Nov 26 Market Update

WB isn’t invested in ETFs himself. His problem or rather THE problem with actively managed money is… well…. just see the Wolf Of Wall Street….

I’m not saying luck doesn’t play a part but it simply does in life anyway. It’s probably luck that I was forced to sell a good chunk of AAPL before it sunk to its present lows (in order to prevent financial ruin). I wouldn’t have sold it otherwise that’s for sure. Can’t get lucky with an ETF though. 🙂

I have to agree with Patrick that it is difficult to navigate the rise and fall of real estate base from the rise and fall of interest rates. IMHO the likely hood of a housing price drop is low if any in the near future, because current mortgage rate is relatively cheap compare to historical average, and Victoria currently is not in a mass unemployment down fall.

higher end new condo rentals are stacking up…

How would high end condos have anything to do with the the average first time buyer?

It is like saying that filet mignon are stacking up at the market therefore the price of regular ground beef must drop soon.

247 Government St and a high end town house on Dalas both have sold signs on them today. Looks like some people are still optomistic about the market picking up in the spring.

Patrick,
CHEK news tonite says higher end new condo rentals are stacking up according to CMHC guy. Once they are soon forced to drop their prices then the chain reaction kicks in. Few could afford to have new presale rentals sit there empty month after month.

Josh, are you prepared to wait 7 years for prices to finish falling as a result of rate hikes? And 4 years to wait for prices to START to fall from Rate hikes. That’s what history (1978-1985) tells you are the waiting periods.

If you’re planning to “wait”, both history and the squiggled red-line predictions at the end of that graph you posted tell us that you’re going to need to wait 7 years to see the effects of rising rates on making prices fall. And waiting shorter than that will have you losing money. The best thing you could have done in 1978 when rates started a massive rise was to BUY. Worst thing you could have done was to buy in 1981 when rates had peaked and started to FALL.

The strategy of waiting out an interest rate rise, and then buying when rates started to fall would have been the only possible LOSING strategy someone could have had in Victoria since 1973. It would have you buying in 1981 with peak prices when rates peaked, and then losing money 3 years AFTER the peak.

There was a huge rise in interest rates in the 70s. From 9% rate in 1978 to 22% in 1981. During that incredible 13% rise in interest rates, what would you think Victoria prices did? Dropped? Nope… they doubled… Victoria Prices went UP, in fact doubled from $63K in 1978 to 1981 $126k.

Then rates fell massively, from 82-85 , from 22% to 10% and what do you think happened to Victoria house prices? Went up? No, dropped Victoria prices fell 25% along with the falling rates. From $126k to $93k.

The drop in house prices in the 80s occurred AFTER the rise in rates, and during a massive fall in rates. So for a guy like you that plans to wait it out, if you want history to be your guide, you can’t wait until rates start to fall, you gotta wait about 4 years after that, while they fall. Total waiting time was 7 years. Your posted graph predictions has 7 years of waiting as well. And the net result of all this waiting? You could have bought at $63K when rates started to rise in 1978, and been up 50% when all was done and prices troughed in 1985.

Interest rates in Canada, 1971 to present
https://www.ratehub.ca/csv/boc.csv

Victoria house prices, 1973 to present
https://www.vreb.org/media/attachments/view/doc/ye782017/pdf/Annual%20Summary%20of%20Single%20Family%20Sales%20from%201978

p.s. I hope LeoS can create a graph from 1973 to present, based on these two indices, Victoria house prices, and mortgage rates in Canada, as represented in those two links above. That will tell the tale of the waiting game outlined above.

Weren’t you heavy in APPL

Was in my cash account but that had to be liquidated along with my TFSA to keep the building going. Thus the rebuilding. I still have AAPL in my RRSP though…

Greater Vancouver has just recorded a whopping 46% drop in home sales for November, YOY.

LF,

Latest consumer numbers are down, house sales down,debt levels are up. The new year will bring much pain. It’s the business cycle doing its natural thing. Deniers will be severely roasted and many will quit posting as they will be so shook at what they let slip away.

This is because I don’t think prices will fall more than 9% if rates rise 1%.

Well, I do. Prices are flat in the first year of barely higher rates and they’ve only just started to go up. Furthermore:

If you’d bought a year ago, you could have…

Ah yes, the wailing cry of the heavily leveraged bull. “Well if you could have just bought in 20xx, my god you’d be rich!”. Spare me.

Greater Vancouver has just recorded a whopping 46% drop in home sales for November, YOY.

I keep warning, unless this reverts in a big way and fast, the market would appear to be in serious trouble. Like always, people covet that which is rapidly rising in value; conversely, they don’t covet that which is stagnant – and certainly not if it’s declining in value.

All the apparent wage growth, immigration, and touted “desirability” somehow doesn’t seem to be helping. I wonder if these things were symptoms rather than causes? Perhaps it was excess lending both foreign and domestic? Haha, what a concept.

“Ya well eff off, bear boy. Sellers in Vancouver aren’t, and won’t sell at lower prices”.

Actually they are, most especially in the higher segments. But that’s also spreading downwards, and outwards. On the whole, there has been a mild decrease in valuations. But like every other RE market, sales are a leading indicator of price movements. If there aren’t enough buyers willing to pay the price, and for long enough, the prices must fall. And yes, it actually is that simple. 🙂

When the excitement and enigma is gone, you’ll see this mess for what it is – exorbitantly overpriced shelter bid up by those who were convinced beyond any reason, that it was different this time™.

Oopsie daisy…

Josh: We want the wind to be taken out of the sails of rising prices and rising rates are a direct way to do that. Is that so difficult to understand? Why do you think I’m waiting?

