is correcting, the negative wealth effect negatively impacts consumer spending which hits corporate profits. i don’t suggest YOU sell – I am just saying that this may not be the most opportune time to buy or add. Just saying………….
A fool and his money………….are lucky to have gotten together in the first place.
Victoria born – Leo S (and other “novices” here) have been suggesting index funds since forever. Therefore using your suggestion one would have been in GICs for the bulk of the bull market. Hardly an optimal decision.
Sometime in the next little while there will be another bear market and stocks will once again fall 20, 30, 40, 50, or 60%. If you have a crystal ball by all means sell, stick your money in GICs and wait for the crash. For the rest of us there is no telling whether that next bear market is 6 months or 6 years away and how much the market will go up in the interim.
All that said I’d have to agree with you that this bull market feels close to done.
Only a complete poltroon would “invest” in mutual funds, particularly in Canada which has the most swinging fees on the planet, easily costing the average Joe $250,000 or more over his investing lifetime.
Conversely, If you have less than a million dollars in the market you don’t need or want individual stocks. One of the few things that Garth is right about.
This leaves only ETFs, of which you only need three.
As you near retirement, you most definitely do need an advisor to maximise your tax advantages by alloting your retirment drawdowns amongst TFSAs, RRSPs, and non-registereds.
He will charge you .75% or so which is tax deductible so more like .6% true cost. Will he do better than you can by .6%? Yes he will.
Selling out in anticipation of a downturn (as opposed to rebalancing, e.g. going back to 50% stocks / 50% bonds) very seldom works.
If you are putting $X a month into stocks and bonds just keep going. That’s for a long term investment, if you’re in for the short term I would question going into stocks in the first place.
There is discussion below about “financial advisors” and whether you need one [re: stocks, bonds, etc.]. If you don’t have the background, education and experience, you either need to get all three OR meet with an advisor. As the saying goes, a fool and his money are soon departed. LeoS is recommending 2 ETFs. Be mindful that we are 9 years in to the second longest bull market in history – in June 2019, this will become the longest, assuming we are still plodding along. It is long in the tooth. When the novice steps forward to invest, particularly on his own, OR gives investment advice like I am reading below – friends, it is time to sell and wait it out in GICs. That is what Peter Lynch did when a cab driver in 1987 gave him investment advice – he avoided black Monday.
The comments below tell me exactly what to do. Thank you.
Want some good investment advice:
https://tsinetwork.ca
Spend some time and learn from this site. Subscribe to the Successful Investor newsletter ($100 a year) [you get access to all past issues] and look at the 3 model portfolios for conservative investors – they show the rates of returns that we have enjoyed [as a long time subscriber – those are the returns we have enjoyed for the past 20 years – easily beats the RE market] and have done so very safely. Take a look.
It’s another sign of cyclical changes in RE, especially one as extreme as the run-up Canada has just seen.
If this downturn turns into a significant one, evidence of fraud at multiple points in the transactional process will almost inevitably be uncovered, centered upon the Toronto and Vancouver regions. The most common will probably be “liar loans”, which CMHC is referring to in that article. You almost always see this and other irregular lending practices in housing bubbles, as prices rocket beyond what fundamentals can support. The US is a recent and perfect example. Australia is beginning to uncover this phenomenon as well, with as much as AU 500 billion dollars of recent mortgages potentially being fraudulent.
Again: fraud and/or misfeasance is inherent to every housing bubble. Problem is, it’s almost never seen or even ignored until the cycle has actively rolled over and the books are finally opened.
Strata change to help availability of long-term rentals
A change to the Strata Property Regulation will support strata corporations in enforcing short-term rental bylaws, helping strata corporations address issues that can arise from short-term rentals, while keeping long-term rentals in the market.
Currently, strata corporations can pass bylaws that restrict or ban short-term rentals, and fine owners or residents who are not complying. Maximum fines of $200 per week will be raised to up to $1,000 a day, to discourage unwanted short-term rental activity.
“The new regulations will help define short-term commercial use as a different function than rentals, and provides some very real consequences for the violators,” said Tony Gioventu, executive director, Condominium Home Owners Association of B.C.
https://news.gov.bc.ca/releases/2018MAH0093-001419
Local Fool: Canada’s housing watchdog pushes for better income checks to catch mortgage fraud
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<
This article is actually kind of intriguing LF because it looks to me like CMHC is trying to get ahead of the upcoming correction/crash.
