Slow on the uptake
I’ve previously written about what is behind the flood of (downward) price revisions this year. In short: after a red hot couple years, sellers expected the market to continue to appreciate when in fact prices stagnated.
The degree of this seller delusion becomes abundantly clear when you look at the median asking price and the median sales price together. For single family properties in the core, that gap has expanded to around $100,000 for most of this year.
It seems that the median sales price for single family homes in the core pretty much hit a wall around $900,000 at the start of 2017 but sellers didn’t get the message and kept raising their asking prices up until just a few months ago.
Note that this doesn’t mean the average buyer got $100,000 off the asking price. Many of the listed properties were simply way overpriced for the market and simply expired without selling. However it does show that sellers need to get back to reality if they want to move their properties (some evidence that has happened in the last couple months).
Condo sales prices kept steadily increasing in 2017 but have also substantially detached from asking prices in 2018.
Will sellers come to their senses in 2019?
Merry Christmas to all!
Monday numbers: https://househuntvictoria.ca/2018/12/24/dec-24-market-update-construction-turns-over
I am pretty sure you can get waterfront or great water views for those prices you have listed
https://www.realtor.ca/real-estate/20125599/4-bedroom-single-family-house-46-king-george-terr-victoria-gonzales
https://www.realtor.ca/real-estate/20073868/3-bedroom-single-family-house-572-beach-dr-victoria-south-oak-bay
the none water ones are cheaper like this one here:
https://www.realtor.ca/real-estate/20088389/3-bedroom-single-family-house-1893-gonzales-ave-victoria-fairfield-east
https://www.realtor.ca/real-estate/20102454/3-bedroom-condo-1906-moss-park-gdns-victoria-fairfield-east
It’s also obfuscating that it’s called “real” house prices. The term should be “adjusted” and “nominal” should be “real”.
Merry Christmas, may it be joyous to all.
I’m looking at these houses in Fairfield and Oak Bay that are listed for $1.8M to $2.5M. Most of them are approx 2500 sq ft on a 6000 sq ft lot. In 2016 that probably made sense, buyers from Vancouver, buyers from overseas. I realize these are new homes (just imagine the taxes on top of the transfer tax, but I feel sorry for the builder or whoever is holding the bag. They’re all at least 40% over priced. 2019 going forward could be a tough year for trades.
That’s why the banks charge interest on each and every payment. At mortgage origination, the balance you’re borrowing is not just a “snapshot” of a price at that moment in time. Each monthly you pay goes to the principal amount and the interest amount – the latter will add a considerable amount to your obligation over the amortization period.
So if you borrow 500k and pay it off over 25 years at 3.5%, you’re paying that 500k plus around 249k in interest. If you’re paying a still low 5%, then you’re paying 372k over that period. Calculate a nominal rate of 6.5%, and now you’re paying a whopping 505k! In other words, your obligation is rising faster than inflation, especially for the first 10 to 15 years. Hence – the bank usually more than covers for inflation. And the higher the inflation is, the higher the interest rate tends to be. We don’t have 30 year terms here in Canada, so you’ll get nailed each renewal.
Of course since 2009, interest rates have been effectively negative, which, for that time period, means the money was “free”. Hence, housing could be considered an inflation hedge. Trouble is, there hasn’t been much inflation. People were piling in for the opposite reason from the 1970’s and 80’s, that’s yield. And of course, we probably won’t have another 35 years of declining rates…
Anyone who reads my posts over time will know that what Hawk just said is not at all what I said. I’m not at all surprised though that my posts might be confusing to Hawk and some others though.
No one said to never buy Deryk, just that there is a good time and a bad time and now is one of the worst market conditions to buy in 30 years if not ever. As others pointed out you said it’s good to buy anytime and good to go negative equity by 30%. That’s very confusing and financially disastrous. Anyone who bought in the last year and half most likely overpaid by huge amounts they will not see again for another 5 years plus.
Why buy now when financial markets are on the cusp of some very nasty global blowups that could save you hundreds of thousands of dollars by just being patient ? You obviously didn’t Google “credit squeeze” and the repercussions.
Merry Christmas all !
It’s so interesting listening to the discussions on this forum
Some people believe that it is a good idea to own real estate….. if you can manage it.
On the other hand there are always those who believe that it is better to rent and watch their rents go up every year as they pay off their landlords mortgage.
That’s really the two choices. Watch your mortgage go down. Watch your rent go up.
Ha ha…….To all the negative thinkers out there……Wave your graphs and inflation models all you want. I know which choice I’m making and I encourage others to do the same if you can manage it in a careful and well thought out way.
Thanks to those who support my thoughts on this forum. Much appreciated.
To all the others…well…. as the old saying goes, it is much easier to tear something down than to build it.
Yes, this sounds right to me.
Good post caveat.
If anyone was serious about using inflation adjusted house prices as a metric, they would of course also have to adjust the debt owing on your mortgage downward each year with inflation. But they don’t, so that they can pretend you are losing money with inflation.
Throw inflation-adjusting-mortgage-balance down each year and it makes buying a house a no brainer. Suddenly that 3.49% mortgage interest I’m paying gets to be offset with the 2% inflation. And I’m really only paying 1.49% as a “real interest rate”
So anyone out there with a big mortgage balance, raise a glass to yourself, you’ve made it through another year, and your mortgage balance has magically fallen 2% more in “real terms”. You’re richer than you think!
By bears using inflation adjusted house prices, and not also inflation adjusting my mortgage balance, you are adjusting the asset I have (house value) down, without adjusting the debt (my mortgage) down.
The irony is that the main thing “inflation, dude” does is make buying a house a much better idea, yet it’s used by the “afraid-of-buying” bears. Because “inflation” typically increases the nominal value of your house, but doesn’t increase the nominal value of your mortgage owing. So your equity grows.
IMO, best thing to do is use nominal prices.
Inflation dude. You could replace the words real estate with most any asset and that statement would also be true. If the value of money goes continuously down that is the same as prices going continuously up.
Everybody on this board, bears included, would likely agree that even if prices fall they will almost certainly be higher again in the future. Even if we DO have a huge crash nominal prices will likely be back at approximately today’s levels in 8-10 years
TSX under Harper 1.6% per year CAGR over his 9+ years
TSX under Trudeau 0.4% per year CAGR over his 3 years
Both terrible figures
Under Harper TSX underperformed SP500 2012, 2013, 2014, and 2015. Under Trudeau TSX outperformed in 2016 but has badly underperformed in 2017 and 2018.
Personally I don’t give a Canadian Prime minister or even an American president much credit for making the stock market go up or down. But FWIW historically Liberal governments in Canada have been better for stock market returns (same thing for democrats in the US)
I hope that everyone understands LeoS disappointing reply. This is a sad statement of the level of debate on this board. Deryk starts with a resonable question “Tell me one time in history when the prices of real estate did not swing back into higher territory after a slump.”
And LeoS (who’s opinion I usually respect ) has to give a reply pretending the question was about “inflation adjusted house price increases”
It is a sad statement that someone like LeoS who understands the question can’t just say “you’re right Deryk, there has been no been no decade long period where RE didnt swing into higher territory.