Yes, that is so “difficult (for me) to understand”, because a rate rise of 1% would need to make house prices fall more than 9% for that “I’m waiting” plan to pay off.
This is because I don’t think prices will fall more than 9% if rates rise 1%. First of all, lets make sure I have the premise understood. You are waiting for mortgage rates to rise, so you can then buy a house and sign up for a big mortgage. Your hope is that the price has fallen on the house because of the rising rates.
Let’s have a look at the numbers on that. Home-gamers can follow along at this mortgage calculator https://www.scotiabank.com/mortgage/payment/en/payment.html with rates taken from here http://www.mortgagearchitects.ca/

Assume you’re buying a $800K house with $100K down.
Today, you’d borrow $700K . The payment would be $3,500 per month (25 year period, 3.49% 5-year rate).
But you wait, and your dream comes true. Rates rise 1% in the next year. If you still expect to pay $3,500 per month, you can only borrow $630K ( at 4.49% rate) and so with your $100k down payment you could buy a $730K house. That would be a 9% fall in house prices that ($800 to $730k) you’d need to see to break even.
If you’d bought a year ago, you could have bought a $860K house for $3,500 per month mortgage, because rates were 0.75% lower. So you’re already behind in this “waiting game” (as you can only buy a $800k house for $3,500/month), and your next hope is that you can buy a house for $730k if rates rise 1% for that $3,500 per month.

Yes, that is difficult for me to understand.

I rented my downtown 530 sq/ft unit with no parking in 2012 for $1,175/month. Had 11 applications. I don’t remember begging anyone.

Now, now. You’re contradicting FHawk’s News’ predetermined narrative.

When you have a good tenant in, a lot of non-commercial LL’s don’t do annual increases in the rent. They simply correct to market when that tenant leaves. If vacancy control is applied, then those same LL’s would be nuts not to do annual increases

Spot on.

Check these IG ads from the developer of Topaz “20% off for a limited time only.

I’ll give you 30% off one of my condos, but I’ll set the price.

Check these IG ads from the developer of Topaz “20% off for a limited time only”.

https://imgur.com/a/GiCBgv8

Same developer redoing the Pandora Medical Arts Building.

As I said a while back, too much meddling by the government is a bad idea. Vacancy control will only create slums and super expensive new rentals. Stupid stuff… this only benefits those that need cheap rent and don’t mind renovating their rentals themselves…. or don’t mind bashed up walls, stained carpets and peeling paint.

Dad: It seems that he is not aware that upon turnover, a landlord can charge whatever the market rent is….vacancy control is a terrible idea.

Hey Dad. For the record, of course I am aware that rent controls don’t currently apply to times of vacancy. You can refer to my post about the recent 7.5% YOY rent increases.

It seems you and I finally agree on one thing … (proposed) “vacancy control is a terrible idea”. I expect the GreeNDP and their one-sided rental task force to introduce it anyway. If/when that happens, will you still laugh when I call it Soviet-era price control?

I had not heard of it but it sounds like it could work (Vacancy control)

Think of the existing rent controls, but broader. This is a proposal that makes it so the rental rate is tied to the unit itself rather than the tenant. That means when the tenant leaves, the LL can only raise the rent by the specified amount allowed (CPI I guess), rather than to whatever the current market rate is.

The idea here I think, is to discourage renovictions. The problem is, renovictions on the scale they’ve been occurring are one symptom of (IMO) a housing bubble; these discussions tend to resurface in some jurisdictions whenever there is a bubbly market. As this bubble deflates, people won’t be renovicting very much as housing is no longer turning into blocks of gold overnight.

Rent control carries its own issues, but vacancy control is IMO, kind of nuts. There’s the usual “rental units wont be built, LL’s won’t rent out their suites” arguments, but the more immediate problem is how existing LL’s would respond.

When you have a good tenant in, a lot of non-commercial LL’s don’t do annual increases in the rent. They simply correct to market when that tenant leaves. If vacancy control is applied, then those same LL’s would be nuts not to do annual increases – not to mention the pre-existing issues I mentioned above.

This is all hypothetical of course, but the concerns do make intuitive sense. Of course if prices were to fall, then the consideration changes, as it’s kind of predicated on a continually rising market.

I haven’t seen a listing like this before – is this common at all? Just curious.

Not common here for residential. More common for vacation properties.

I am curious (but not very) as to how they are going to register the basement suite’s title?

I presume with % owned as tenants in common and separate rights agreement. Lots of precedents out there.

This could make an interesting day with the bank trying to place mortgages without joint liability.

You may not be able to get a mortgage as easily and it will likely be .5% to 1%+ above the best available market rates. Co-ownership agreements address mortgage default and generally include a ‘right of first refusal.’ This means one owner wants to sell their interest in the property and the other owner(s) has the opportunity to purchase that interest at an agreed upon price (generally market value). The bank can still foreclose.
https://www.vancity.com/Mortgages/TypesOfMortgages/MixerMortgage/

< Patrick, heard of vacancy decontrol?<

I had not heard of it but it sounds like it could work

taxing can be good by reducing wealthy land owners from holding too many properties and monopolising this small city .. Unfortunately, the ones writing the laws are the wealthy land owners. Taxes ends up as cost for commoners and the less fortunate ones.. to fix the problem .. they should increase tax base on the number of properties owned. But then again .. this stifles growth and we will become a crumbling city with no one to build … history repeats itself . .. houses seems to build in different eras .. only during times when economic booms happens

the debate about taxing more to ensure affordability for less fortunate ones or allow trickle down effect with no regulations.