Lenders contractually agree to ensure that all data provided to CMHC for mortgage insurance underwriting is accurate and properly verified. Undoubtedly, if they have proof of fraud the insurance would be nullified.
There's no doubt that recent headlines had a big part in this decision. I'm sure the scariest headline for CMHC (prior to the rate increase) was in regards to the MNP survey which probably had them considering worst case scenarios.
1) If rates increase, 28% said they will probably move towards bankruptcy, unable to pay their monthlies.
2) If rates rise “much more” 42% say they will fear for their financial well-being.
3) Currently 27% say they have no cash left after paying their monthly expenses. No savings. No investments.
4) 44% claim they are within $200 of insolvency on a monthly basis.
They could certainly save a lot of insurance on defaults if this 2 year "study" proved to be as bad as some people suggest.
Landlording is a similar time commitment 🙂
Just don’t do Financial Adviser/s! They are just getting your hard earned money for a down-payment on their BMWs.
Or if you must, get them to invest in diversified balanced index funds for you. !Never! get them to do a mutual fund.
Here are some clips from the book (Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School – By Andrew Hallam)
Just get the book and start reading from chapter 3 for more in-depth information.
*Oh and about the myth of robot advisers (Robo advisors AREN’T ROBOTS!):
https://youngandthrifty.ca/complete-guide-to-canadas-robo-advisors/
Here’s an interesting one… MLS 395295. Just increased asking price by $30k. Haven’t seen that for awhile as these days, mostly price cuts and big DOM.
A good reminder to always check the bank’s first offer.
That’s the key. For some reason I have zero interest in my money once it’s in my retirement account. Never check what is happening in the market, just buy more when I find some money. Total time spend managing my investments: 1 hour / year.
I dunno I think I got you on condo prices!
We Germans embarrassed ourselves early.
they might recall my friend
In highsight, would have probably done best to stay in the Christmas Hill home pocketing half a million tax free.
When looking to invest you need to ask do I want to do it myself(like doing a renovation to your house yourself) or would you want to pay someone to do it(hire a contractor). The actual investment allocation doesn’t take that much work as shown below through the couch potato portfolio’s. What an advisor should be bringing is a list of other factors: emotional coaching(do you tend to worry when the stock market goes down or Trump starts talking), on going education that is specific to your situation(when to apply for CPP or how to draw down RSP’s), doing a risk profile for you(how did you react in the past when this happened, what would it feel like if you lost $50,000 of your $300,000 portfolio), goal setting(I would like to pass on money to my grandkids or retire at 60) and regular updates.
Many people can stay on top of there finances and are emotionally detached from there money. However there have been studies that show that the average mutual fund investor receives a return below what the average mutual fund does(same fund vs. fund, fee vs. fee). This is due to panic selling and try to time the market. https://www.investmentexecutive.com/news/products/the-damaging-behaviour-of-mutual-fund-investors/ – Have you been able to stick to a long term diet in the past? If so you probably have the self discipline to invest yourself.
I would look at the do it yourself options(every bank and credit union has a self direct trading arm) and see if you feel comfortable with handling the responsibility(I wouldn’t bother with the robo’s as Leo’s doing you can but a ETF that does the same thing for less money yourself). Depending on how much money you have I would interview a couple of advisors(stock licensed/brokerage arm bank or Credit Union only, as there has been too much trouble with independent advisors in Victoria in the past). Make sure they tell you what the overall fee’s you will pay and what service you will receive.
Canada’s housing watchdog pushes for better income checks to catch mortgage fraud
Canada’s housing agency has asked the country’s tax authority to take a “more direct and formal role” verifying income claimed on mortgage applications, part of a two-year plan to tackle mortgage fraud, documents obtained by Reuters show.
Unlike tax authorities in the United States and the United Kingdom, the Canada Revenue Agency (CRA) does not verify income for lenders, even with taxpayer’s consent.
“The CRA is currently exploring different avenues in which to improve how it delivers taxpayer specific information in a secure manner, including the feasibility of securely sharing tax information with financial institutions upon client consent,” the tax agency said in an emailed statement.
https://business.financialpost.com/real-estate/mortgages/exclusive-canada-housing-agency-pushes-for-better-income-checks-to-catch-fraud
And for the old blog dogs on here, they might recall my friend who had bought a duplex AND a new house on Bear Mtn AND a house under construction in Colwood.