Anyway, Deryk, the correct answer to your question. Is that there has been no decade long time in )last 40 year Victoria) history that prices have not swung back”, and it’s sad that none here has the courage to say that. Of course that doesn’t speak to the future, only the past. But “kidding yourself” about the past, whether you are a bear or moderator of this forum won’t do a service to anyone, least of all yourself.
That isn’t true, and we don’t even need to leave the country to find an example. Toronto’s bust in 1989 didn’t recover in real terms until 2010. That wasn’t an “economic collapse” by any means, and that’s a span of 21 years. Having said that, that’s not the norm.
1981 took a decade to recover real house prices. But no examples of plural decades.
I suspect 10 years is pretty safe, 15 years definitely safe for real house prices in just about any market barring economic collapse of the region (e.x. Detroit).
Expired.
No matter what he’s got to say, I always have to smile at Ian Watt. Just can’t shake the similarity
https://www.youtube.com/watch?v=22O6Nmjt-mw
Average is just a lot bigger than the median in BC.
Median $429,400 vs Average $880,100 (2016, Table 11-10-0049-01)
So one year newer (and associated strong price gains between 2016 and 2017) means $1M average seems reasonable for Victoria.
They don’t collect data for Victoria separately in the survey of financial security so I imagine Environics has done some estimating and massaging based on other data sets.
the chicken or the egg … forever debates…but I agree with you regarding Trudeau on the lack of economic knowledge
https://househuntvictoria.ca/2018/12/20/slow-on-the-uptake/#comment-53809
Bearkilla
” yvr-yyc-yyj you’re doing it wrong if you transferred from Vancouver to Calgary
after 10 years and had so little equity you underwater in two years.
Actually I sold one house in Vancouver and bought three houses in Calgary. The bank made me put 30% down on the two rentals. The prices dropped, but my mortgages were small on the rentals, so no issues. I still have the two rentals and they have been cash flow positive for 11 years now.
Hey Dasmo. The graph isn’t a 1:1 basis for the statement. You could probably correlate them to the major markets using real dollars, but the movement in rates would confound it, especially after 2009.
Just for fun (and ignoring downward interest rates) if we look at Victoria in 2018 constant dollars, we could see a few things.
If you bought in 1994 and had to sell in the proceeding slump, your maximum loss would be on average, ~$46,744. But if you never sold, it would take the market until 2003 to regain the valuation you paid. Victoria bucked the trend for a bit by peaking in 1994, as 1990 was the broad, nationwide downturn in housing.
If you bought in 2010 and had to sell in the proceeding slump, your maximum loss would be on average, ~$71,676. But if you never sold, it would take the market until 2016 to regain the valuation you paid.
The latest (probably outdated) number I have for 2018 is $901,721. I suspect next year we’re going to be seeing losses, and we repeat the themes seen above.
The good thing for prospective buyers here is that if history is any guide, the worst of the losses tend to be 1 to 2 years after the peak, then they slowly bleed out for a few years after that. So if you bought a year after the peak you’d lose out if you had to sell during that time, but the majority of the preceding fat would have been trimmed off (ie if you’re scared of paper losses immediately after purchase).
The point is then, the affordability index is a good indicator (I think) suggesting how stretched people are. And we know what’s happened in the past when prices have fast run ups and when affordability stinks. The more it’s stretched, the more it tends to snap back. Again though, all this is against the backdrop of falling rates – a rising rate environment could alter future movements and recovery times quite drastically.
The secret cause of interest rates.
I was going to point out your last option LF. Thanks for saving my thumbs.
A Christmas present for the bears…
https://www.scmp.com/comment/insight-opinion/hong-kong/article/2179045/how-could-global-economy-crash-let-us-count-ways
This is why it’s usually no fun to debate with you, because you attempt to refute people by getting them to argue on disparate terms, and/or using metrics and interpretations that send people on circular, wild goose chases. No. I’m not going to have a nominal price argument with you again. It has absolutely nothing to do with what I posted.
What you could have said is this:
Or if you really wanted to chide me and point out an actual issue with my argument, you could say:
Good luck!
@Local Fool
Yep, agree. Had a couple friends that bought vacation property in Hawaii when that market crashed. Both got about a 250 k discount on their properties. Market has just recently returned (in the last year or so) to pre-crash levels, so around the 700 k mark. Now sitting on a tidy profit (in USD) if they decide they want to sell.
Hawk I follow your advice and do the opposite. Been incredible successful. A big thank you.
A bold statement. It’s not clear if you’re talking about the topic of Victoria house prices. But if you are talking about Victoria house prices, please elaborate, and point out a single “point” in the last 40 years since 1978 that wouldn’t have taken “decades to recover”.
Here’s Victoria house SFH prices since 1978. They are on a almost straight-up rocket ride from $63k to $859k, up 1300%. https://www.vreb.org/media/attachments/view/doc/ye782017/pdf/Annual%20Summary%20of%20Single%20Family%20Sales%20from%201978
I’m just looking for a single year that would have been the absolute worst time, and taken decades to recover like you said. I know that you like simple answer questions like this, because you posed one earlier when you said “Not a trick question or something I plan to come back and pick on you later for; I’m just curious what you think. ”
So now it’s your turn to answer, based on actual house prices in that official vreb.org historical record above. What was “one of those times” in the last 40 years that you are confidently warning us about?
We’re doing Christmas in Calgary this year, where it’s currently a balmy -5. There is a patchwork of old crusty snow on the ground, predominantly grey in colour from pollution and what else. Views of the snow-capped Rockies are admittedly very nice, though.
Found this a couple weeks ago and thought I’d put it up today:
So what should all this massive invesment money going into gwac? Rocks and trees ? Oil and gas with losing profits ? How about falling real estate? Instead of ranting like an old fool maybe you should make some solid suggestions since you know better.
Bang on Jamal. Never been a more dangerous time to buy when a madman down south is imploding world markets daily via tweet.
They will be this time. The banks knew Harper was bailing out the banks so why foreclose on people.
You obviously had a job to keep paying. Many won’t this time around with a construction heavy economy . Justin will not be there to bail out the banks, gwac, or those millions who spent way above their means. Statistics show clearly half the country lives pay cheque to pay cheque , over borrowed and struggling to stay afloat.
Harper’s credit bubble bursting will be one for the history books.
Jamal I suggest you look at the performance of the s and p against the tsx during the Trudeau years. He and his liberal have not been good for investment period.
2016/17 tsx brutal performance compared to 500. 2018 just as bad.
https://www.google.ca/amp/s/www.cbc.ca/amp/1.4526473
“Tell me one time in history when the prices of real estate did not swing back into higher territory after a slump.”
