Foreign Buyers Drop by 89% in Victoria

This post is 6 years old. The data and my views may have since evolved.

Recent BC Ministry of Finance data for June property transfers indicated only 6 properties went to foreign buyers in Greater Victoria.   That compares to 53 last June, for an amazing 89% drop in the number of foreign buyers now that the foreign buyers tax is in full effect.

If the intent was to discourage foreign buyers from purchasing property in Greater Victoria, then the tax seems to have had the intended effect so far.   If the intent was to collect substantial revenue it looks like it will fall short.  Foreign buyer numbers have been down now for almost a year along with the overall market decline, but the tax has clearly dissuaded all but the most determined from purchasing.   Those determined few paid some $600,000 in property transfer tax (which is how the foreign buyers tax is collected) in order to secure their properties.

The percentage of purchases by foreign buyers is similarly way down, from an average of 4.24% in the last two years to only 0.65% of all sales.

The price of properties being purchased by foreign buyers is also down, with the median property only $380,000 compared to $728,000 one year ago.  It appears the biggest hit has been to higher end property sales by foreign buyers.   Of course the alternative explanation is that those wealthier buyers have moved to purchasing properties inside numbered companies or some other loophole and aren’t being captured as foreign buyers in the provincial statistics.  That we won’t know until BC sets up their beneficial ownership registry.

The shift to a lower end property combined with massive drop in sales means that sales volume is down even more dramatically than sales numbers.

In Vancouver we saw a bit of a recovery in foreign buying activity after the market adjusted to the new tax, but we can likely expect that foreign buying activity (which mainly comes from Americans in Victoria) will likely be cut at least in half going forward.  Not a huge impact on our overall sales figures, but just another nibble out of the demand side.

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richardhaysom@ymail.com
richardhaysom@ymail.com
August 5, 2018 4:56 pm

“Recent BC Ministry of Finance data for June property transfers indicated only 6 properties went to foreign buyers in Greater Victoria. That compares to 53 last June, for an amazing 89% drop in the number of foreign buyers now that the foreign buyers tax is in full effect.”

It’s not an “amazing 89% drop” in the no. of FBs

It is an unbelievable extraordinary freeking amazing 890% drop in the no. of Foreign Buyer sales!!

Ian
Ian
August 2, 2018 8:58 pm

Scotiabank: Given the improved outlook, we now expect that the BOC will raise rates more rapidly, with the next increase in Sep, followed by another in Dec. We have not changed our view on the total amount of tightening required by end-’19, at 100bp above current levels .

Local Fool
Local Fool
August 1, 2018 5:34 pm

Does anyone here remember years ago when there was a Kmart there?

I do! I actually remember when there was a Johnny Zee’s down there where the tax place is now. But it was gone soon after I was old enough to actually appreciate it. Will be kind of sad to see it all go. But it’s dated and impractical for the community’s current needs, I guess.

Andy7
Andy7
August 1, 2018 5:25 pm

Via Steve Saretsky today re Van:

“Vancouver home sales for the month of July tricked in at an 18 year low. This is for all property types.

Vancouver Detached average sales price fell 16% year over year in July. Median sales price registered a 3% decline.

Vancouver condo average sales price fell 2% Y/Y in July. Median sales price still shows a 5% increase Y/Y.

To summarize, sales are in the dumps. Buyers are price sensitive and over the past few months prices have been moving lower across all property types, including condos.”

Introvert
Introvert
August 1, 2018 5:13 pm

If there’s any community input sessions I’ll be there speaking in favour! Exactly what we need along Mckenzie.

Apparently, the first session was last night. There’s another one on Sept. 6th.

I’m certain this redevelopment will be approved by Saanich council; I haven’t heard anyone say anything negative about it.

The current building is very dated, so an update will be nice. Does anyone here remember years ago when there was a Kmart there?

Michael
Michael
August 1, 2018 4:59 pm

My guess is the ‘mid-cycle lull’ many of us were predicting a year and a half ago (pre-election), is slowly ending – certainly for the low to mid range.
https://househuntvictoria.ca/2017/04/27/how-to-mislead-with-charts/#comment-25678
However, gwac could be right for a bit longer on the high end. Some good news for all earners is the latest polls have Wilkinson pulling ahead of the dippers.

Barrister
Barrister
August 1, 2018 4:51 pm

I notice that the VREB release talks about the inventory of properties over 1.5 mil but does not mention the number sold this year compared to last year.

Marko Juras
August 1, 2018 4:48 pm

We are in for a 3 to 4 year slow down and some better pricing especially on higher price points.

Seems like a reasonable prediction imo.

Gwac
Gwac
August 1, 2018 4:36 pm

My estimates are non inflation so inflation adjusted add another 10% if you want. As I explained i never look at inflation adjusted because people borrow the vaste majority of the buy. Reality is the price is the price regardless of inflation.

Andy7
Andy7
August 1, 2018 4:24 pm

@Marko

Also, the lowest new listing count since 2005 is a little odd with the spec tax and everything else going on? I would have also thought that the climb in interest rates would have started to flush out more inventory onto the market, especially amateur investors carrying a lot of debt on the rental property.

I was surprised too about the low new listing count. I think a lot of sellers think the market is going to pick up in the spring; know of two sellers that said this as their currently overpriced listings are not selling so they’re thinking of pulling them off the market and relisting in the spring – my sense is this is what their realtor is advising them to do; personally, I think they’re going to be in for a rude awakening in the spring, but then again, I don’t understand why people just don’t price their house well if they want it to sell in the first place.

Isn’t it Ross Kay that says the stats we see today are actually reflecting a market about 3 months ago? Something like that. The interest rate hike was relatively recent, so will be interesting to see how things look a few months down the road.