The status update? Duplex currently being rented. She just received her development permit from Saanich and next step is to evict and teardown. The Colwood house that was supposed to be done in February just had drywall go up last week. And she put up the Bear Mountain house up for sale a week or two ago. Only one showing so far.
There’s a few Vancouver-centric Facebook groups that monitor some of the listings that are pulled and relisted, but it certainly wouldn’t represent all of them. It’s mainly just “top drops”.
But I haven’t seen one where the initial listing/relisting/sold price data is compiled into a set to depict an alternative gauge of market momentum. I think that such a data-set would be mere curiosity, as in the end relisting to alter DOM or “hide” price drops will be unable to mask aggregate price movements in the market.
Don’t worry about it. The relisting phenomenon isn’t new, and it’s a gimmicky tactic that’s done everywhere. But in a region where we’ve suddenly become so dependent on RE, you can bet they’ll aggressively pull out everything they can to push a narrative. Right now, Toronto is a perfect case in point – “sales have turned a corner, correction is over, back to the races!”
Thankfully in the end, the gimmicks aren’t going to fool the market.
A little late to the party as always. I got the call from BMO two weeks ago to renew the mortgage (it’s due Sept 1), and I was quoted a 5 year at 3.59%, and a variable of prime – 0.7. I said “oh that’s too bad, I’d heard in the news they were offering prime -1 and the girl said, ” unfortunately that’s no longer available.” She went on and on for a little bit longer, all the while she was talking I hopped on the computer and went to ratehub.ca and quickly scanned to see what the comps were. I told her, I see that TD is offering prime -0.9? She asked me, “where did you see that?” I told her I’m looking at ratehub right now. She said, “oh well seeing as it’s a major bank, I can definitely see what we can do for you, but it might take me a day or two.” I said that was fine.
Of course I would never go with TD (don’t they have those collateral charges?) Plus their “prime” is actually higher than BMO! How sneaky. And there were all kinds of conditions attached to that rate.
Anyhow, she called me back the next day and said of course they could do prime -0.9. ‘Cause I’m such a loyal customer. 😉
As expected, prime went up last week, but I’m still at 2.8% and anything less than 3.59 and I’m happy enough for now. Just sad to see the old rate of 2.09 go. My semi-monthly payments have increased by $26. No biggie.
Interesting article on Australia https://www.zerohedge.com/news/2018-07-13/it-hit-mortgage-market-over-head-baseball-bat
Is there anyone who has compiled the true price reductions in Vancouver based on initially listed prices not the listing that get redone with 5 reductions so in the end it looks like they sold for asking?
About Investing (Advisor vs. your own research). I’m still in the research fais.
Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School. <—Read the chapters on Mutual Funds and Advisors. It'll be a rude awakening for advisors from this book.
Here's all the information you should research with before you consider an advisor.
https://canadiancouchpotato.com/model-portfolios/ <- as mentioned. (Personally, I'm stuck between going with Option 2 and Option 3. I'm not convinced on the Tangerine Option 1 as the reviews online are horrible to read.
https://boomerandecho.com/archive/ <- good info. on robo-advisors, and credit cards ( Annual Fee, Sign Up Bonus, Reward Value ).
https://maplemoney.com/ <- This one is not my favourite, but there is still some great advice here. It should be mentioned.
https://www.mrmoneymustache.com/blog/ <-mostly American but for the frame of mind concept and some Canadian content, it's worth mentioning. It also has a forum (US mostly) to get answers straight from Canadians (or other countries).
And many many more…
These are just the few I bounce around in to get a full perspective from different views. I would suggest find a few for yourself or just the ones I mention, but no more the 3-4, as it get overwhelming quick.
Can one person on here tell me that their managed portfolio with any investment team has beat the s&p index with dividends rolled in or the nasdaq?
I look at people I know and the crazy fees they pay to these companies and they never even get close to the returns of a single index.
I have to say for myself my issues more come about market timing, pulling out and going back in. In. The end set it and forget it longterm seems the best. I have switched to only 2 index funds and a very small group of some individual stocks. (tech and weed)
This year those individual stocks out preformed but over the past few years the etf was always ahead.