Your logic for buying now seems to be that at no time in history have prices not gone back up after a slump. Well at no time in history have prices ever gone up so dramatically in such a short period of time. On the one hand you said “If you buy a $600,000.00 house and even if it drops two hundred thousand….why does it really matter? Your mortgage payment stays the same. The rental income from the basement suite stays the same.” But you also said the other day “My advice is buy what you can afford. Never risk your family home by over leveraging. Make sure you have the ability to “Hang on” during harder times such as losing your job, illness, tenant not being able to pay their rents, etc etc.” I agree with that advice but it contradicts the losing 200k doesn’t matter if you buy now. You also say your rental income stays the same but how does that work. If your home goes down 200k we are likely in a recession and many of those construction workers would leave town and vacancy rates would shoot up pushing rents down. All those landlords who are just breaking even or have a negative cash flow already between mortgage payments and rental income would go under. Many people in Canada recently went on investment property buying sprees hoping that there will be others left to bail them out and pay what they did. This is a huge risk to take and not very different from going to a casino and placing everything you have on one bet. If you look back 10 or more years ago buying was a great choice but that doesn’t mean that buying right now is going to be the right choice going forward
yvr-yyc-yyj you’re doing it wrong if you transferred from Vancouver to Calgary after 10 years and had so little equity you underwater in two years.
I just thought I’d come back to this blog and see what’s going on with the bears for christmas. Looks like not buying is the answer as usual because they’ll never buy. Here’s a classic video from days gone by that sums up the situation nicely :
https://www.youtube.com/watch?v=BGL-ZEbXO1k
people have to remember .. not many people who will buy a house and will stay in that house forever … I know the idea holding long term .. but life happens … you might end up with kids ..might need to move up for more space … might get old and down size .. kids moved out .. who knows… then there is buying condos .. not every one have the mind set of staying in 1-2 bedroom boxes for 3 decades… not many people can afford to purchase it as rental properties … everyone’s advice is fool proof .. until shit happens …
… anyways .. merry Christmas and stay warm over the holidays
The S**tshow going on has got almost nothing to do with the federal government, or any government in Canada. Neither does the housing slump…
On a long enough time period, there isn’t one. That’s not always the point. Objectively, there are some times that are better to get in than others, and then there are some truly awful times to jump in. The problem with the latter is that it always seems like those are the very best times to jump in – ie high financial cost, low emotional cost.
But if you buy in at one of those times, that can literally set you back hundreds of thousands of dollars and take you decades to recover, not a few years. And that’s no exaggeration, especially if the debt levels are so high. Here, look below:
So you can see – you are correct. However, so am I. If the series went back further to the early 80’s, you could see my point yet again. The core of the debate given what you have told me is that, you expect something like we might have seen in 2008, where it drifts lower, a little bit, before being outdone by further gains.
I am saying I think we’re going to see something more like 1990, since we have little room to cut rates and the economy is so imbalanced in an unproductive asset class. I believe that puts the overstretched markets in Canada in very significant danger. My scenario doesn’t happen nearly as often as yours. But I think we’re well primed for my scenario this time around, perhaps more than in the last 35 years. Only time will prove either scenario true.
Regardless, it’s never prudent to jump into something in blind faith that it always goes up, sooner or later.
Banks don’t care about this if the mortgage is insured. I can surmise this most likely applied to you, e.g. Vancouver only went down about 15% over the whole period 1995-2000 so it follows you had <20% down.
You also had the good luck that both underwater episodes were followed by a dramatic drop in interest rates.
Home ownership isn’t for everyone, it takes commitment and sacrifice. While the house (land) value may beat inflation, upkeeps and taxes aren’t cheap, esp for those not willing to swing the hammer.
damn .. the dow is down too … must be liberals
damn… the s&p is down too .. those damn liberals …
damn… my shit is crap …. must be liberals
I am not a fan of the liberals .. but it take some one that lives under a rock to blame it on Canadian political parties
To Hawk……I think it was around 1990 – 1991 when houses were in the range of $175,000.00 in Victoria. Somewhere around that time is what I was talking about in my other post.
My dad bought his first house in Kitsilano (Vancouver) in 1966 for $12,000.00. Everyone then thought he had paid “way too much” for it. A year later he sold it for $24,000.00 and thought he had made a fortune !!
We bought our first house in Kerrisdale in the mid 1970’s but of course it didn’t come cheap and was way overpriced (according to everyone at the time) because it cost us $50,000.00 ……. Just a ridiculous amount of money…… right?
And that story repeats itself over and over again to today.
On the topic of negative equity: Of course no one wants negative equity. That’s why I always preach that you have to have the ability to hang on so that you can ride out a low period.
Tell me one time in history when the prices of real estate did not swing back into higher territory after a slump.
I’m not an economist but my guess would be that it is simply due to inflation. Owning your own home protects you from inflation. Don’t believe me? Ask someone who bought there house fifteen years ago how they feel about their mortgage payments and then ask someone who is paying ever higher and higher rents every year.
https://househuntvictoria.ca/2018/12/20/slow-on-the-uptake/#comment-53797
replying to Hawk
I have been underwater twice in my live. In 1997 in Vancouver, I remember getting City Assessment notices for a few years that were less then what I owed on my mortgage. I had a family and they needed somewhere to live, so I kept paying the mortgage, property tax, Utilities as normal. When my mortgage came up for renewal the bank sent me the renewal in the mail, so I selected the option I wanted and signed it and sent it back with no issues. Being Vancouver the market did rebound and I sold my house about 10 years later for a profit.
In 2007 I was transferred to Calgary and the market was very hot when I bought my house. But in 2009 we had the Lehman Brothers fiasco and the market tuned dead and I was again under water. I kept paying my mortgage again as normal as my family needed somewhere to live. When the bank sent me the mortgage renewal I signed it and sent it back with no issues.
I never once thought to give my keys to the bank and become a renter, as I knew over time the Real Estate prices would improve which they did.
In both my cases the banks never once contacted be about being underwater!
Steve Mnuchin had to call top US bank executives this weekend to ask if they have liquidity. They said yes, no probs. Just the fact he had to make the call is f’n scary.
Did 144 Eberts sell? I remember seeing the listing some time ago but don’t recall the result.
+1
In fact, prices don’t even have to fall to cause serious disruption. If a market gets caught in a whirlwind of speculation, people spend much more than they would normally, and in many cases, much more than they can actually afford. But at that moment, it “doesn’t matter because it will be worth more tomorrow.”
In other words, they overextend on the assumption that prices will continue to rise. When that doesn’t happen and the excitement over the asset disappears, then that same person may look at their bills and realize – jeez, I have to pay all this for the next 25 years? Then watching others pay less (or perhaps a lot less) than you paid for your home, rubs salt in the wound. This is bad news, and for pre-sales buyers, even worse. And it’s these people that cause the years long debt hangover in the economy where everyone suffers.
What’s even worse than that though, is that markets don’t generally “stagnate”. They trend up, then they trend down. That usually means price movement, especially in this market where rates have little room to move lower and wage growth would need a generation to catch up to current valuations.
Tick tock.
“If you buy a $600,000.00 house and even if it drops two hundred thousand….why does it really matter? Your mortgage payment stays the same.”
Have you ever heard of negative equity ? Good luck with that idea. If you are forced to renew at much higher rates or are turned down at your bank because of negative equity, or higher debt loads you are forced to seek private lender at loan shark rates.
Your $175K house was what year ?
Google “credit squeeze” and see what comes up in first 20 news items. 90% plus are Australia news talking about their current credit squeeze.
We don’t even need anymore rate hikes cause its happening now. They even compare us to them so those who say there is no comparison you are out to lunch.
Via Australian news just over a month ago:
“Canada’s housing market is a lot like Australia’s. Like us, Canada had no major fall in house prices during the Global Financial Crisis. Like in Australia, official interest rates fell, making borrowing very cheap. House prices soared and household debt went with them.