Active inventory is climbing nicely (up 50-100% from July 2017) across the board (SFH, townhomes, condos etc)

Local Fool
Local Fool
August 1, 2018 4:02 pm

We are in for a 3 to 4 year slow down and some better pricing especially on higher price points

I agree. I think the higher markets will be hit the most, but that also places parallel pressure on other segments. Personally I don’t think 5 to 10% in real dollars is likely to be where it stops, though I concede that’s just biased intuition. Call it a fun little guessing game with potentially serious implications, I suppose.

Speaking of which, what do you think is going to happen to VanRE prices across the board over the next few years (in aggregate, not each segment). Gain? Nothing? -10%? -25%? -50%? -100%? 😛 No clue/not willing to wager? Just curious, it’s not a loaded question.

gwac
gwac
August 1, 2018 3:34 pm

Local

it is exactly what I mentioned. Those in over their heads are being flushed out. Sorry for the harsh words. I realize those are people losing $. Hopefully things will be better soon for them.

Lots of liens out there and contractors and subs not being paid. Not an epidemic but like I said it is not 2014 -17 anymore.

We are in for a 3 to 4 year slow down and some better pricing especially on higher price points.

No crash IMHO just a 5 to 10% cleansing

Local Fool
Local Fool
August 1, 2018 3:24 pm

Ya I know, that’s so slow and plodding though. There must be a compilation somewhere, I just don’t have the gumption to go looking for it. Even if the anecdote is wrong, I think it’s something to watch if only for curiosity, as the market shifts.

gwac
gwac
August 1, 2018 3:19 pm

Local

you can through the court proceedings not aware of all other place. Just Jack was good at listing them.

gwac
gwac
August 1, 2018 3:13 pm

vreb

https://www.vreb.org/pdf/VREBNewsReleaseAndSummary.pdf

HPI down to 880 from 889k/average 929 vs 889k in june/median 800k vs 780k

HPI reflecting what is happening out there.

Local Fool
Local Fool
August 1, 2018 3:10 pm

Newest video from Alice Kluge, Victoria realtor. Goes into the numbers as Leo has done although some of her percentages appear to be different (-26% change vs LeoS’s -18%)? Anyways, had an interesting comment at 11:00 minutes in:

“I talked to a lawyer this week as I am dealing with a foreclosure property, and she was telling me she was frazzled to no end because she’s dealing with so many foreclosures right now she doesn’t know what to do with herself. So that’s another thing I’m hearing more and more of, is that people and realtors that haven’t had to experience that yet, they’re starting to deal with foreclosures a lot and everybody’s kind of learning, you know?”

Does anyone know if there’s a database where we can see foreclosure activity to either confirm or debunk this?

https://www.youtube.com/watch?v=YH9yhiBvwb4

patriotz
patriotz
August 1, 2018 1:50 pm

there is no paying it back….

Yes that’s right. On the other hand you can pay back a withdrawl from a TFSA. So the latter is really the right vehicle for saving for some project as opposed to retirement (hence the name).

gwac
gwac
August 1, 2018 1:05 pm

My house build and recent renovation on another place both came in on budget and little issue. 3 pop nails in my home build is the extent of my issues. Knock on wood.

Use the same guy for both. I got lucky with him. Honest and blunt. Told me upfront what some of my decisions could result in at the beginning. Did not make any major changes. Was there all the time to see what was going on. Was willing to get dirty. I contribute the success on both to having the right contractor and willing to listen and realize others no best. Its all about the relationship between the builder and owner. This is just my experience and is not meant to judge anyone else. I just got lucky and found the right person to work with.

dasmo
August 1, 2018 12:31 pm

No need to say your sorry for my stress. I set sail with a crew of pirates. I didn’t expect a vacation with umbrella drinks. I knew the risks and took them and so far it looks like I made it back to land with only a good case of scurvy… I am a lucky man to be where I am today so don’t take sympathy on me! I’m just telling it like it is…. And it ain’t been easy. Has anyone ever said building a house was?

I have also had some good people work on the house. The man who did my rock work is a genius and an artist. Gutter guys were great. Roofing guys were good. Even the builder himself has done some good things. His big problem is never really finishing beyond 80%…

dasmo
August 1, 2018 12:27 pm

Sorry patriotz, I guess the better way to say that was it’s subtracted from your original contribution room so there is no paying it back….

late30
late30
August 1, 2018 11:37 am

Numbers aren’t as bad as last month. Sales down 18% instead of 30% YoY and average/median prices up a bit from the big dip as expected.

Also, the lowest new listing count since 2005 is a little odd with the spec tax and everything else going on? I would have also thought that the climb in interest rates would have started to flush out more inventory onto the market, especially amateur investors carrying a lot of debt on the rental property.

those “amateur: investors have deep pockets…. where would their funds come from? My guess is they are creating, and adding value to the globe with a lit bit luck and many skills which we are not familiar with….

Barrister
Barrister
August 1, 2018 11:28 am

Dasmo:

Really sorry to hear about the stress. The rule of thumb that I heard was to expect the project to run at least 25% over budget and about 35% longer in time. But, I hear that it is even worse these days. My painter had to do one more coat in a fairly large area than he had estimated for but he only charged for the extra paint.

patriotz
patriotz
August 1, 2018 11:21 am

I learned that you not only pay the tax hit the amount withdrawn (from RRSP) is also subtracted from your contribution room.

Not true. Taking money from your RRSP does not affect the amount you are allowed to contribute.

Marko Juras
August 1, 2018 10:20 am

Numbers aren’t as bad as last month. Sales down 18% instead of 30% YoY and average/median prices up a bit from the big dip as expected.