Do you have data for this?
If you want to be extra lazy (like me), just buy VGRO or VBAL and be done with it. All my investments in a single holding. Can’t get simpler than that.
https://canadiancouchpotato.com/2018/02/05/vanguards-one-fund-solution/
Down in Washington this week. Let’s just say I’m very happy to live in Victoria. Too busy, too car dependent, and that’s only the pacific northwest, not even real America.
You do not need an advisor.
Spend a day reading the archives on this site https://canadiancouchpotato.com and go forth and prosper. The method takes a reasonable amount of discipline in this respect: you need to do absolutely nothing for most of the year. Other than new purchases, any trades which seem like a real good idea to you aren’t. Always.
High end buyers…Uplands Home
https://www.rew.ca/properties/395473/3190-norfolk-road-oak-bay-bc?direction=desc&page=1&search_id=oak-bay-bc&search_type=property_browse&sort=latest
Some bargains to be had. $500,000 below assessment.
Very interesting to see what this sells for.
@Rook
I agree with the comments below. You will pay for the advice, it is likely of dubious value, but it could be better than nothing if it keeps you investing and you have little knowledge/time/interest yourself. I wouldn’t expect much from a bank, although I have found the larger your portfolio, the better the credentials of the person you deal with.
I started reading about investing over 10 years ago in the Globe and Mail and Moneysense magazine. Moneysense now has a fairly recent update to their Couch Potato Portfolio online: https://www.moneysense.ca/save/investing/index-funds/ultimate-guide-couch-potato-portfolio/
There are now robo-advisors thrown into the mix.
Ten years ago, PH&N had a good reputation for lower fee advice. I see it’s now part of RBC. I am not sure how their service now differs. I never dealt with them, though, because I thought I could make out fine with self-managed index funds.
However, here’s my example of how things can go wrong with that approach: I moved my money out of my bank portfolio after the crash in 2009 into a Waterhouse account. Then I got into a car accident from which I never fully recovered, other things came up, and we were looking for a house so it didn’t seem worth the effort if I was going to need the money soon. In the end, the money sat there for 7 years and I locked in my losses from 2009.
I generally suffer from terrible timing in life; others might have better luck. Had I gotten things rolling the year before, I might have kept up with it. However, the moral of the story is that one really needs to do an honest self-assessment of their current needs and an assessment of how much the advice of a particular advisor will cost them in an average year.
I wouldn’t feel any guilt, though, at deciding you need the help. There are people like Marko who have both an interest and the health and energy to deal with things like this, but not everyone does.
@Grant
You are correct….in fact, I believe that Warren Buffet plans to place his estate in a S&P 500 tracking, low admin cost index fund. As you mentioned, most “pros” can’t beat such an index fund, hence his famous challenge (http://fortune.com/2016/05/11/warren-buffett-hedge-fund-bet/)
@rook
It’s really tough to beat index funds, most “pros” can’t. Index funds give you broad exposure to the market (or a given segment if you prefer) and something like Vanguard has really low fees.
+1. I have this issue myself, surprise surprise. 😛 I tried direct once about 2 years ago, got impulsive on a trade and regretted it for months. I like the peace of mind of just forgetting about it. If you add up a broker’s TC over a lifetime though, you’ll find it costs you a rude amount of money.
So…peace of mind costs money, and doesn’t always give you peace of mind anyways.
For the record, I was rootin’ for Croatia too. A dive and a bogus penalty call kinda ruined it.
First two goals for France were a complete shame but Croats aren’t dwelling on it based on the country basically shutting down yesterday to celebrate and party. The squad played really well and left everything on the field which is the most important. Played well enough to win just ran out of luck.
How to find investment adviser in Victoria?
When my friends ask me this question I reply with Questrade and TD Waterhouse 🙂
How complicated is it? Buy a telecom, bank, railway or pipeline, throw in some Fortis and a few other large dividend payers and good to go.
If I need help with tax planning regarding investing I’ll go see an accountant.
To me an investment adviser is the same thing as full service agent versus mere posting. You pay an arm and a leg for something that isn’t really proven to fetch better net results; however, the vast majority of the population have this fear of handling a big transaction/investing on their own when it really isn’t rocket science. It is also appualing how little research people are willing to do. Every year around RRSP season I’ll run BNN in the background in my office to catch up a bit before I buy.