One is having reduced growth and the city can’t provide enough housing for the growing demands of rights to shelter… which cause more public outcries to solve housing crisis ,… result .. the bottom citizens suffers

The other one is allow uncontrolled growth… growth is good…,initially, some people gets a boost of wealth.. the less fortunate gets forced out .. public outcries for solutions .. but uncontrolled growth in a confined space with limited resource is like cancer — the host will eventually die. Result.. the bottom citizens suffers

Fortunately.. if you live long enough .. like another 50 years.. you will see populations growth reversal .. first world countries will have more old people dying off and the current generations wont be able produce enough offsprings due to affordability .. work force will be replaced with robots . transportation will be automated and people will start to migrate out of cities due to increase of automated transport speed .. housing crisis solved.. too bad many dies in the progress of progress

i dont have solutions … i just here to make pointless statements

Now with the NDP cap, he would have to answer “I may have a shortfall if rates rise and my mortgage payments rise, and can only raise my rent up to the cost of inflation”

No professional rental unit developer would put themselves in a razor-thin situation like that. Any amateur that does that should have known the risks and has none of my sympathy. Does your heart seriously bleed for landlords that relied so heavily upon that extra 2% increase?

I would expect fewer rental units to be built, because who wants to build a product that has a built-in cap on revenue, and no cap on expenses?

Less wannabe RE tycoons snapping up properties to rent them out at ridiculous rates is a good thing. Purpose-built rental apartment buildings still make sense.

I am curious (but not very) as to how they are going to register the basement suite’s title?
This could make an interesting day with the bank trying to place mortgages without joint liability. My practice was not in real estate but this smells like the sort of mine field that a lot of lawyers would simply refuse to handle. Nobody needs this sort of potential E.& O, problems.Most people dont really appreciate that with joint ventures liability to third parties attaches to all the members of the joint venture. You can limit liability to the asset by putting title in a corporation but then you lose the principle residence exemption.

I am going to stop writing because i am already up to about a half dozen problems with this. Makes for a nice law school exam question.

She can make whatever choices she wants and always get my love but I’m only going to incentivize those options that I think are best for her.

Yes, I view it as a family investment. I also don’t view paying for higher education as a gift either, but as an investment made in the best interests of my child which requires them to apply themselves and not waste it.

How about the outrageous rental increase cap the NDP are proposing? What are we, the Soviet Union?!

Ya, what is it with those hippy-dippy NDP? What are we, a province that wants homes to be lived in!? Next they’ll be implementing policies to lower homelessness rates. PFF.

So how does this work? What if you don’t get along with the person who purchased the basement suite (or vice versa). I haven’t seen a listing like this before – is this common at all?

The area around Beacon Hill Park has had a number of basement suites for sale. I don’t understand it. Buying someone’s basement is super unattractive to me and I’m sure it’s no fun for the seller either.

It is astonishing to believe that governments thinks that increasing taxes on people who are trying to build rental units

What the hell are you talking about? Are you getting mad about an imaginary tax? Unsurprising if you are, that seems to be half of conservative arguments.

It is astonishing to believe that governments thinks that increasing taxes on people who are trying to build rental units

Increasing what taxes?

The best way to create new rental units is to offer people incentives to bring new suites onto the market.

The best way to encourage the building of purpose built rentals is to bring RE prices down. This increases the rental yield making rental properties a more attractive investment.

@guest_52700

Market timing generally fails. Diversify and invest for the long term.

Stayed charges can be brought back to court at any time.

Only within one year of being stayed. Very rare and usually only if new charges are brought against the accused.

@LF: “Sometimes governments get it right – marginalizing cigarette smoking is one example”

In fact, governments generally did nothing to discourage cigarette smoking, raising the tobacco tax cautiously to avoid depressing revenue. But now everyone knows that tobacco kills, the government promotes the smoking of hashish instead, despite the known role or marijuana as a cause of both motor vehicle accidents and, in adolescents, schizophrenia.

@guest_52484
“So, that’s in a class that most people can’t afford”

1/2 acre and a $1 million build for a total of 2 milllion!!! Of course most people can’t and shouldn’t be able to afford that. That’s luxury. People need to get used to duplexes and condos. That’s the new reality. No one has a god given right to a Vancouver downtown condo or a detached Victoria core house.

Unfortunately, it is going to be hard (impossible?) to fix the many factors that have lead up to the affordable housing crisis.

Politically hard. The problem is the commodification of housing, abetted by tax policies and subsidies that encourage people (mostly local, but also foreign) to put their money into RE, rather than productive investments. If RE were treated the same as any other investment the problem would disappear. What’s stopping this is that so many Canadians have bet their financial well-being on their RE holdings. We have some excellent examples here in this forum.

You can’t tax your way into prosperity

There also needs to be some redistribution of wealth so we can all share in the prosperity. The gap between top and bottom income earners is too high, and much higher than it has been historically. No one is that indispensable and no one’s life energy is worth that much more than another’s. We are all human.

However, I think government interventions can go too far and make it unappealing to be a landlord. It is still essentially a private business and the landlord takes the risks associated with running it.

Unfortunately, it is going to be hard (impossible?) to fix the many factors that have lead up to the affordable housing crisis. I think a big issue is failure to build rental housing for 30 years (although much of those were leaky-condo years, so not entirely a bad thing). This is also like the failure to train physicians and set up collaborative care teams, leading to a family physician shortage now. An ounce of prevention is worth a pound of cure, but that’s not how governments usually work.

Robin: I’ve already written Carole James and John Horgan several times to show support for their multitude of new taxes because I’m sure all they hear is the backlash from enraged property owners.

That don’t impress me much. I’ll wait until you buy your house, and you tell us that you’re still writing letters to Carole James telling her to keep at it, more taxes to keep lowering property values more. Until then, its just your self-serving money issue, and kudos to Carole James and John Horgan for not bothering to reply to you.