Also, the lowest new listing count since 2005 is a little odd with the spec tax and everything else going on? I would have also thought that the climb in interest rates would have started to flush out more inventory onto the market, especially amateur investors carrying a lot of debt on the rental property.

Marko Juras
August 1, 2018 10:13 am

Numbers aren’t as bad as last month. Sales down 18% instead of 30% YoY and average/median prices up a bit from the big dip as expected.

A bit of a weird market but overall busier than I thought it was going to be in July given all the factors piling up against demand. Weird in a sense that I had a listing with three offers and than on other places you can’t even get a showing.

I had a sense we would see a 2010 type summer with sales in the mid 500s so 651 isn’t too bad. Still higher than 2010-2013 on substantially lower inventory.

gwac
gwac
August 1, 2018 9:55 am

Dasmo

So sorry for your stress but what you explained is exactly what a lot of people are facing at this time. The guy has had to put numerous liens on numerous projects as owners scramble to find cash. In a rising market this is not such an issue.

The kitchen is a large draw factor that people do not know. Usually a lot higher than actually spent.

Builder spec homes like I said on higher price points are being foreclosed on an every increasing number. Not huge but it is not 2014/17 anymore.

Grant
Grant
August 1, 2018 9:50 am

Sweethome, I’ll give you my 2 cents regarding painters and flooring people. If you want a good job then get both the flooring and painters lined up first, then hire movers to move all your furniture and appliances outside or to your basement before work begins. You’ll make the job 10x easier for the workers and they will do a better job. Also, don’t hire any outfit that claims to be ‘student painters’.

That’s what we did – we took possession and I scheduled 2 weeks for everything to get done before we arrived with our furniture. Painters came in first and they claimed it took twice as much work, as a result they pushed out the start of the flooring time – they said some walls required 4 coats (that statement and their justifications were argued about for quite a while.) The painters did do an absolutely professional and fantastic job, it looks amazing, but I really had to fight on the invoice because you simply don’t give an estimate at $4000 and then plop a $8000 invoice into the customer’s lap without authorization. We settled at $6500.

On flooring I think they had 2 problems. One was the heat and the stain dried too fast in some places, causing too much variation in the appearance. (A/C in the house wasn’t on, why they didn’t turn it on was beyond my comprehension.) The other thing was they rushed the sanding in some spots and some swirls were visible. When I got to the house and sent a picture of the floor to the lead flooring guy he came over right away – said he was completely embarrassed by the end result and that they’d be back in 2 days to completely redo it at their cost. So – that’s good. The problem was we’d arrived with our furniture by that point. So as I type half our furniture is in the garage and the flooring guys are currently putting a top finishing coat on the floors. It’s our 3rd day living out of our bedroom like it’s a hotel. Moral of the story – you always need to be on top of contractors, trying to manage them from Calgary was a fool’s choice on my end. And always allow for way more time to be needed and money to be spent.

Dasmo
Dasmo
August 1, 2018 9:30 am

The bank did not make it easy on me. The loan was not at all explained at all towards what it actually was. The draw calculator was completely weighted towards finishing. There was some financial pain and suffering on our behalf and I came closer to financial insolvency then I would like. Our builder went over budget on everything. I was prepared to spend my savings as a backdrop but dipping into the RRSP was a tough blow. I learned that you not only pay the tax hit the amount withdrawn is also subtracted from your contribution room. So there is no paying it back. Near the end game we had to sell our house, soon, in order to get a bridge loan, at 30% interest, to pay the builder or they would F-off. It was like standing on the edge of a cliff staring down this down market with no mania to buy the house once we listed. If we didn’t sell it in weeks, our house of cards would have come crashing down….It didn’t and I am very glad to have a regular mortgage now. (The 30% one is also gone).

Sounds like another nail in the owner builder coffin. The big issue for the bank would be time. They would go over budget because it would take forever to get trades to finish and the carrying costs would kill them. For us that was more than $5k/month. An interest only construction loan+mortgage for house+storage+insurance. That hurts if there is nothing happening on your build.

Predictability is one HUGE reason prefab needs to take over.

Local Fool
Local Fool
August 1, 2018 9:14 am

Here’s some market peak fear mongering for anyone interested in seeing that vested interest “system” at work. I’ve posted similar articles from 2007, 2005, 2003, 1990, 1988, 1981 – the content and theme never really changes; it just adjusts to present and/or local contexts.

So below, we have, “Young Canadians will never own a home again, and it’s the government’s fault due to stress testing”. (Hint: Yes they will, and no it’s not.)

https://free.vice.com/en_ca/article/ywknnw/young-canadians-are-giving-up-n-home-ownership

gwac
gwac
August 1, 2018 8:42 am

Bitterbear that story is not totally false. Lake Cowichan check this development. Houses and lots small but cute. Development done nicely 14 of 30 released have sold or pending in a month.

Very few properties on the lake for sale.

https://woodlandshores.ca/

Local Fool
Local Fool
August 1, 2018 8:24 am

Vancouver RE Continues to Decline, Enters “Balanced” Market

Sales to Active Listing Ratio – Segment Aggregate
comment image

Bitterbear
Bitterbear
August 1, 2018 8:17 am

Barrister, sleight of hand is the order of the day for VREB. CHEK (source: hahaha) ran a block two nights ago about how the prices of recreation property are skyrocketing because of all these people cashing out and looking for “work/life” balance and evidently a long commute. Spin, distraction, smoke, mirrors, lather, rinse, repeat.

Barrister
Barrister
August 1, 2018 7:20 am

I cant wait to see how the VREB spins this months numbers.

LeoS; your stats are always great and it is much appreciated. When you have time you can tell us how sales in the 2mil plus market have done in the last three months.