Rook,
I used one person at RBC for several years, but had to go elsewhere (unrelated to their performance). Been having some luck with a consultant at IG, and I like their scope of services too. But it really is just down to personal experience and whether you feel comfortable with the person you’re speaking with.
Engineered hardwood floors would be a big expense. I would go with high quality laminate purchased from a hardware store when on sale. Then it’s best to have it installed professionally, hammer and sons here in town comes highly reviewed. It comes down to the installation as to whether or not it looks cheap and they will not let you down. The difference will be long term durability when comparing engineered to laminate. You could probably do 1000 sq. ft. for under $4000 CAD adding some serious interior appeal to preserve your investment. Good luck!
New topic: Renovating to sell
In 2016 it didn’t seem to matter what shape a house was in. However, since buyers now have more selection, I am wondering what is worth renovating for sellers and to what degree (for a house in the $800K-1M range)?
I have an interest in this for a relative now and for myself as we replace things, since we don’t plan to keep our house forever. My spouse and I particularly disagree over flooring. We agree on hard flooring vs. carpet, but I don’t think we will ever see the money back from hardwood, while he thinks anything else makes the whole place look cheap.
Another solicitation for advice (slllightly RE related)
How to find investment adviser in Victoria? Anyone know someone? Looking at you Local Fool.
Curious if anyone knows of a resource to follow Edmonton real estate? Looking for some similar opinions and analysis that this great blog provides.
Heck, I’m French and I was rooting for Croatia!
For the record, I was rootin’ for Croatia too. A dive and a bogus penalty call kinda ruined it.
With a last name like his he might still be mourning the underwhelming performance of “Die Mannschaft”
“…just go ahead and buy a smaller and less expensive home”
I kind of just saw it as Poloz saying, “We have to raise rates now but please, please don’t stop buying.”
Leo isn’t French, Marko.
That is correct…Leo is like the English 🙂
No one cares that we lost to France…..500,000 people (half the population of the city) showed up to await the team in Zagreb. Hopefully my condo didn’t get damaged as it is close to the main square where the party was happening 🙂
“British Columbia government projects worth billions of dollars will now be built under a so-called community benefits agreement that sets out job training, who can work on the projects and wages to be paid.
The agreement is aimed at boosting apprenticeship opportunities and hiring more women, Indigenous people and other under-represented workers who will be organized under a new Crown corporation — BC Infrastructure Benefits Inc.”
How awful to give opportunities to BC’s young people and First Nations. Why not just hire foreigners, like the BC Liberals would have done.
It didn’t take the government long to take care of the unions:
https://www.cbc.ca/news/canada/british-columbia/ndp-launches-new-labour-agreement-for-public-projects-1.4749023
Leo isn’t French, Marko.
“…just go ahead and buy a smaller and less expensive home”
I wanted to put that quote up there, which is from BoC Governor Stephen Poloz a few days ago. He was responding to inquires and concerns that hiking the interest rate such as he did would further strain already stretched housing affordability. Some people thought the remarks were insensitive, as smaller and less expensive homes are already unaffordable in many locations.
I see his remarks differently.
What he’s indicating, IMO, is the mandate of the BoC. It isn’t to ensure your house is affordable for you, or, that those who over-leverage remain protected. It’s to help control inflation and manage the currency in accordance with their assessment of the broader economic dynamics. He does say that on interest rates, Canada charts its own path. And it’s true, they do – no one but the BoC decides what the BoC rate is. But in practice, their mandate has meant that we almost always follow the US interest rate. Right now, the US Fed is on a hiking spree with quite a bit more expected to come.
If you think “they won’t raise rates in Canada because it would decimate the housing market”, the fact that he’s raising them while now effectively telling home buyers to go eat cake, might challenge your belief. If it doesn’t, research what Poloz’s predecessor Gerald Bouey did in the early 80’s, when he suddenly jacked the rate to over 21% despite the fact that housing was huge in Canada.
Will they raise rates to 21%? Highly unlikely. But it does go to show you – make a responsible choice when you buy a home, including the choice not to buy. If you over-extend under the assumption they won’t raise rates on you…let’s just say, you won’t be the first person who has had an awfully rude awakening.