Older and wealthier Canadians got caught up in a frenzy of investment while the younger portion worried about affordability. It could almost be Australia, right?
If four major cities in Canada and Australia all start falling in synch, it would be enough to start to suspect that they are all at the mercy of the same global forces — interest rates and liquidity. If you want to have a full picture of what will happen in Australia’s housing market, add Vancouver and Toronto to the list of cities you keep an eye on. Canada’s spring selling season is coming up in five months and it will be very interesting.”
I am a strong supporter of trying to own your own home for the following reasons. When you rent, you can get the notice in the door at any time that the landlord wants to move into the house themselves or is going to sell the house. The disruption is huge and it is hard on the kids who might have to change schools and its very stressful on the family etc etc.
Having a house that provides that security is invaluable. If you buy a $600,000.00 house and even if it drops two hundred thousand….why does it really matter? Your mortgage payment stays the same. The rental income from the basement suite stays the same. And your family is secure. History (best education) shows that the prices always rebound and overall you only have to wait out the slump and you will come out ahead in the long run. It’s hard to put a value on the security of having your own place.
I remember going around with an agent showing me houses in Victoria many many years ago and she was shocked at the high prices and said that it would be insane to buy at that time. I remember thinking the opposite. I thought…..$175,000.00 for a lovely house in a nice neighbourhood in Victoria seemed like amazing value to me.
I’ve witnessed this negative attitide all my life…… where people see the glass as half empty, while others see it as half full.
I would never buy a condo. Never. Too much at the mercy of other people on the strata etc. etc. I just don’t see the value in them. Basically a box with granite counters and a few cabinets. Not to mention the fact that nearly every one of them are out of date before they are even out of the ground. (For example: Not enough power coming in from the street to the building to power all the electric cars that everyone will soon be driving.) I predict that Condo owners will be getting stuck with very expensive upgrade bills as everyone demands a power station for their parking spot.
Anyway…..I hope everyone has a great Christmas or other holiday celebrations!! I’m looking forward to the new year. Have a good one.
3525 Beach sold for $2.3M after 18 months of trying. ~30% under assessment. 35% under original ask. Not too many people looking to build in the uplands I guess.
Chinese owners of Vancouver’s Bentall towers looking to sell: reports
After Vancouver’s Bentall towers were purchased in 2016 by Beijing-based insurer Anbang, talks are now reportedly in progress between Anbang and Canadian banks and commercial realtors, regarding a potential sale of the four buildings that it owns in the Bentall Centre office complex.
The office tower complex is said to be worth over $1 billion, with Anbang acquiring a controlling stake of $600 million in 2016.
According Asian Real Estate business website Mingtiandi, “should Anbang follow through on the reported Canadian discussions, it would make for the company’s first disposal of a Canadian real estate asset, after Anbang had spent an estimated $1.96 billion buying offices and retirement homes in the North American nation from 2015 through 2017.”
http://dailyhive.com/vancouver/bentall-towers-chinese-owners-looking-to-sell-2018
Thanks Deryk, I understand where you’re coming from.
He’ll eventually import inflation. He’s already warned those getting over their head over housing, that they are very vulnerable. I don’t think that was widely received though – I mean who’d listen to a central banker. I continue to believe he’ll do to rates what he must in terms of fulfilling their central mandate, regardless of the housing market.
Hey, if anyone hasn’t seen the Christmas lights show at the Butchart Gardens, it’s worth checking out. A number of new things this year!
Deryk,
Great posts!
Anyone notice the CAD to USD today? If Poloz does not raise rates soon, hang on to your shorts because the CAD will crumble.
To Local fool: I actually believe that prices will be a bit lower than they are today. So why would I recommend to people to buy now? Because I don;t think their will be a “major” correction and one might still need someplace to live anyway. Better to be in the housing market and getting on with ones life than very possibly being left out of the market forever. If I thought there was going to be a major correction then I would not buy. The key is to buy as long as you have the money to pay your mortgage and you have “the ability to hang on” if you have guessed wrong.
Universal human behaviour…
Deryk,
One year from now, do you think prices in Victoria RE overall will be higher, the same, or lower than today? Never mind interest rates, inflation, wages etc.
Not a trick question or something I plan to come back and pick on you later for; I’m just curious what you think. Not looking for a “only the long term horizon matters”, “I really have no idea”, “it depends on this, this or that”, or other evasive and/or safe answers.
Just one of those three – if…you don’t mind indulging me.
“Full” Duplex Moncton NB ….very common price for something like this post. Many duplexes can be bought in Moncton for much less actually. I’ve seen some duplexes sell for $175,000.00 (Both units in the duplex!) The government in Moncton is building hospitals, universities, art centres and a beautiful conference centre etc as a way to try and get people to come back to NB. Apparently it is starting to work as people are doing just that. The opporunities are amazing.
https://www.kijiji.ca/v-house-for-sale/moncton/286-288-highfield-st-moncton-new-brunswick/1388492988?enableSearchNavigationFlag=true
I find it very interesting to look at what other cities are selling for.
Another example of why buying a house in Victoria is a good deal. https://www.myvancouverhomefinder.com/homes/bc/vancouver/vancouvresdr2118348262139975/2831-e-broadway-vancouver-bc-v5m%201y9
Another house for sale in Vancouver BC. It is located in Kitsilano. https://homes.vancouverhomeliving.ca/idx/details/listing/b499/R2289937/2275-W-16TH-AVENUE-Vancouver-British-Columbia-V6K-3B4
You can believe that the “housing market” being discussed here on this site is also concerned with details about rental pricing. But I’ll leave it to LeoS to clarify the importance the rental market is here compared to the house buying/selling market.
In the meantime, I refer you to LeoS November summary, and ask you if you think any of this is talking about the “rental market” in Victoria.
NOVEMBER MARKET SUMMARY
The market in Greater Victoria is cooling off due both to strained affordability and regulatory changes. The single family market is in a roughly balanced territory while condos are still in sellers market conditions. Inventory for both is still lower than normal keeping prices approximately flat in 2018. The high end market is weakest, followed by the entry level, while mid market remains strongest.
Another example of a house in Vancouver. This one is also located in Kitsilano. https://www.rew.ca/properties/R2298904/3123-w-16th-avenue-vancouver-bc?page=2&search_id=kitsilano-vancouver-bc&search_type=property_browse
Agreed Hawk. Interest rates are national. The big lenders are national. GDP is national.
Great, so when Vancouver tanks hard so will Victoria. But “Oh no! ” the bulls will cry, “we’re different !! “. The bulls always want it both ways.
As I said before, we all borrow from the same pot of money from which the credit squeeze is tightening like a vice. Lenders see insolvencies up and payments not being met, markets tanking. Its “risk off” in spades.
Only 42.5% of Swiss households own their residence. A much greater % of households lives in apartments than in Canada. Finally 25% of the population is non-citizen, the highest of any Western country.
All of which means simply comparing house price/income to Canada is meaningless.
Canada house prices are about half the “sensible” Swiss house prices. We can learn things from the Swiss (like how to play hockey- ouch!), but managing house prices isn’t one of them.