Local Fool
Local Fool
August 1, 2018 7:20 am

Interesting anecdotes, Gwac thanks for sharing.

SweetHome
SweetHome
August 1, 2018 12:48 am

@LeoM

Thanks for your 2 cents. That advice make sense. I have just casually browsed Home Depot for the flooring, but will definitely visit some local flooring stores.

Also thanks to @VicRenter for a gutter cleaning recommendation and to whoever recommended a flooring installer awhile back.

If the projects ever get done, I’ll give some feedback of my experience. An acquaintence had terrible reno stories from last year of how the counter installers gashed her new kitchen cupboards and the guy working on the bathroom left halfway through for a bigger job. It sounds like the Wild West of Renovations out there.

Gwac
Gwac
July 31, 2018 11:06 pm

Had a little chat with some builders. Expect a few more high end foreclosures in new builds going through the courts in the next little while. The expensive builds are having a hard time finding buyers at the higher price points.

Also some issues with owners not getting the money required to keep their builds going. Banks are getting a lot tighter on rising budgets.

Also heard from a broker a lot of financial institutions will have nothing to do with owner builds and will only finance if a reputable contractor is involved with the owner. The soft market and rising costs recently have lead to this. Financial institution want more assurance on the price and to stop price overruns that owner builds have a higher risk on. Anyways not looking for a debate just what I have heard from people in the field.

Lower price point builds still a lot of demand for right now.

Local Fool
Local Fool
July 31, 2018 9:07 pm

Saw this dropped into my little article repository and – wow.

A Vancouver realtor describing the market and actually uses the property cycle diagram to describe where we are in that cycle, the dangers – and the opportunities. No doom, no pump, just raw market dynamic information that explains it in a manner understandable to most.

Very refreshing to see; we need more of this sort of information available. Credit to his industry, IMO.

“Like any cycle, The Real Estate Market Cycle comes back to a full circle.”

https://www.sukhbrar.ca/blog/32565/real-estate-market-update-in-north-delta-amp-surrey-bc-summer-2018

LeoM
LeoM
July 31, 2018 8:47 pm

Sweethome, I’ll give you my 2 cents regarding painters and flooring people. If you want a good job then get both the flooring and painters lined up first, then hire movers to move all your furniture and appliances outside or to your basement before work begins. You’ll make the job 10x easier for the workers and they will do a better job. Also, don’t hire any outfit that claims to be ‘student painters’. Do the painting first, but don’t tell the painters you intend to install new floors unless you want them to use your existing floors as drop-sheets. You can usually get good advice on floor installers/refinishers from reputable flooring stores. Good luck.

Marko Juras
July 31, 2018 8:21 pm

And by “business sense” we mean the willingness to expedite the commercialization and residentialization of every inch of municipal land as fast as possible.

That’s one way to build a city…

Your other option is to be like Colwood where they promised sewers years ago and people are still on septic. I would rather live in a condo in the core versus a house in Langford as Langford is not my cup of tea whatsoever but for what it is I think they are making the best of it.

Things aren’t like they were 70 years ago where you can build nice neighbourhoods on a grid like Oaklands/Fairfield with municipal roads, etc.

SweetHome
SweetHome
July 31, 2018 6:51 pm

If you have any recommendations for good painters and flooring installers, I’d be very interested. I don’t know if I’ll be able to convince my spouse to hire anyone, but I’d like to at least improve the odds that they will do an acceptable job. If they mess up, I will never hear the end of it.

Introvert
Introvert
July 31, 2018 6:51 pm

I think it more had and has to do with Langford having a major and council that have some business sense.

And by “business sense” we mean the willingness to expedite the commercialization and residentialization of every inch of municipal land as fast as possible.

That’s one way to build a city…

Big changes coming to GH. Not your GH of the 90s

Yeah, I’m not dead opposed to the University Heights redevelopment. It looks nice and it’ll probably be fine. And Leo tells me that “smart medium density” will help buoy SFH prices, so that sounds good.

SweetHome
SweetHome
July 31, 2018 6:47 pm

Sorry to hear about your experience with painters and floor refinishers. I’m sorry for you and for me too because we also need painting and new flooring installed. My spouse keeps saying he’ll get to it, but I’m afraid I’ll be waiting years to get it done. He has no confidence that anyone we hire won’t mess it up and he’ll end up having to do it anyway. Your experience is not reassuring.

Ian
Ian
July 31, 2018 5:20 pm

Barrister,

I trust you will be wearing a rose in your lapel from the garden, ala PET..

I’m wearing a light blue golf shirt.

Marko Juras
July 31, 2018 5:16 pm

I would contest that it made business sense. Developers got a subsidy at the expense of Langford taxpayers. The same amount of housing would have been built regardless – somewhere in metro Victoria – so no net employment was created.

By that logic if government policy and bureaucracy make no difference and homes are built regardless Colwood and Langford should have grown by the same pace.

Also, just to add re cost to build correcting via land value decreasing there isn’t much room when it comes to density. On a SFH the land might be 30 to 50% of cost but once you get into condos it is below 20%. I’ve seen land aquisition be less than 10% of construction cost on a few projects so you simply can’t create a huge amount of margin via decreased land aquisition cost.

Gwac
Gwac
July 31, 2018 4:53 pm
patriotz
patriotz
July 31, 2018 4:50 pm

I think it more had and has to do with Langford having a major and council that have some business sense.

I would contest that it made business sense. Developers got a subsidy at the expense of Langford taxpayers. The same amount of housing would have been built regardless – somewhere in metro Victoria – so no net employment was created.