You can’t tax your way into prosperity.

I agree completely. I would also agree with the notion that the route to prosperity is through innovation and production, not selling pieces of land back and forth to each other at ever higher prices. The latter eventually impoverishes an economy, makes it noncompetitive, reduces its ability to weather recessions, and contributes to excessive social polarization.

Regardless of whether people believe taxes are inherently good or bad, I don’t think most people would agree you can “tax your way to prosperity”. I suspect the line of thinking is taxation and other policy tools are ways to encourage or discourage certain types of social and/or market behaviour. Sometimes governments get it right – marginalizing cigarette smoking is one example. Other times of course, they don’t, which is what people tend to remember.

Hate to spoil a great conspiracy theory, but you do realize that the money-laundering charges have been dropped?

Stayed charges can be brought back to court at any time. Wouldn’t be surprised they found out some high level people were on the take and they are covering it up until they get all of them. Those currently charged may be getting future plea deals. Eby will dig deep.

I think the main problem is buyers are not organized together to share information and strategy because we’re supposed to be competing against one another.

Sounds like a Maoist rebellion. Also sounds like it has zero chance of working precisely because of what you said up there ^

Maoist leadership: “No buying property for 2 YEARS! No exceptions! We will tank the market and show those owners what’s what! BE STRONG COMRADES!”
Maoist rebels to themselves: “Ok so I guess I’m buying in 1 year and 11 months.”

Big difference between being dropped and stayed.

Best of luck to you with the buyers strike…..just let me know when the strike is ending so I can jump in at that time.

and they can build a lot more rental housing a lot faster than they can build houses.

Maybe in theory, but has this ever happened lately?

I’m beginning to strongly feel we should start our own support group and petition other prospective buyers to wait out the sellers as long as possible.

What you’re describing is essentially HHV.

Me to my daughter if she gave me any grief about such an agreement:

The kid’s reaction depends a great deal on the relationship one has with him/her.

So you will try to evict your kid from their condo? Like I said, crappy life. Also completely controlling! If you want to support them in their life don’t give them a condo. Let them start living their life on their own. Experience some self sufficiency. If they can’t work because the study is too intense then give them a rental budget that makes financial sense. I lived with (at one point) seven people in a three bedroom apartment in Ottawa and survived just fine. I appreciated the extra cash for going out and spent most of my time at the campus anyway. I found Max, who lived in the back stair case landing a very interesting fellow!

I always advised parents to fully mortgage a money advanced to a child for a property including a number of the terms and conditions referred to hereunder by others.

How would this help with the current common law structure in BC? The common law partner would still be entitled to the appreciation in the condo which seems to be the idea behind buying a kid a condo versus having them rent.

You need a co-habitation agreement and I am sure your kid will love……….”here is a condo, but you need sign a co-habitation agreement with any romantic interest that moves in.” Kid might accept it but it will cause strain for sure.

Hate to spoil a great conspiracy theory, but you do realize that the money-laundering charges have been dropped?

I haven’t looked into this specific case, but money laundering by nature is a pretty slippery activity. In so many cases it’s not easy to prove one way or another, as the “hockey duffel bag” example is probably an outlier in terms of how this activity manifests.

I don’t think we’ll ever know to what extent money laundering has effected BC RE. Probably some, but that’s nothing more than intuition. What isn’t intuition is the sudden and dramatic rise in fentanyl deaths in the province, which clearly does have links to the Chinese drug trade. Would an unmonitored RE market be an ideal place to move and clean that money (for the money that stays here)? Sure it would.

To me the issue isn’t arguing “yes it’s caused a bubble” or “no it hasn’t”, it’s more that I don’t want people to live in a place with that kind of activity goes on unchecked. It’s shameful, embarrassing, and the real human cost is absolutely appalling.

td2121: Just finished reading last half of the posts re Leo’s last Market Update, no one concerned that the pricey BC real estate market is supported by criminal activity???

Hate to spoil a great conspiracy theory, but you do realize that the money-laundering charges have been dropped? Or will you keep it going by theories as to why the charges may have been dropped?

https://www.cbc.ca/news/canada/british-columbia/money-laundering-charges-stayed-1.4923861

“In a written statement, Public Prosecution Service of Canada spokeswoman Nathalie Houle said the charges did not meet its prosecution test, which stipulate there be a reasonable prospect of conviction on evidence likely to be available at trial and it would best serve the public interest.”

I found most of that “great” Global article to be speculation, short on hard facts.

@Barrister
“but the most common new build is not 6000 sq feet but somewhere around 2500. (you need to stop driving in the Uplands).”

There seems to be some kind of rule that you don’t build a new house that costs less than the lot it’s built on. With lots in Oak Bay averaging, I would guess, a million dollars, that would mean 2500 square feet is likely on the lower end of the range for most new builds.

That certainly is the case in the Estevan area, e.g., the 11 new builds and major rebuilds on Lincoln Road during the last five years. At least three are six thousand feet or more, and the rest are pretty certainly over 2500.

Wolf: we invested our down payment and ended up with a 76% and 47% year-over-year return on our stocks in 2016 and 2017

Are you the “Wolf” of Wall Street?

A share of appreciation is an equity position. You can’t have it both ways.

No, a shared appreciation mortgage is a legal mortgage in which the lender agrees as part of the loan to accept some or all payment in the form of a share of the increase in value (the appreciation) of the property. Typically seen only in private mortgages/loans.

If the child really owns the property they can do what they want with it. That also goes for an “agreement” not to have a partner move in.

You are substituting your opinion on how things should be vs. what you can do legally and how you can consider managing risk, which was the question posed by Marko. If you have a mortgage you legally own a property, but it is subject to mortgage terms and conditions including things like not renting it out without the mortgagor’s permission.