Barrister will have got the interest rate bang on. Depending on how much sales drop, he may be closer by the end of year (on everything except # of sales obviously).
That is okay, as long as I beat LeoS 🙂
Barrister will have got the interest rate bang on. Depending on how much sales drop, he may be closer by the end of year (on everything except # of sales obviously).
Looks like the aggregate of my predictions is pretty close to the top of the pack. Lower sales but prices holding. Everyone with lower sales than me had prices dropping substantially with the exception of RichardHaysom.
personal experience with Calgary real estate market – late 2004 bought a 2 bedroom in a a 2 yr old concrete high rise for $240k. 18 months later sold it for $420k. 12 years later units in the same building are going for a bit less than what we sold for. 836 15th Ave. SW if you don’t believe me or think there was some issue with the unit/building.
If you bought a condo in Victoria in mid/late 2006 you were in the same position here in 2014 (worth a bit less). The only difference is we had a run up 2015-2018.
I suspect that I might be misunderstanding the stats. This week we had 514 new listing and 282 sales; a net difference of 232. Yet inventory went up by only 6.
Does this mean that about 226 properties where taken off the market without being sold?
Is this number in any way connected to listing agreements expiring and then after a few days off market reappearing as “new” listings?
Indeed. Teranet index for Calgary (which includes houses) is less than 1% higher today than it was in September 2007. Don’t expect retirees from Alberta to support price growth on VI going forward.
https://housepriceindex.ca/#chart_compare=bc_victoria,ab_calgary
…personal experience with Calgary real estate market – late 2004 bought a 2 bedroom in a a 2 yr old concrete high rise for $240k. 18 months later sold it for $420k. 12 years later units in the same building are going for a bit less than what we sold for. 836 15th Ave. SW if you don’t believe me or think there was some issue with the unit/building.
LNG Kitimat
There are strong indications that this is moving forward. ATCO, the company that provides modular housing for these projects have already has already asked some suppliers to start costing for enough housing for 5000 workers to a ramp up of 25,000 workers. They usually do this in anticipation of 18-24 months before installation, so add 2 years to this and looking at a 2020 earliest start date for Kitimat.
The recency bias is strong with this one.
Jingle mail anyone?
Yes it has indeed been resilient, but I don’t know how well we can look to that RE market or any Alberta RE market as a proxy for what we could experience here in a hypothetical “sharp downturn”.
The reason why some folks are shouting risk in the RE market here isn’t to do with an external factor like oil crashing, it’s because of our RE market itself. Nowhere in Alberta has seen a run-up of real estate even remotely approaching the out of control nature of what we’ve seen here. At least with oil and gas, real wealth is being generated. In BC, we’ve recently embraced the self-defeating economic model of trading houses back and forth to each other at ever higher prices.
We’ve now taken this monstrosity so far, that home flipping and its spin-offs are now more critical to BC’s GDP than oil and gas is to Alberta. This isn’t hyperbole, it’s not scaremongering, it’s not squawking in the wind. It’s an appalling fact, and it’s one that objectively places the BC economy and its citizenry at very significant risk. I would argue that while Alberta faces headwinds due to struggling energy prices and high consumer debt loads, their systemic risk due to a looming housing market event is much lower than any populous region here in BC.
and
The hyperbole is strong with this one. 😉
If the CRD construction industry does experience a sharp downturn (not a foregone conclusion IMO), then you can probably look to Calgary as an example of how things shake out in RE. Like construction, the O&G industry attracts a lot of people from outside the area who are going where the dollars are. Typically these folks rent, they do not buy. After the oil price collapse in 14, Calgary’s incredibly tight rental market transformed into a market where landlords were offering incentives to rent. The housing market however stayed remarkably resilient all things considered. Price growth cooled or stopped for SFH and Calgary has been a buyers market for a while now. A ton of condos also came on the market due to the condo building boom, but there was no bloodbath.
“In summary, he wants to expropriate the homes and property of retired seniors …”
Since that’s rubbish, not need to read any further.
I advocated the freedom of property owners to do with their property as they wished, including subdivide it, something that zoning laws severely restrict.
That’s how it works. And the greater the boom, the greater the subsequent downtu…actually, you don’t need to take my word for it:
Anyone want to guess what might happen to our current whackadoodle construction boom, depicted in the far right? Hint: look left.
I’m still ruminating on the last blog post.