Marko Juras
July 31, 2018 3:59 pm

I get the feeling this was in large part an attempt to keep Bear Mountain out of bankruptcy, which was ultimately unsuccessful of course.

I think it more had and has to do with Langford having a major and council that have some business sense.

patriotz
patriotz
July 31, 2018 3:02 pm

When the market tanked in 2009 Langford did a pretty bold move

I get the feeling this was in large part an attempt to keep Bear Mountain out of bankruptcy, which was ultimately unsuccessful of course.

Andy7
Andy7
July 31, 2018 2:35 pm

Via Steve Saretsky… “Looks like Vancouver home sales will trickle in near 20 year lows for the month of July.”

Local Fool
Local Fool
July 31, 2018 1:55 pm

China Further Tightens Capital Controls to Clamp Down on Money Laundering Abroad

China’s central bank is tightening up capital controls to verify transfers that exceed $1,000USD to stop money laundering, and has already fined firms failing to comply with the new rules.

The People’s Bank of China released four policies to stop criminally inclined capital outflows on July 26, after which it has fined some of China’s securities firms, insurers and third-party payment platforms such as Alibaba’s Alipay and Tencent’s Tenpay for related wrongdoings.

The scope of the four notices included identity verification, the scale of cross-border payment transactions, management of high-risk businesses susceptible to money laundering or terrorist financing, as well as safekeeping of transaction records. In addition to financial institutions, real estate developers and accounting firms must report to the central bank.

https://www.yicaiglobal.com/news/pboc-demands-id-check-over-usd1000-overseas-transfers-stop-money-laundering

Marko Juras
July 31, 2018 1:34 pm

You always see lower construction in any RE market when it cools off. Every market, everywhere, regardless of bureaucracy.

For sure, but bureaucracy will impact the magnitutde of the cool off. When the market tanked in 2009 Langford did a pretty bold move ->

https://canada.constructconnect.com/dcn/news/government/2009/02/langford-reduces-taxes-and-waives-permit-fees-to-attract-developers-dcn032740w

plus 48-hour issuance of building permits! Try currently 3 months for Victoria or Saanich.

The last few years the market has been so hot and delays by way of luck have helped a lot of developers (i.e. prices went up while dealing with bureaucracy) but once things cool off year on delays and added costs won’t be so cool.

Local Fool
Local Fool
July 31, 2018 12:46 pm

Canada Frozen out of NAFTA Talks, US & Mexico go Ahead

https://www.bnnbloomberg.ca/canada-shut-out-of-nafta-amid-u-s-mexico-talks-1.1116757

patriotz
patriotz
July 31, 2018 12:32 pm

If the market cools where there is no more margin because bureaucracy eats it all then you will see lower construction.

You always see lower construction in any RE market when it cools off. Every market, everywhere, regardless of bureaucracy. The higher prices are, the more builders want to supply. The lower prices are, the less.

Since new builds compete with existing properties, the price of the former must drop along with the latter. Where’s the margin – land prices.

Dasmo
Dasmo
July 31, 2018 10:35 am

Yep, that’s the big problem with the industry. There are no repercussions for anything and you are expected to be obsequious to them. There is a saying out there, “don’t bother measuring. Cut twice, you’ll make more money”….

Marko Juras
July 31, 2018 10:34 am

but construction is flat out and they literally cannot build any more than they are right now. There are twice as many units under construction now than 2011. So apparently this increase in bureaucracy has not hit construction that much.

Only because of the market. As little as three years ago you could buy a brand new higher-end house 3,000 sq/ft with a suite in the Oaklands area for <$900,000. Now that same home is $1,250,000+ so there is enough room in there to absorb the $50,000-$100,000 of added BS bureaucracy costs.

If the market cools where there is no more margin because bureaucracy eats it all then you will see lower construction.

Marko Juras
July 31, 2018 10:28 am

Brutal. Hope your luck turns soon.

Sounds about normal…..remember what I said a couple of days ago about how people who haven’t built a house can’t really comprehend the process involved?

When construction slows down there is this theory by individuals working desk jobs without real life experience that tradespeople will substantially drop their prices and be readily available……….and then there is reality.

Good old times on HHV when bears predicted tear downs dropping to 350k and a new building being 350k = 700k for a new custom house in Oak Bay 🙂

Helps if you are around and keeping an eagle eye.

I guess for one job this might work but if you are watching someone with an eagle eye they aren’t answering their phone next time you need something done.

If a tradesperson doesn’t show up to your home at a scheduled time you can’t call them and be like “wtf, you told me you were going to be here Tuesday at 1 pm and you didn’t show up or let me know you weren’t showing up,” you need to be a long the lines….”hey, just making sure everything is okay?” If you piss them off they just won’t show ever again, and it isn’t like you have other options.

Doing renovations or building a home is a bit of an art in dealing with people. It isn’t like hiring a REALTOR® where he or she is always late so you fire them and hire one of the other 1,300 willing REALTORS®.

Barrister
Barrister
July 31, 2018 9:34 am

Grant:

Isn’t it a bit warm to be wearing gloves. Ask me about the rain later, like about November.

I have heard that it is really hard these days to get good contractors. I have been very fortunate in getting great referrals from my neighbours. Helps if you are around and keeping an eagle eye.

Introvert
Introvert
July 31, 2018 9:26 am

Hey, Hawk. This article falls under the category of Things Probably Aren’t So Hunky-Dory. Take note that I posted it.

Higher interest rates will hit younger, middle-income households the most: analysis

https://www.theglobeandmail.com/business/article-higher-interest-rates-will-hit-younger-middle-income-households-the/

Introvert
Introvert
July 31, 2018 9:22 am

Nothing like contractors to brighten your day. A painting contractor who estimates X and then gives you an invoice for 2X (no seeking prior authorization.) A flooring contractor whose guys completely botch the sand and restain of all your hardwood floors necessitating a complete 4-day redo!