The adult child can legally own a property and you can legally contract with them on conditions, including occupancy, in exchange for providing financing/equity. It would be fool-hardy not to imo given the Family Relations Act issues that can arise and the plan being to assist your child and not create conflict for them in future. You can always forgive a condition, you can’t impose them without agreement afterwards.

we invested our down payment and ended up with a 76% and 47% year-over-year return on our stocks in 2016 and 2017

Betting your nest egg on stocks with returns that high seems wildly reckless. But congrats, I guess.

@ Robert

What is your current electric consumption for the year or every 2 months?
How many Litre of oil or how much does it cost to heat your home currently for the year?

Use documentation from parents setting out assistance as a callable, repayable loan, promissory note or private mortgage to the child with compounding interest and a share of appreciation

A share of appreciation is an equity position. You can’t have it both ways. If the child really owns the property they can do what they want with it. That also goes for an “agreement” not to have a partner move in.

If you want to control the property, own it yourself.

@Wolf
“we invested our down payment and ended up with a 76% and 47% year-over-year return on our stocks in 2016 and 2017 ”

Those returns are insane. Luck, insider trading, or phenomenal skill?

AZ,
If Leo can devise an ignore button then there wouldn’t be a need. Only defending my reality posts versus the bubble deniers who speak out of both sides of their mouths.

Introvert ‘That suggests to me that any price decline wont’t be too severe.’

Seriously, the more you comment on this blog, the more ignorant you sound. You should stop.

Ouch!

Victoria rents up 7.5% YOY.
https://www.timescolonist.com/real-estate/greater-victoria-vacancy-rate-rises-slightly-as-rents-jump-7-5-per-cent-1.23512403

On a $2,000 rental that’s $150 extra per month, $1,800 extra per year.

Is this why the bears here are so gnarly?

From the article..
“Greater Victoria’s average rent climbed by 7.5 per cent. The turnover in Metro Victoria was 18.1 per cent in 2018, exposing roughly one in five units to current market-rental prices. Most new households are choosing to rent rather than buy, CMHC said.”

Just curious what the plan is when his or her girlfriend or boyfriend moves in for 24 months? The 2013 makeover of the Family Law Act pertaining to common law is interesting.

Use documentation from parents setting out assistance as a callable, repayable loan, promissory note or private mortgage to the child with compounding interest and a share of appreciation, which can be forgiven at a later point if the parents wish. Agree in writing with your child that any future partner needs to sign a cohabitation agreement prior to moving in.

If I pay $4,000/month for a mortgage plus property tax, plus $1,800/month for two kids in daycare, plus food, gas etc. I now have zero margin for error.

I don’t understand the math, or maybe I have something wrong. A couple needs about 180k to qualify for a mortgage of $4000 a month. If this is the case, even after they have paid 6k in mortgage and daycare fees (which are deductible) they have at least 6k after tax to pay the other bills using their dependent deductions. Not really a hardship situation median family in Victoria lives on.

One of the more creative variations on “real estate is always goes up”.

It goes down sometimes. But Victoria house appreciation over the long run is over 3.8% inflation-adjusted.

Also, the concept of “paying a price to win” is a valuable one, IMO.

3) Our strata council here in Mill Springs seems to be drunk on power.

Mill Springs sounded familiar. Turns out, we drove up there one morning in early spring last year, just to waste some time and get out of the city. Kids played at Deloume Park. The area was quite nice!

Glad you’re liking Island life, Grant.

For 30 year olds with two middle or upper middle class incomes these days that’s not putting some of your money into a house, it’s putting all of it. And I mean sacrificing a lot of things to do so as well beyond simply the down payment.

You have to make some sacrifices to put yourself in a position to get ahead.

buying an adult child a condo

Just curious what the plan is when his or her girlfriend or boyfriend moves in for 24 months? The 2013 makeover of the Family Law Act pertaining to common law is interesting.

lol Hawk. Must be a fun place in your head. Too bad you cannot charge to enter,

Sorry to interrupt your price slashes or below assessment work. Please get back to it.

BC casino Money laundering charges stayed. No info on why and will not be coming forward because of operational privacy. NDP not happy. Political blow for them I guess.

https://www.bnnbloomberg.ca/one-of-canada-s-biggest-money-laundering-probes-has-collapsed-1.1175340

Charlie I have said for months the high-end stuff will and is coming down as well as all other stuff away from the core . I also said the benchmark core will come down between 5 to 10%. We are around 2% so far.

In the summer I posted that builders on high end stuff are suffering and having to cut prices.

I think core benchmark will be limited to 5% though. I expected by now to see more but the NDP spending and job creation in Victoria is keeping core benchmark stuff stable,

I also stated I would be happy to see some bigger cuts if they happen. I want to pick up acreage.

So gwac, are you saying asking/selling prices are beginning to come down ?

looks like this is re listing with a lower price. I see 1.7m from a discontinued listing. The higher end stuff is not doing as well price wise as the benchmark ones. There are bargains compared to last year out there at this price point and higher,

Looks like a nice place with a good price if you want to live in Victoria.

The listing is here: https://www.realtor.ca/real-estate/20149227/5-bedroom-single-family-house-110-eberts-st-victoria-fairfield-west

No, +48% is not reasonable, but it’s closer to the average gain over this period than +11%. If the assessment is say 30% off, then that’s $3k/year in extra property taxes. Adds up over a long period; I’d think they’d be motivated to contest an assessment that far off.

WO

No it was written by a real estate agent trying to market their property. Listing is gone.

up 48% from a sale in 2016 seem reasonable to you?

gwac,

I’ll quote the listing:

Amazing Value in today’s market, truly an outstanding Fairfireld Character home, currently assessed for over Two Million.