CS has expressed enough of his adamant ideas and concepts that a clear picture is emerging of his personality and his mindset.
In summary, he wants to expropriate the homes and property of retired seniors, particularly those in Oak Bay, then he wants to subdivide their Oak Bay lots into 25 foot wide lots and build high density skinny buildings (trailer park trash), then he wants to export the seniors to somewhere north of the Malahat where they won’t be a burden on the younger working class people who deserve the Oak Bay livability without working 20 years first to earn it.
CS keeps writing posts about the need for rapid and extreme densification in the core, but is it really needed?
I have a basic fundamental question about the need for higher density in the core to accommodate all the workers that want to live near their intown jobs.
What are all these new intown jobs?
The intown area job market has not expanded much in the past 15 years; except for one sector… construction. ‘Construction’ encompasses the carpenters, plumbers, electricians, roofers, concrete workers, structural steel workers, landscapers, building supply company employees, truck drivers, and all the other construction-related jobs.
Construction related jobs, direct and indirect, account for about 25% of all well paid jobs in greater Victoria.
On the flip side, the number of intown dwelling units has grown exponentially during the past 20 years.
When the current construction boom ends, we might be surprised to find the construction related workers and their families making a mad exodus out of Victoria en masse leaving behind an oversupply of empty dwelling units, unable to be sold or rented.
Without the booming construction industry in Greater Victoria there would be profound changes to the demand for real estate while supply grows exponentially. Personally, I think this change has already begun and by the fall and winter of 2020/21 the bloodbath in the local real estate market will be evident in all neighbourhoods.
Actually that includes the cost of the pipeline to the Dawson Creek area.
Maybe? We’re talking 3000 peak jobs in Kitimat and 1500 peak jobs on the pipeline, many of which are reserved for First Nations.
QT,
Yes, I know about those LNG projects – I worked on several of them previously when everyone was sure that LNG was going to completely transform BC. What happened?
Approvals took far too long, investment climate soured, and LNG tanked as a commodity. Companies like Petronas went to greener pastures. Just because we have 17, or 117, of them on the drawing board, that doesn’t mean any of them will be built. They’re all proposals, many years old already which in the LNG world is almost light years away from actually having a functioning plant.
What you seem to be suggesting now, is someday we might be an LNG powerhouse, and RE will take off. And you might be absolutely correct. But that is not the reality now, or the foreseeable future. If little Kitimat can get their LNG plant, awesome. Better than Rio Tinto alone, if you ask me.
PS – 40 billion dollars refers to the construction cost of the plant, not the annual addition to the GDP thereafter. LNG plants are highly specialized infrastructure that are extremely expensive to build. It’s not indicative one way or another of how much wealth it would generate after operating costs are considered.
Hey RenterInParidise, just don’t throw out a $300,000 under without providing a bit more detail..It seems like fake news unless you put up some proof. So, what was the listing, just to figure the reason why it went that way…. Cheers
It look like the Terrace Mayor believe that it is going ahead.
https://www.bloomberg.com/news/articles/2018-07-09/canada-s-30-billion-lng-hope-edges-closer-as-shell-ramps-up
BC government is looking at 17 LNG proposed projects, and so far the BC government has approved LNG Canada project, and Kitimat LNG project located in Kitimat. Woodfiber LNG project located in Squamish is approved and has started.
https://lnginbc.gov.bc.ca/tile/bc-lng-projects/
Perhaps I over estimated the volume of jobs on the Canada LNG project, and maybe the RE boom wouldn’t reach the South Coast. However, $40 billions is a lot of coins that they are spending in 5 years, and surely some of those money going to find it way to Vancouver/Victoria.
Off to the states for a week.
Yes. The estimate is based on where the sales are compared to the same period last year. Sales decline in July, so although they declined last week, they are still down 22% from last year and estimate remains at 620 for the month.
A post worth hitting ‘refresh’ for. Thank you Leo for a nice recap on YTD. With a decline from week 1 to week 2 in number of sales, would the guestimate of 620 still be in range? I’ve noticed a marked slow down on pending contracts for homes I follow. I’ve also noticed fewer homes coming to market in that area/price range.
PS: A home I could only dream of affording just went pending but $300,000 under ask. I thought the ask was fair-ish but that much under makes the property look like a downright deal.