Canada already has close to the cheapest house prices in the world (9th out of 91 countries, measured by price/ income ratio).
Canada house price/income is 6. Switzerland is way worse, 39th best of 91 countries, Swiss house price/income = 11, so Switzerland prices are almost double Canada (as measured by local price/ local income)
Source for all this: https://www.numbeo.com/property-investment/rankings_by_country.jsp
That’s an especially difficult comparison. Mainly due to the insanely low interest rates in Europe. 5 year fixed? Nearly 0.5%. Ten? < 1%. Fifteen years? About 1.5%.
Then there's the fact that owners in Switzerland can pay down their house with nearly untaxed money through extra pension contributions. Also, many owners never pay off their mortgage fully, since the interest is tax-deductible.
Fortunately the Swiss haven't been allowed to blow their brains out on mortgage debt because banks must qualify buyers at the historical 5% rate. And foreign ownership is very restricted. Plus, speculation is curtailed by capital gains taxes that regress with duration of ownership. So sensible. So Swiss. I wish we'd learn from them.
Josh,
I think this is what you’re looking for. It is directly from Environics, and talks about the wealtshcapes data that they’ve collected from stats can, CRA and BOC (previous PDF link confirms that they collect it from stats can etc.)
The wealth scapes raw data seems like a pay-only access, but Environics provides a lot of summary data here.
https://www.environicsanalytics.com/en-ca/resources/news/2018/09/17/canadians-are-starting-to-feel-the-sting-of-rising-interest-rates
This includes:
Victoria net worth $1.1m (third in Canada) ($1,097,699 to be exact)
This consists of (see notes)
$600k net real estate (consisting of $800k gross and -$200k mortgage)
$400k “liquid assets” (stocks etc)
$100k employer pension plan
= $1.1m
If real estate crashes in half, this would change the numbers to…
$200k net real estate ($400k gross and -$200k mortgage)
mortgage)
$400k “liquid assets” (stocks etc)
$100k employer pension plan
= $700k average family net worth in Victoria after a 50% house crash
Notes: all these numbers are taken from the link above, rounded to the nearest $100k. For the breakdown of the $1.1m, the BC numbers were used (as no breakdown numbers for Victoria were provided) -since Vancouver numbers are higher (than Victoria) and rest of BC are lower (than Victoria) the BC numbers seem a good proxy for Victoria.
Regarding real estate markets, the biggest similarity between Victoria and Vancouver is that they are in the same country.
@ Deryk
It would be great if you could keep the personal attacks out of your commentary – I think I’ve been fairly respectful towards you.
This is your post that set off this discussion:
Read the last sentence you wrote.
When i see delusional high asking prices right now … all I am think is which desperate dumb ass realtor sold the owner a fantasy dream… we all know that the property will sit on market for 2 more months then another … time is money now .. the faster you move your property off the market the more money you can keep .. unrealistic prices will only keep your house on the market till you realise the market is lower than the realistic prices 3 months ago
The majority of the time the owner sets the price. You’ll tell them, based on all the comparables the home is worth $660,000 +/- $20,000 and they will come back with “okay, let’s try $719,000.”
Whether you take on the listing or not varies on a lot of factors. It isn’t unusual in a slow market for sellers to go through 3 to 5 REALTORS® and you want to be the 5th, not the 1st. Typically with each new REALTOR® the price drops; therefore, the odds of a sale increase. I’ve been the 4th person in way too many times.
Other sellers perhaps you’ve worked with before and you know they will execute the price drops without switching you out as the REALTOR®.
Most of my clients call me because the commission structure is a bit more reasonable than the competition so if they’ve done their homework on saving money on commission usually, they’ve done a bit of homework on pricing and aren’t completely delusional. I probably turn down less than 5 listings a year because of unrealistic expectations. Most of the listing I turn down due to traffic. In the spring when things are crazy, I’ll refer out listings and Langford/Colwood unless it is a repeat client, for example.
If I was a brand new REALTOR® I would take on everything including way overpriced properties just to get the name out. You get a sign in the ground, people see your face/name on realtor.ca, etc.
Cities are connected. They influence each other financially. So does geography. Victoria and Vancouver have a lot in common. Only a fool would not at least consider the connections and how they will influence the future.
Josh: As i suspect that you would agree looking at net worth statistics comes down to exactly what is being measured. Look at age tranches also produces very different results considering what portion of the 18 to 24 are still in school. Also does one value earned but not vested pensions into the equation. I am suspicious of most stats based arguments myself.
Comparing small apples to big apple. Victoria to Vancouver…
It’s like comparing Parksville to Qualicum Beach. Or maybe Campbell River to Nanaimo…
There is nothing to compare, they are all in their own little bubbles. Stop comparing!
What you presented was a promotional PDF, and not the data itself. Show the actual data from the actual database and I’ll concede. You found one article which sited Environics then assumed the rest. The reason I find it so hard to believe is that the 2016 census put the median Canadian net worth at $295,100. Somewhat amazingly the BC net worth in 2016 was $429,400. I know mean can be quite a bit higher than median but I can’t see how that would account for the difference between $429k and $1.1m. If it does account for the difference, then it goes to show just how unrepresentative the average net worth is.
Hey google, define “post-purchase rationalization”.
I wish people like “Andy 7” would read and listen to what people actually say.
For example: He says that I claimed that a “Kitsilano” house price is a good indication of prices in Vancouver. I never said that it was. So why would he say that? I would never say that Kitsilano represents Vancouver prices. Vancouver is a big place.
That’s per person so for a married couple, you’re looking at a $500,000 exemption. The deductability of the principle mortgage interest & taxes is somewhat muted by the standard deduction. I suspect for the average homeowner in the US (outside of the very expensive areas), they are more likely to take the standard deduction than to do a schedule A and deduct interest & taxes.
Not that that mitigates the argument – just thought I’d clarify.
Patrick
You sort of are out of line by your logic – here’s the statement from the About section of the website.
So whether buying, renting, or otherwise, anything that relates to the real estate market goes here. There are interesting trends here on HHV and tidbits of information to glean. If one chooses to buy or rent, that will always be a personal decision and not one to be mocked. Life is always about choices. And if some of us renters choose not to divulge highly personal information such as net worth, do not take that as a sign of poverty but merely a lack of information on your part.
@ Patriotz
But other than a $250,000 exemption, capital gains on the sale of one’s principal residence are taxable in the US. The same provision in Canada would likely damp enthusiasm for RE investment — although the imposition of capital gains tax on would logically imply tax deductibility of mortgage interest, so it’s unclear what the net effect would be.
How is the pre-sale condo market doing? Is there more or less appetite for this?
But that’s just your house outpacing inflation, not your money losing value.
Somehow I think we’re arguing the same side here. It’s just that arguing for housing to continue to outpace inflation by 5% isn’t a very ‘hairy halibut’ position; more of a horny halibut one, eh?
Like, no back at ya man. 7% compound interest is almost exactly doubling every ten years. So if this is in fact what happens with house prices then you can enjoy your cheap beer over the decade as your money loses half it’s value.
Absolutely true. Because you have qualified it to be talking about many households instead of the average household.
But let’s accept your observation that many households are close to negative net worth. Of course. Problem is, that has always been true, and will likely always be true. So that shouldn’t hold you back from buying, or you’ll never buy.