Must have been written by a bear.

Obviously assessments are approximations and should be taken with an error tolerance. This is way beyond a reasonable error tolerance.

It’s notable someone is asking only 11% more than they paid in January 2016 when the median SFH has gone up over 30%. Comes with a legal suite and looks pretty nice to me, but I’m no mansion connoisseur so what do I know.

that’s not putting some of your money into a house, it’s putting all of it

Robin, most of your description of your position is understandable to me. I don’t understand your statement above though. If you’re putting,as you say, “all your money into a house” then a minimum of 40% of what you pay ( in year 1) is forced savings )principle payment). Over the lifetime of your mortgage an average of 2/3 of the “putting all of your money into a house” is principle payments (assuming 3.49% rate on mortgage). Any principle payment you make is immediately saving you 3.49% yield after tax guaranteed. Which is better than any GIC or any other risk free investment. If you don’t buy a house you may end up “putting 2/3 of your money” into a GIC or stock ETF, yet you’re happy about that idea but not happy about doing the same thing with mortgage prncipal payments.

As you know, your kids don’t grow up inside a GIC, and your family might not like moving when your landlord says so. The rental market is tight and not getting better.

YeahRight, I’m not saying it’s wrong for others to stick to ETF investing. Dollar cost averaging applies to all investing by the way. I just make my own assembly of stocks so I can manage them myself. I actually don’t recommend stock picking to any friends who are not invested and point them towards CCP as well. I don’t want to be responsible for someone going all in on NIO or anything…. However, I have my own way that works for me and have proven many times here that I do in fact beat the market over the entire length that my bank tracks my performance. Maybe it’s a gift. I just think its the combination of awareness, willing to take reasonable risk, being able to stare down downturns, and being active but not too active. I invest in what I’m interested in or what I consume so I am inherently aware and interested in reading about etc. Take Tesla for example. The media simply repeats and regurgitates whatever attracts the most clicks so everyone thinks Musk smoked pot. Share plummet. If you actually watched the podcast he takes one toke, doesn’t inhale and it’s obvious he isn’t a smoker at all. A good time to buy and I did. The algorithms pay way too much attention to twitter…..

I also have a diversified portfolio spread across different industries, countries and somewhat optimized for the benefits of TFSA vs RRSP.

This is in my Portfolio:

US Index: XUU
Canadian Index: XIC
International-Developed Index: XEF
International-Emerging Index: XEC
Canadian Bonds: ZDB

They are all down now since when I started in August.

I say “YAY!”.

To me, this means they are now on sale and I can get more shares now, with my bi-monthly contributions, than I could in August.

Should I have waited and try to guess that in a few months the market would go south for my big lump sum in August. And let my money dry powder in the mean time?

Nah.

They have already given me little dividend payouts. And I will be getting future returns.

Always get in as early as you can, and in 10,20,30+ years hope to start cashing out at a peak market. Or not, the returns will still be good.

I’m not worried. I’m diversified, balanced and allocated.

So, yes, the majority of indicators say the near-term trend in prices will be downward. However, don’t fall asleep at the wheel.

Good advice.

Someone eager to get out? 110 Eberts just listed for $1.5m, 26% below assessment of $2.014m. Bought in 2016 for $1.35m.

In response Patrick, I’m not just interested in maximum monetary return, what I want is a house for my family. To try and paint me as some greedy investor is very inaccurate. Unfortunately the price to get that in today’s market vs. the market of 5 years ago requires a much much higher level of risk than a lot of first time buyers realize. I’m fortunate to have $200k saved up and am willing to wait things out a bit, I follow the market closely enough to feel comfortable with waiting right now. But the majority of those who may read your opinions and who get advice from other landlords, realtors or property-lusty older folks is that the meteoric rise in debt required over the past few years to get a mortgage has far surpassed the rise in incomes.

I hear all the time from those who already own, typically people who are 40 years old and up, how great it is to have a house in addition to investments and how we’re all missing out if we don’t have one. These are people who’s house has tripled in value since they bought it 25 years ago so I recognize why they say this. But then those same people also tell me things like “I don’t know how people these days can want to pay $4,000 per month in mortgage + property taxes, that’s just too much!” The reality is that at today’s prices and rates that’s what it takes to own a detached house, ~$4k per month. We don’t want to pay it but it’s the reality. For 30 year olds with two middle or upper middle class incomes these days that’s not putting some of your money into a house, it’s putting all of it. And I mean sacrificing a lot of things to do so as well beyond simply the down payment.

But simply giving advice that you’re missing out regardless of these factors is in my mind irresponsible. I know several young families that bought in 2016 and 2017 that are just struggling to make their mortgage payment every month but real estate always goes up and money will always be cheap so they trudge on. When I mention to them that interest rates may be going up they say “no, they wouldn’t do that to everyone, no one would be able to afford their house”. My belief is that most buyer’s knowledge doesn’t extend too far beyond the “real estate always goes up” part. I mean my own realtor last year cautioned me against quite a few houses for various reasons which I was thankful for but this year he was changing his tune and telling me things like “don’t worry about what rates will be at renewal, that’s 5 years from now”. Unfortunately I’m the one who will have to pay that increased rate which will greatly increase my payments on my huge mortgage. If I come off as a greedy investor trying to time the market so be it, but really I’m just trying to find a way in without locking myself into a mortgage that eats up all the monthly income I have and will ever have if rates go up.

I’ll finish with saying that if I or any other prospective buyer decides to rent and not buy, we’re not simply paying someone else’s mortgage. Obviously for some in this tight and expensive rental market it may make less sense to rent. But if you’re rent isn’t too high it would be far below the interest you would pay on a mortgage these days which means the amount you can save or invest will exceed the principle equity you’re “missing out on”.