Brutal. Hope your luck turns soon.

Where’s this rain everyone talks about?

Historical July average rainfall for Victoria is approx. 23 mm.

This July, so far: 1 mm.

Local Fool
Local Fool
July 31, 2018 9:21 am

Grant, which segment are you referring to as being in a buyer’s market?

RenterInParadise
RenterInParadise
July 31, 2018 9:05 am

Hey Leo – thank you for the weekly numbers. Always interesting to see the numbers followed by the charts for a better view of what’s happening.

I have a couple questions for you. I’m sure you’ve explained this before but I probably missed it. For the weekly numbers, is that Mon-Mon, Sun-Sun or ? Are these numbers for the core only or does it also include surrounding regions? For the Sales-to-New-Listings category, how do pre-sales entered into the system affect this? Do pre-sale properties also show up at some point in the New Listings category?

Thanks for any additional insight into these numbers.

RenterInParadise
RenterInParadise
July 31, 2018 8:56 am

Grant –

Where’s this rain everyone talks about?

Summer is always super dry. Have patience – the rains will come and stick around for days and days on end but not now. Enjoy the summer sun!

Grant
Grant
July 31, 2018 8:48 am

Owen’s latest on his video blog:
More red arrows now (selling under list) than green arrows (selling over list). But still a buyer’s market. (Plus a bunch more on staying away from hotel stratas)
https://www.youtube.com/watch?v=RcRrXHlVuLE&amp;

Luxury BC
July 31, 2018 8:46 am

We have seen a lot of less interest from foreign buyers in the luxury sector here on the Southern Island. We’re still seeing a good amount of mainland buyers showing interest but sales definitely are slowing for us compared to this time last year.

The high end market will always thrive here I think but I hope the low and midrange markets being open and healthy to first time buyers and families.

Grant
Grant
July 31, 2018 8:11 am

Nothing like contractors to brighten your day. A painting contractor who estimates X and then gives you an invoice for 2X (no seeking prior authorization.) A flooring contractor whose guys completely botch the sand and restain of all your hardwood floors necessitating a complete 4-day redo! But island life is fitting me like a glove so far, and the weather has been hot! Where’s this rain everyone talks about? 🙂

Michael
Michael
July 31, 2018 8:07 am

Andy/LF/pat
Just look up the data. There’s no need to make up stories 🙂
http://creastats.crea.ca/treb/images/treb_chart05_xhi-res.png

Barrister
Barrister
July 31, 2018 7:32 am

It is last minute and informal but if anybody else wants to join us at the Penny Farthing, in Oak Bay, today at 5:30 to share a pint you are welcome.

patriotz
patriotz
July 31, 2018 3:06 am

No, unfortunately Toronto only fell for a few months a year ago, then started rising again.

“Mirza said they learned how dramatically the housing landscape had shifted when they found 11 similar properties in their Bedford Estates development listed well below the $639,900 they had agreed to pay. In some cases, identical houses were listed for $130,000 less.”

https://www.thestar.com/business/real_estate/2018/07/29/first-time-homebuyers-in-barrie-squeezed-by-falling-property-values.html

Barrie is on the edge of the GTA (end of the GO train). Such places are where crashes usually begin. Oakville is a good deal closer in:

https://www.thestar.com/business/2018/04/04/they-bought-their-prebuilt-homes-at-the-markets-peak-now-they-face-financial-ruin.html

Local Fool
Local Fool
July 30, 2018 10:51 pm

Andy7,

The Toronto market IMO, is experiencing the same phenomenon Vancouver did when the foreign buyer tax was moved in.

When Ontario introduced the Fair Housing Plan, contrary to popular belief, it didn’t “break the bubble”. The initial opening of the correction had already begun before FHP was introduced. Its implementation simply created a market shock, driving activity sharply lower. Then the drop halted, and there was indeed a rise in sales which our learned friend below is referencing – and it looks promising until you realize it’s comparing against last year’s market shock when activity virtually froze solid. The real numbers continue to under-perform compared to historical trends, in fact in some areas, quite dramatically. Sales activity is still falling, prices are once again flat-lining or declining (depending on area), and in virtually all cases, inventory is moving higher and higher. This is not a market in a state of recovery.

When Vancouver introduced the foreign buyer tax, it had a similar effect. After a while, activity did come back up, and in fact, so did prices – they even edged out a new peak. But the correction in VanRE was already beginning 5 months before the tax was even mentioned.

So in both cases, markets bounced back from the shock, but due to their preexisting, underlying weakness, are now faltering again. This is the same underlying weakness that LeoS refers to in the Victoria market. Vancouver speaks for itself: the correction is getting larger and larger and metastasizing into all segments of the market. If it continues, panic is inevitable as the most over-leveraged sellers rush to undercut each other to get out. Toronto is inching towards the same place.

The RE industry and people like Michael will always find a way to tell you what’s happening, isn’t really what’s happening. All I can say to people – don’t listen to them. And don’t listen to people like me, either. Our info is collectively worth exactly what you paid for it. Go have a look at the data yourself. Understand what it means, what it doesn’t mean, and how it can be manipulated. There’s a lot of obfuscation out there to what are very, very simple and timeless principles. The old adage applies: K.I.S.S.

Ian
Ian
July 30, 2018 10:31 pm

Barrister,

I have been talking to myself on the last post all day now…

See you tomorrow at PF.

James Soper
James Soper
July 30, 2018 10:22 pm

It’s weird that inventory is still building when it should be dropping no?