And it’s funny how you assume that all the millionaires in Victoria are house owners. How about the renter millionaires? You bears tell us endlessly of the amazing returns you’re getting from plowing all your excess cash into the stock market instead of housing. Maybe the Victoria net worth millionaires are renters, but why aren’t renters like you telling me that? Why do you assume that anyone rich made it from owning a house, and not from renting and investing? Is it because you actually realize that renting/investing is not a likely route to getting into that Victoria $1.1m average net worth club?
The topic I was talking about, and linked to, was data showing the average net worth of Victoria household being $1.1m. And your response needs to be a typical, fact-free off-topic, shoot-the-messenger post that I “must have something to lose” and I “don’t listen to anything” and I must be “mad”.
Well I’m not any of those things. I was just blown away by that net-worth piece of data about 6 months ago when I first read it, and still am. Try it out at your next cocktail party if you are talking housing – “did you know the average net worth of a Victoria household is $1.1m?”. If you have nothing to say on that topic, that’s fine with me. And choose to reject it as false for whatever reason. Just stay on topic and avoid the personal attacks.
If you or anyone else wants to rent, for now or forever, go for it. This is a site about buying houses, not renting them, so it’s not like I’m out of line by stating my position – of being in favor of buying a house for your family if you’re planning to live here long term (at least 10 years).
The Canadian average doesn’t apply to Victoria (or Vancouver or Toronto). The % of net worth in RE is much higher. Many households have negligible assets outside of their residence, and only a small drop in prices would take them to negative net worth.
Patrick:
I think many people will be saying “Josh was right, prices do rise over the long term but I was not able to live my life to the fullest because I had this huge debt hanging over me. Now I have to sell this house we made beautiful memories in to pay for retirement/job loss. I wish I had waited until it made sense financially, planned out my retirement and looked at historical interest rates before taking on my max mortgage. I wish I could have sent my kids to hockey, had a parent work part time while they were young and had a shorter commute but we couldn’t afford it.” 🙁
But honestly I don’t think you listen to anything anyone else has to say anyway. You seriously sound like you have something to lose here. Why does it make you so mad if a renter is able to afford to buy but doesn’t?
100k / 900k = 11%
Asking price is 11% over the Sold price. It is hardly “delusion”.
It is a Environics database compiled from stats Canada, CRA and BOC data. (As clearly shown in the release notes PDF). Victoria average family NET worth (that clearly does include debt because it’s NET worth) is $1.1m. You need to come up with a better argument than shoot-the-messenger.
Or, better still, ignore all that, and decide that everyone is only as well off as you. Feel better? And just wait it out until prices fall where you want them to be. We may need another desperate perma-bear to kick around here in 10 years, and it may as well be you.
I wish you and others would respond to the data presented, and not just attack the messenger.
For example, the data reported was average net worth of $1.1m per family. This from an Environics database compiled from Stats Canada, BOC and CRA. Nothing to do with promotional materials. If you don’t believe it, then ignore it. And continue to post surprise every time you see a multi-million dollar home sold in Victoria, and ask “who could afford this based on $90k average income?” And continue your opened ended “plan” of waiting.
I take a different approach. I bought a house many years ago when I got married. I paid almost no attention to prices thereafter, as I knew I would own a house forever, so what would it matter if they went up or down. As it turns out, my first buy was at a market peak. So what, I didn’t even think about that. I liked owning a house and paying it off. And that always has been true including the present day. Note that I don’t own anything beyond my personal use properties.
You are always going to have an argument against buying a house. But pay attention to Josh’s comment ( # 53678) when he admits that “of course prices will rise over the long term”. Well, he’s right and they will. But that only works for people who “get on the train” and buy a house, not the ones who let every train pass them by. Buy a house today, and sell/buy a new one as your family grows or you need to move. Don’t obsess over prices along the way. 25 years from now, when your mortgage is paid off, you can say “Josh was right, prices do rise over the long term. And it was fun to own a house as my family grew up”.
That PDF is nothing. No stats, not about Victoria, nothing. There’s an article that sites Environics which says Victoria’s average household is worth $1m, but that’s the value of the home itself and clearly does not include debt. So your claim that the average Victoria household has a NET worth of $1.1m is hot steaming bupkiss. I’ve seriously never seen anyone grasp at straws as hard as Patrick does.
Australia now in a credit squeeze even at low rates. It’s already starting here with increase in financings being turned down. The new year will bring more evidence things are going south with housing in Victoria.
Credit squeeze hampers new home approvals
While the Australian Prudential Regulation Authority’s regulation was designed to curb high-risk lending practices, Hopkins said ordinary home buyers are now also experiencing delays and constraints in accessing finance
“A credit squeeze has emerged in the latter of half 2018 and this is playing a major role in slowing the flow of new home-building work entering the pipeline,” Hopkins said, ““Households who are seeking to buy new homes are often not receiving sufficient finance, while for those who do receive adequate financing, it now takes much longer to reach that milestone.”
Actual financial and market data is probably a better underpinning for a debate though, and the data is saying so far, that none of the breathless promotion in these magazines appears to be helping the market at this time. I honestly don’t know why you keep harping on promotional materials to make some kind of “it’s all good” case, wrapped up in your fiery rhetoric to make it sound airtight and non-debatable. It’s not convincing in the slightest. Regardless, the macro and micro data will be continuously posted to this forum as it comes in whether you accept it or not, and whether it supports one narrative or another. Right now, it does not support yours. At some point, it will.
And Dad kinda gotcha there. A bit silly to accuse your “opposition” of ignoring something while you do the same, in the same sentence. And arguing net worth is so beaten to death on this site it’s not even funny. Net worth through aggressive credit expansion has never saved an overbought, inflated RE market, and this one isn’t going to be the first.
The Environics Wealthscapes database is a database, not a survey. As you can see in the release notes, it is “compiled from data from Statistics Canada, Bank of Canada and CRA”
You can confirm that here
https://www.environicsanalytics.com/docs/default-source/can—release-notes/wealthscapes-2018-release-notes.pdf?sfvrsn=5cb25098_10
If you research anything about net worth in Canada you will discover that about 50% of average net worth is in residential real estate. So if prices crash 50%, that would drop average net worth in Victoria from $1.1m to $775K .
Remember that $1.1m is per average household. That means for every “flat-broke” household, there is one worth $2.2m . Note that these are averages and not medians, so feel free to ignore all this if you want.
Patrick, the source in the article you posted is not Statistics Canada, it is a report by Environics.
Also, did you see this part?
“The report goes on to suggest that the top-three in the millionaires club are benefiting from rapidly raising real-estate values that speak to a housing bubble that has the potential to ‘burst’ and lower the values of real-estate holdings.”
It’s hard to do a survey on people who have never travelled to the city in question, so a tourist magazine seems like a natural for me.
The $1.1m figure is from stats Canada, and quoted in many articles like this one. http://victoria.citified.ca/news/1-one-million-thats-the-average-net-worth-of-a-victoria-resident/
The figure is for all households. Net worth for homeowners would be considerably higher, because they own a house. This is average and not median, so feel free to ignore it as many bears here do. Just dont be surprised when you see expensive houses sell here.