Frank Victorian Your house buying argument should also consider the alternative of properly investing the $125k down payment.

There was no down payment in my example, so you just picked that $125k number out of the air. Let’s apply the minimum down payment. My example was $500k (which would have a minimum down payment of $25k) but you can scale it by any factor to get the house price you want. Minimum down payment on a $750k house is $50k. Knock yourself out by investing that $50k amount in the stock market.

Anyway, who said it was a house or a stock investment but not both? I have both. Don’t you? Ask 100 people with significant stock investment “do you own a house?” and likely 75% say yes. The National Post does a financial analysis for a family each week, and almost all own a house and have investments as well.

The average Victoria family has $1.1m net worth, from a combination of RE and investments. I’d still recommend a house as your first major investment, especially if you have a family.

@Robin

Why invest money now in something that is not likely to appreciate much over the next few years if I can grow my money more by investing it and possibly buy that same house at a lower price in 5-10 years before the next upswing?

Thanks for your comments. It is good to hear the perspective of a prospective buyer. If I were in your situation, I would do the same thing right now. However, I want to caution you that you won’t necessarily know the right time to jump in.

We didn’t buy after the drop in 2008/09 because prices didn’t go down here that much compared to the US. Then there was talk of rising interest rates which could have dropped prices, which still were double what they had been around 2001. Also when prices were flat, we had other things going on in our life, and there didn’t seem to be a rush to buy.

Suddenly in 2015 it was clear prices were going up but the market selection was poor. By the time we found something decent, we ended up paying about $150K more for our house in 2016 than we would have the year before, and it didn’t really “tick all the boxes”. I will say, though, that we had a larger downpayment than you do, so that made it an even clearer mistake on our part.

So, yes, the majority of indicators say the near-term trend in prices will be downward. However, don’t fall asleep at the wheel. I would hate to see you waste a decade in rent and still lose out financially like I did.

on buying house for your kids: It will become more common imo. Again, due to how available information is these days.

I have heard many folks talk about buying for their kids and seen some actually do it. For many it was both a way to help their adult kids and a way to benefit from rising RE prices.

If we see stagnant (let alone falling) prices for RE for a few years buying a place for your kids to use for a few years won’t seem like such a genius move without the capital appreciation component. I think stagnant (at best) prices for a few years is quite likely. For this reason I expect to see less people not more doing this.

But I’ll agree with you that there are families and situations where this probably makes great sense and has been super successful. In some situations it’ll probably continue to make sense even if capital appreciation is little to none.

time changed but this time salary cant keep up with increasing rates at 600k mortgages

when interest rate increase to 5% from 3.5% on 600k mortgages.. you have to pay a lot more .. that is from 2500 monthly to 3200 monthly .. dont think many family will be able to have salary increase of 700$ a month in a few years

They can’t open a TFSA until they’re 18.

My example was four TFSA contributions of 6000 per year for four years of an undergrad degree ages 18-21 or 19-22 and then left alone for 50 years. Most folks are 18 when they hit university or within that year.

@ WO

“Noticed a few new listings significantly under assessment:

2932 Henderson: assessed $1029.8k, asking $899k (-13%)
2342 Cranmore: assessed $1024k, asking $899k (-12%)

I suspect that the assessment on Cranmore is off. The house is livable but in the current market, the price is determined largely by lot value, and that lot backs onto Oak Bay Lodge, which, it is the hope of the new mayor of Oak Bay, will be redeveloped, which would mean greater height (more than four stories) and greater site coverage, which would lower the value of the adjacent property.

@ Patrioz,

Every time the government funds a new transportation technology – and it’s always been the government – there is someone attached to the old technology who objects. That doesn’t necessarily mean they’re wrong of course.

Investment by the Government of Canada in the Canadian Pacific Railway, was undertaken for political, not economic reasons: namely, to bring settlers to the newly incorporated North West territory (i.e., the prairies) before the Americans built railways into the area bringing America settlers who would demand annexation. Likewise, the Government funded construction of the Rideau Canal to provide means of mobilizing Canadian military assets in the event of an American invasion. In neither case, was the investment intended merely to usher in new technology. In both cases the objective was to defend the sovereignty of a very weak nation against a very powerful neighbor.

Investment by government in electrification of motor transport is quite different. It is simply a blunder. We already have a policy to reduce carbon emissions. It is the carbon tax, which is not only working but which according to the economists is the most efficient means to the desired end of reduced carbon emissions. However, it makes nonsense of a carbon tax if the government is then to interfere in the market economy with subsidies and incentives based on its own, generally ill-informed judgement of the best way to reduce carbon emissions.

But of course no one is going to object to the government paying them a cash incentive to buy the electric car they were going to buy any way. Well certainly, I didn’t object to getting $8000.00 out of my neighbors’ pockets. In fact, let me take this opportunity to thank all those who contributed, i.e., everyone, including those who cannot afford an electric car of their own.

About 40% of all your mortgage payments have gone to equity which is like forced savings

Forced savings that will span at least two decades (in most people’s case) into a historically strongly appreciating asset like Victoria RE is a very good plan.

It’s hard to have the same long-term discipline when it comes to contributing to TFSAs and RRSPs.

But if you are concerned and see inflation and higher rates coming – get some insurance and you can make a huge profit from inflation if it happens. Lock yourself in to a 10 year mortgage at 4.14% (vs 3.49% for a 5 year). Then you’ll look smart as inflation increases the cost of everything except your mortgage payment

Not only would inflation increase everything except your mortgage payment, but your mortgage principal would effectively shrink due to inflation. We must remember that inflation actually benefits the debtor during any period in which the interest rate is locked in.