James Soper
James Soper
July 30, 2018 9:10 pm

In other news, oil’s coming to the coast more dangerously because of trans mountain pipeline delays:
https://business.financialpost.com/commodities/oil-by-rail-reaches-record-levels-in-may-on-track-to-rise-higher-still-amid-pipeline-crunch

Andy7
Andy7
July 30, 2018 8:39 pm

@Michael

No, unfortunately Toronto [prices] only fell for a few months a year ago, then started rising again.

Michael, I think that may be realtor spin…

“TREB sales are on track for worst year since 2008, it appears like. I’d guess they’ll wind up between 77,000-79,000 but even if they’re 85,495 (would mean 2nd half is 21.7% more sales than last year) it would still be the worst year since 2008” (twitter)

“Alternative headline: Sales dropped 11% year over year, the total was 7% below June’s 10-year average.”
– Steve Saretsky re: Toronto/ https://www.bloomberg.com/news/articles/2018-07-16/toronto-leads-canada-s-biggest-gain-in-home-sales-this-year?utm_content=markets&utm_campaign=socialflow-organic&cmpid%3D=socialflow-twitter-markets&utm_source=twitter&utm_medium=social

“Getting desperate now.”
– Steve Saretsky re: https://business.financialpost.com/real-estate/crea-reports-june-home-sales-down-10-7-from-year-ago-but-up-from-may?utm_campaign=Echobox&utm_medium=Social&utm_source=Twitter#Echobox=1531752032

“Toronto Real Estate Records a 10% Price Drop Courtesy of Higher Interest Rates”
– Ross Kay

“We are seeing a few sub $500,000 reno ready single detached in #TOre now. Didn’t take long.”
– Ross Kay

Wolf
Wolf
July 30, 2018 8:33 pm

@LeoM & LF “When foreign purchasers stop buying our treasury bills/bonds it means the interest rates must be increased to attract buyers.”

Or if/when China stops buying American treasuries in a trade war, pushing American interest rates higher and dragging Canada’s along with it.

So many different ways to blow down the same house of cards.

Introvert
Introvert
July 30, 2018 6:25 pm

I’m going to miss those foreign buyers.

Barrister
Barrister
July 30, 2018 5:59 pm

Tomorrow at the Penny farthing at 5:30 works for me. See you there.

Michael
Michael
July 30, 2018 5:44 pm

Prices in Toronto, by far the largest RE market in Canada, have been falling for a year.

No, unfortunately Toronto only fell for a few months a year ago, then started rising again.

Leif
Leif
July 30, 2018 5:00 pm

@guest_46823

Tuesday works for me as I will be in town. Does 5:30 work for you guys? Leo are you coming as well?

I have seen you guys chatting about this now for a few weeks but no date/time set.

patriotz
patriotz
July 30, 2018 4:48 pm

LF, I’ll give you a hint as to the ‘when’ of the next correction

Prices in Toronto, by far the largest RE market in Canada, have been falling for a year.

Michael
Michael
July 30, 2018 4:02 pm

LF, I’ll give you a hint as to the ‘when’ of the next correction – when you see central bank ‘pause’ raising rates for a year or more (like ’07).
comment image

Canadian Mortgage Growth Plummets To The Lowest Levels Since 2001

and recall what happened to RE prices from 2002-2007…

Local Fool
Local Fool
July 30, 2018 3:51 pm

The BoC metric represents Canada in aggregate and the increased affordability on the national scale was entirely due to falling rates. However, it’s disingenuous to use that measure to argue that RE is more affordable in a particular market, or that it somehow implies that foreign buyers will be ramping up their home buying activity. Precisely the opposite is occurring.

Anyways. If you want to argue that FDI is the more important metric for RE, go for it. I’m glad you read Better Dwelling, too. I encourage you to read the latest entry – I’ll even post the link for you:

Canadian Mortgage Growth Plummets To The Lowest Levels Since 2001

https://betterdwelling.com/canadian-mortgage-growth-plummets-to-the-lowest-levels-since-2001/

Michael
Michael
July 30, 2018 3:25 pm

I’m just pointing out the FDI (the more important indicator 🙂 ).

Foreigners are starting to notice how cheap many Canadian assets are.
For instance, even our RE has better affordability than ten years ago (far more affordable than 30 yrs ago) as far as the BoC is concerned.
https://betterdwelling.com/the-boc-still-thinks-canadian-real-estate-is-more-affordable-today-than-in-2008/

Introvert
Introvert
July 30, 2018 3:08 pm

but we can likely expect that foreign buying activity (which mainly comes from Americans in Victoria)

Who knew that there were so many Americans living in Victoria that are to blame?

Local Fool
Local Fool
July 30, 2018 2:25 pm

Net foreign direct investment has turned positive for the first time in 3 years.

Foreign Direct Investment has got nothing to do with the article I posted or LeoM’s expansion on it.

I’m talking about foreign buyers purchasing public securities, in other words, assets that are held by the public – this includes stocks or bonds. Another term for this is Foreign Portfolio Investment. If foreign investors don’t want these kinds of stocks and bonds, we have to sweeten the deal for them until they do (ie – raise rates). This has potential relevance to our housing market, especially if our next door neighbor (the US) is paying a better rate.

On the other hand Foreign Direct Investment refers to foreigners buying out private interests in another country – for instance, China’s Anbang Insurance purchasing Vancouver based Retirement Concepts, Walgreen’s buying out Shoppers Drug Mart or any other similar type of transaction. That activity does not effect rates or mortgages, and is completely distinct from purchasing public securities.