Patrick, both of those ratings are by travel magazines. Victoria is, evidently, a wonderful place to visit. Moving to and buying a home is quite another consideration from visiting.
Source on the average net worth being $1.1m? Is that average household networth of homeowners?
Dasmo-
Like, no man. It would take over 7% inflation for money losing half its value in 10 years.
Think about it – if a decent beer at a bar is $7 today, it wasn’t 3.50 in 2008 (and sure as hell wasnt 1.75 in 1998). Today’s $100 grocery bill wasn’t $50 in 2008, a $50k truck wasn’t $25k back then either, etc.
At 2% inflation it takes over 30 years for cash to lose half its value.
Did you mean house prices double every ten years? That is a bit of a cliche that’s probably unsustainable, but has been closer to the truth.
Size of city doesn’t determine price. How about “I’m rich and I want to live there!” Remember, average family NET worth here is $1.1m.
Victoria may a small city, like Regina, but unlike Regina, Victoria is ranked as the 2nd best small city in the world by Condé Nast readers. Higher than small cities like Florence Italy . https://www.cheknews.ca/victoria-named-no-2-small-city-in-the-world-by-conde-nast-377492/
And 7th best city period in the world. https://vancouverisland.ctvnews.ca/victoria-named-7th-best-city-in-the-world-by-international-travel-mag-1.3124048
“The B.C. government has filed a civil forfeiture claim in a bid to seize millions of dollars in cash, property and other assets linked to a massive money laundering case.”
https://theprovince.com/news/local-news/b-c-government-files-forfeiture-claim-in-money-laundering-case/wcm/74d606ee-e1cf-4753-9d83-bbac6640cddc?utm_medium=Social&utm_source=Facebook&fbclid=IwAR1xptlgkRKySe95DAUtw6hjL4L8O0sBUIYix0pAJloB43WslJvu6vTjgXE#Echobox=1545422756
Happy solstice and Saturnalia, HHV’ers! It’s brighter everyday from now on.
Well that was entertaining. 10 hours no power. Oddly enough starting this morning after the storm.
Perhaps predictably, CAD is now trading at a nearly 2 year low. If this keeps up, Poloz will have to act as that’ll eventually stoke inflation, especially as the Fed continues hiking.
Given the outsized effects of the measly interest rate rises we’ve already seen in Canada, that could really be a tough spell.
Fairfield = Kitsilano
Gonzales = Point Grey
Uplands = Shaughnessy
Although all of these comparisons fall apart because Vancouver is just so much bigger and different
@ Deryk
That would be me, and I spent years living and working in Vancouver and I know all parts of Van and the North Shore extremely well.
If you are going to post house prices in Kits/Point Grey area, then you need to post the equivalent of house prices in the Uplands because Kits/PG and Uplands are pretty much on par (the difference being lot size).
The point of my post was that not all prices in Van are reflective of Kits/Point Grey which is pretty much the most expensive area of Vancouver, and to paint a broad brush that the average house price in Van is the house price in Kits/Point Grey is absolute rubbish.
There are many factors for house price discrepancy between cities as there are fuel price variation. Demand, regulation, taxes, and environment are some of the contribute to price.
Perhaps, Eugene federal and local government have less regulations on construction restriction/costs and growth than Victoria. And, it is possible that Victoria is more of a tourist destination that drive up the price discrepancy.
Perhaps, the average bear could enter the housing market if they willing to move, and lower their expectation they could get into a house in places like Port Alberni at 1/3 of Victoria price.
4 beds, 2 baths house list at $175,000
https://www.realtor.ca/real-estate/19879453/4-bedroom-single-family-house-3407-4th-ave-port-alberni-z6-port-alberni
hmmmmm 72/10 is 7.2% yearly growth. Or…. Money loses half it’s value every ten years….
ICYMI gwac, there’s a guy named Trump whose fucking up the world with his psychosis/Saudi buddies who he got to tank oil, on top of a global recession beginning.
You know, the one that pumped your house up along with Harper’s 40 year mortgages/bank bailouts of $113 Billion onto taxpayers ? Well it’s going the other way now, AKA “bear market”.
Maybe you should get Christy back so she can loot ICBC and Hydro again to balance the books and bankrupt the taxpayers some more.
20 to 850 in 50 years is 7.8% per annum price appreciation. Though as patriotz pointed out that is not the total return as it overlooks the net rental yield which applies whether it was owner occupied or actually rented.
My father owned a rental house in Kitsilano from 1978 to 2008. Almost exactly 7% annual price appreciation over that 40 year interval.
Intelligent observers of the sector never expected more than 1-3 projects to go ahead. Christy sold you a pipe dream. It’s also true that BC is a tough jurisdiction for resource industries with all the land claims issues coming more and more to the forefront
Yes indeed, and that is the bear argument in a nutshell. Why should they be higher? I can give you a good reason why prices in Canada should be lower – US buyers can lock in interest rates for 30 years, which means buying is much lower risk. Here’s another good reason – US buyers can deduct mortgage interest and property taxes on principal residences.
I’ll keep that in mind if you keep in mind that as major cities in Canada experience a correction, mobile populations looking for jobs will prefer cities larger than Victoria.
I agree, and Victoria is a medium city at best.
True, but the average income in your comparison city is 134.5k CAD.
My general point is that Victoria is not so extraordinarily positioned that it will be flat while every other Canadian city tanks at the end of this cycle.
In fact corporate income tax rates in Canada are low by global standards and until the latest US budget were lower than in the US.
Hawk read the article and for once deal in reality instead of the constant bs. It represents 3% and has been that way for 10 Years. The green economy is a joke. It generates 1.6% of jobs.
Yep lets keep killing ourselves with toxic gases/deplete the ozone as long as we’re making money. How Trumpian. Anyone with half a brain would know new technologies take years to progress and reduce costs.
Look at solar, it’s incredible the advancements in battery storage/costs just the past year. Again, your Ralph Kleinies are cutting off your oxygen gwac.
FYI, the writer is a disgruntled ex-government employee potentially indirectly getting paid by the O&G bizz working for CD Howe the BC Lib pump machine.
Josh: We are likely moving to Lugano which has a population of about 60k and prices are not less than Victoria. The point is that the population size is not the only factor in real estate. Think of all the reasons you dont want to live in ottawa and combine that with the fact that you want to be right downtown and not in the Westshore and that a lot of people share your priorities particularly a lot of older people who after twenty five years of working have more capital than you. Desirability and city size do not always translate into pricing.
Just for fun check out condo prices in downtown Lugano.
Bit of both for sure. Many agents didn’t get the message and the ones that did get a lot of pushback from sellers that think the agent is trying to push them to list under market to get a quick sale.
It’s a delicate balance
https://business.financialpost.com/opinion/philip-cross-statcan-just-exposed-how-worthless-green-industries-are-to-canadas-economy
This is our green economy so while we destroy our oil and gas what is going to replace it
Okay so, why is demand in Canadian RE falling, and in urban BC, nearly collapsing? Why are LNG projects in BC, project after project, being shelved?
Why is the federal government having to buy our own pipelines? Why does no one want our oil? Why are automakers exiting Canada? Why has the TSX gone nowhere in a decade? Why are people dumping our dollars? Why are our 2 and 5 year bond yields nearly inverted? Why do global businesses bypass us due to our much higher corporate tax rates?