Yet we have governments announcing their intention to transform the transportation system by the deployment of masses of taxpayers money.

That’s been going on since they built the Rideau Canal. Every time the government funds a new transportation technology – and it’s always been the government – there is someone attached to the old technology who objects. That doesn’t necessarily mean they’re wrong of course.

ce: Being a millionaire isn’t quite what it used to be.

I guess it depends on your starting point. If you’re broke the idea of becoming a millionaire sounds pretty good. On the other hand, if Bill Gates dreamt he was a millionaire he would likely wake up screaming.

Deb: I know many people on this blog never experianced high interest rates but they do happen.

Yes, but they don’t happen in isolation. If they happen, your income is going up, the value of your house is (over the long term) rising with inflation. And for sure, if you’re a renter your “down-the-drain” rent payments are going up.

But if you are concerned and see inflation and higher rates coming – get some insurance and you can make a huge profit from inflation if it happens. Lock yourself in to a 10 year mortgage at 4.14% (vs 3.49% for a 5 year). Then you’ll look smart as inflation increases the cost of everything except your mortgage payment

(Rates as posted here http://www.mortgagearchitects.ca )

Wolf: Your argument also sounds incredibly condescending Patrick, but I doubt that surprises anyone here.

I’ll accept that. Because it was a detailed argument, full of objective numbers. And you didn’t say “you got your facts wrong” or “your argument doesn’t make sense”, you just say that I “sound incredibly condescending”. Hopefully we can stick to RE discussions, and leave the personal attacks out.

For example, sitcking to RE…..There may be people out there that don’t realize that 2/3 of your mortgage payments go to equity (on average over a 25 year mortgage at 3.49% interest). That’s like forced savings and at least people should be aware of it, and they can certainly ignore it. And it’s less true if rates go up. But I don’t think that pointing out facts like that is being condescending. When I first learned that it changed how I thought about how to value RE.

Grant: Now that you have been living in Mill Bay for a little while how are you finding it? What are the positives and negatives and have there been any surprises?

Patrick…that last post was a great argument, IMO.

Not being sarcastic.

@ Dasmo

Gambling vs. Investing

BCE, NWL, ETSY, TSLA. Only VW is down a bit.

So, speculating for the short term and winning in the mean time.

VCN and XUU

Much better for the long term, 10 plus years, but not winning in mean time.

On average if you are not Diversified and not Allocated and you just focus just on the S &P 500 (The S&P 500 is a stock market index that tracks the stocks of 500 large-cap U.S. companies. Not just 5 ETFs, but 500 in one), you average about 7% after a ten year run.

(XUU Total Market Index ,3,650 companies) This averages about the same as the S&P 500.

Lets see some stats on a 30 year run for the S&P 500:

1926-1956: +10.77%
1956-1986: +9.63%
1986-2016: +9.99%

I bet half the companies you are speculating on will not be around or have returns like now, in 30 years.

You really should have a portfolio though with the whole world market ,diversified and allocated every year for ten plus years. Some US, CAD, emerging & and establish foreign markets, and some bonds. Better safer returns.

And for the years mention above…

The consistency of returns is fairly remarkable when you consider some of the events that have transpired in each of those 30 year periods:

1926-1956: The Great Depression, a stock market crash of more than 80%, World War II, The Korean War and four recessions.

1956-1986: The Civil Rights Movement, the Vietnam War, a president was assassinated and another forced to resign, an oil price shock from the OPEC embargo, double digit inflation and interest rates and six recessions.

1986-2016: Black Monday in 1987, the Savings & Loan crisis, Desert Storm, 9/11, wars in Iraq and Afghanistan and three recessions.

Local Fool: Here it is again, with the debris gone and a $500k drop in the asking price:

Yah, I wouldn’t have paid more than $300K for that pile of debris.

Yeah, just an option that might make more financial and practical sense than a TFSA given the outlay on rent otherwise and the primary residence exemption. Or not. Depends.

No reason your child is tied to a condo once bought if things change. They can do an exchange or co-op term and it can be sublet without losing the primary residence exemption. They can even go to school somewhere else and designate the condo as their primary residence for up to four years, perhaps longer.

it comes down to math, not imposing limitations. I don’t think too many students would find this type of parental assistance controlling if the relationship isn’t like this already.

Thankfully I’m not doing it wrong and am up thanks to my picks. BCE, NWL, ETSY, TSLA. Only VW is down a bit. Meanwhile QQQ, VCN and XUU are all sucking along with the general market. I think what’s missing with ETFs is not finding deals. As I have said before, when conditions are bad deals will be had….
I’m not one to panic (I at least try to follow rule #1) so I’ll hold the ETFs but probably won’t be buying more.

Anyway, I can go on and on, just think it’s helpful to have a prospective buyer’s perspective on here once in a while, one with no skin in the game so to speak.

Indeed.

And your approach seems sensible.

You can see that on the day of national confederation, our colony wasn’t too interested…

That layout in web design is called masonry. I didn’t realize it was actually an old design. Neat!

Anyone remember this house in Vancouver? It made global news as a symbol of Vancouver’s out-of-control RE market, asking 4 million dollars:

Here it is again, with the debris gone and a $500k drop in the asking price:

https://www.rew.ca/properties/R2293412/2573-w-3rd-avenue-vancouver-bc

Interesting one to watch.

Cheap money forever. Bank stocks are up.

Market forecasts the last few weeks have been so all over the place it’s hilarious. Market crash, or market take-off, both are imminent it seems.

Ricky Gervais on Twitter: “The greatest bit of advice I ever received was “Don’t worry, no one else knows what they’re doing either.”