Michael
Michael
July 30, 2018 1:54 pm

If foreign buying of the country’s bonds and stocks continues to slow then its currency may need to depreciate…

Net foreign direct investment has turned positive for the first time in 3 years.
(also note that our currency is up since it hit 68 cents in 2016)comment image

LeoM
LeoM
July 30, 2018 12:59 pm

Local Fool; good link. When foreign purchasers stop buying our treasury bills/bonds it means the interest rates must be increased to attract buyers. As I’ve mentioned on this blog previously, our government sells our debt, as treasury bills/bonds, at auction to the lowest interest rate bidder. When there are no buyers at the low interest rate the government is offering, the government is forced to offer a higher and higher interest rate until someone buys our debt as treasury bills/bonds. This means with 100% certainty that interest rates will continue to increase for mortgages, unless foreigners start buying our debt at lower interest rates, which is unlikely.

NE14T
NE14T
July 30, 2018 12:59 pm

“Foreign Buyers Drop by 89% in Victoria“. This is fantastic news! As a young professional trying to buy a home in Victoria I am thrilled by this. That is all good Sir.

Local Fool
Local Fool
July 30, 2018 12:29 pm

Not only are foreign buyers losing interest in Canadian real estate, they’re now losing interest in a more important way – our securities.

https://www.theglobeandmail.com/investing/investment-ideas/article-reality-bites-for-canada-as-foreign-hunger-fades-for-its-securities/

What does that mean?

“If foreign buying of the country’s bonds and stocks continues to slow then its currency may need to depreciate or its borrowing costs rise to attract the foreign investment that has bolstered consumption in recent years.”

Barrister
Barrister
July 30, 2018 10:52 am

Thank you Patriotz for the answer (rather a mind numbing read). One word of caution, the vendor is jointly liable for the tax if not paid by the purchaser. It seems to me that this would impose a very high duty of care upon the vendors solicitor to investigate the purchasers status and ensure that the tax is paid. It makes me wonder whether this whole issue of buying through numbered companies, for the purpose of avoiding the FBT is actually a urban legend.

once and future
once and future
July 30, 2018 10:39 am

That we won’t know until BC sets up their beneficial ownership registry.

I am all in favour of CRA and the RCMP having access to this info, but if it is made publicly searchable, we are just giving everyone’s privacy away to black-market identity-theft databases around the world.

Hasn’t anyone learned from the last two years? Data scraping is embarrassingly easy.

patriotz
patriotz
July 30, 2018 9:26 am

A foreign corporation is a corporation that is one of the following:

  • Not incorporated in Canada, or
  • Is incorporated in Canada but is controlled directly or indirectly by one or more foreign entities (see section 256 of the Income Tax Act (Canada) for further details), unless the shares of the corporation are listed on a Canadian stock exchange.

https://www2.gov.bc.ca/gov/content/taxes/property-taxes/help-centre/glossary#foreign-corporation

Barrister
Barrister
July 30, 2018 9:15 am

Patriotz:

I read your reference but can you direct me to where it states that a company incorporated in BC is liable to the foreign buyers tax. I see where they ask for the citizenship of the directors but the directors of the corporation are often not the shareholders who own the corporation. I am not saying you are wrong but I am looking for the legislation that sets out share ownership specifically attracting the FBT.

Thanks

patriotz
patriotz
July 30, 2018 8:53 am

the alternative explanation is that those wealthier buyers have moved to purchasing properties inside numbered companies or some other loophole

“Loophole” generally means a legal way to get around a rule. In fact the FBT has always applied to foreign owned or controlled corporations, and when a corporation buys property the directors must be identified.

Not claiming this isn’t happening, but it would be outright tax fraud, not a loophole.

https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/file/tax-return-guide

Local Fool
Local Fool
July 30, 2018 8:39 am

House prices aren’t just slipping in the UK – this is global

House prices are hitting a wall almost everywhere.

Take Australia. The land down under has long had one of the most expensive property markets in the world. It barely winced during the 2008 financial crisis, despite carnage everywhere else. And yet now, it finally appears to be losing steam.

Australia is far from alone. Hot global markets everywhere are slowing down. Canada is another good example. And now we’re seeing it happen in the US as well. As Bloomberg reports: “The US housing market – particularly in cutthroat areas like Seattle, Silicon Valley and Austin, Texas – appears to be headed for the broadest slowdown in years.”

And what’s happening around the world now? That’s right. Interest rates have stopped going down. And in some cases (notably the US) they are rising. As a result, there’s not much fuel for prices to go higher (rents are as high as they can go without a real boost in wages), and if borrowing costs rise, that will drive prices down.

In short, property (alongside bonds) is one of the asset classes that has benefited most from the decline of interest rates in recent decades. And now that’s reversing.

https://moneyweek.com/house-prices-arent-just-slipping-in-the-uk-this-is-global

Local Fool
Local Fool
July 30, 2018 8:26 am

Nice work Leo.

the alternative explanation is that those wealthier buyers have moved to purchasing properties inside numbered companies or some other loophole and aren’t being captured as foreign buyers in the provincial statistics.

Some people are now saying they’re all simply waiting on the sidelines, which I personally don’t believe. I stand to be corrected by the data, but I suspect that the registry data is not going to indicate legions of people now buying homes with numbered companies.

Rampant foreign buying, launderers and cheats are all symptoms of unabated capital flight, lax/unenforced regulation and/or a rapidly rising RE market. Victoria is far too small to be much of a destination to have any of that in significant numbers, and the RE market momentum that attracted so many of them to southwestern BC is essentially gone. Greener pastures if anything, would be my guess. And no, that doesn’t mean Montréal. 🙂

Barrister
Barrister
July 30, 2018 6:08 am

Ian: A pint at a pub is a good idea this week; how about the Penny Farthing in Oak Bay?
Does Tuesday or Wednesday work for you?