What data are you looking at?
TSX is down 2500 points. Liberals are destroying Canada as an investment country so Deryk I disagree until Selfie Boy is gone. Canada is not a good place to invest at this time.
One LNG project cancelled yesterday. We are a take and distribute to those who don’t contribute country and its taking its toll. Plain and simple we suck at innovation and competitiveness.
Eh we have marijuana. That will make up for destroying our oil and gas sector…lol
BTW all you green lovers who think that will save us. Represents less than 3% of GDP
Keep in mind that north america is well placed to benefit from the mess in Europe with the Brexit looming.
Money is starting to flow in this direction already. Canada is seen as a great place to invest and BC has massive projects such as the LNG in the north. (Those kinds of investments means jobs for lawyers, bankers, architects, engineers etc etc in the big cities)
There are always doom and gloomers on the fence:)
The third most expensive city in Canada which has 1/3rd the population (at most) of any major Canadian city is “still inexpensive”. Ya, ok.
But Hawk, who cares what happens in Vancouver. Vancouver market crashing will have no effect on Victoria. Just ask gwac.
The sound of when a bubble explodes.
Vancouver Real Estate Pre-Sales Fall 62%, New Launches 31% Below Expectation
https://betterdwelling.com/city/vancouver/vancouver-pre-sale-real-estate-sales-fall-62-new-launches-31-below-expectation/
Toronto New Condo Sales Fall Over 53%, Inventory Spikes Higher
https://betterdwelling.com/city/toronto/toronto-new-condo-sales-fall-over-53-inventory-spikes-higher/
LOL… put down 10% like most did who fuelled the latest pump and they couldn’t even qualify in today’s market. $600K is not chump change. Nowhere but down now with the coming recession. Psychology has changed bigtime and that’s what ultimately drives markets.
Houses in Victoria are probably cheaper than in Langford or other outer, but more recently developed, areas. In the core, it’s the land cost that kills you.
It would be interesting to see an analysis of the historical trend in land values by location versus the value of the improvements. In most of the core, the mean house price has probably declined over the last several decades, the escalation of property prices being entirely due to rising lot values. Hence shacks valued at around a hundred grand on million dollar lots.
Wow, you just describe markets in a nutshell. Sometimes they are up, and lots win. And sometimes they are down and lots loose. But if you hold your course you usually get the median return. How was the price 10 years ago. And what will be the price 10 years from now…
It all matters on who is the Greater Fool
https://en.wikipedia.org/wiki/Greater_fool_theory
Headlines from previous Canadian RE peaks, then the inevitable busts:
Market peaks:
Fleeing Torontonians buoy Hamilton housing (Mar 3, 1989)
Housing hysteria may ease, some say (Mar 25, 1989)
Home prices continue to rise but sales dip (Apr 7, 1989)
Mortgage cuts won’t revive house sales experts say (Apr 22, 1989)
Who can ‘afford’ these prices? (Jan 21, 1989)
Housing market should ‘burn’ speculators (Jan 3, 1989)
Metro home sales and prices drop for second month in a row (Dec 8, 1989)
Real estate investors will have to work harder in the ’90s, analyst warns (Mar 5, 1989)
LePage survey reports drop in first-time home buyers (Jan 26, 1989)
Metro’s real estate boom paints artists into a corner (Feb 25, 1989)
Toronto house prices seen ready to cool (Mar 3, 1989)
Metro houses under $150,000 small and scarce (Jan 12, 1989)
Tax hikes spark outrage in Vancouver Shopkeepers face increases up to 400% after market-value property assessments (Oct 14, 1989)
Starting down and denial:
Here are some more selections from readers’ letters on how they would solve the affordable homes crisis. Some of the letters have been edited to fit space requirements. (Jun 24, 1989)
Real estate boom cooling off in Metro (Apr 14, 1989)
House sellers getting scared in ‘buyer’s market’ (Apr 15, 1989)
Real estate groups outraged by report of 25% price bust (Jun 3, 1989)
Metro housing market plunges (Jun 7, 1989)
Yes, I’m a Bad News Bear (Jun 17, 1989)
Home sales rise but prices edge lower (Jul 7, 1989)
Most businessmen, including builders and real estate salespersons, talk in a kind of “double speak.” (May 27, 1989)
Condo market meltdown? Speculators say condo-oh, as glut of units drives (Dec 10, 1989)
House prices in West rise as Toronto market cools (Mar 2, 1990)
Home resales in Toronto down to lowest level since January, ’84 (Feb 14, 1990)
New home sales rose by 19% in October (Nov 11, 1989)
Fall:
Real estate agents face hard times as house prices drop, sales dwindle (Apr 19, 1990)
Home sellers cling to great expectations (Nov 7, 1990)
Giant Century 21 office folds in Metro (May 17, 1990)
2 more Century offices closing (Jun 2, 1990)
Home prices off 20%: LePage (Apr 25, 1990)
Resale home prices down in June (Jul 12, 1990)
Property prices slop in cottage country (Jun 28, 1990)
A house is long-term investment (Oct 20, 1990)
Home starts could reach 5-year low (Aug 10, 1990)
Metro home prices, sales weak in May (Jun 13, 1990)
Further slide forecast for home prices (May 31, 1990)
This is the worst time to buy a house (May 6, 1990)
Resale home market cools in April, even in hot Alberta (May 29, 1990)
Hundreds lose homes as recession hits Metro (Oct 27, 1990)
Buy now and you can own an amazing depreciating asset!
That made my morning. 🙂 🙂
Local Fool: Eugene is cut off by an ocean from Victoria which we all know is the center of the Universe.
Topical listing this morning: MLS 404290
Nice area, average size lot (6107 sq ft). 1972 house with a reno.
Current assessment: $786,000
Asking: $1,249,900
For the listing agent aiming to take home commission on $1,249,900 – possible to provide something more than 8 cell phone images of the kitchen/living room, plus a shot of a cloud? Maybe mix in a shot of a bedroom? bathroom? exterior of the house? backyard? I’m no realtor, but taking more than 2 minutes on the photos (or hiring a pro) might help back up the asking price.
I like your analysis, but who is to blame more, the sellers, or Realtors, whose responsibility is to inform and advise their clients?
patriotz,
Victoria is on an island. is a provincial capital city, is a tourist destination city particularly in the summer, and is an emerging tech/design city. Eugene, OR is not a fair comparison. Also, house prices in Canada are obviously higher across the country than in the U.S.
I don’t think prices are really affordable in Victoria, but I also don’t expect they’ll decline much more. I guess by May they’ll bounce back. Probably now is a good time to buy, especially for folks entering Victoria’s market. (I entered the Victoria market as a first-time home buyer in late 2015 and don’t regret it at all.)
Johnno
Well we do share that in common, don’t we. Haha.
Interesting graphs Leo. Shows the importance of selling prices – not asking prices. The latter is always opportunistic and aspirational…
For anyone interested, Toronto condo sales have now dropped over 53%, inventory is spiking. People looking to sell might be better off being competitive today, rather than the far more common and age old behaviour of chasing the market down tomorrow.
And Eugene isn’t cut off by an ocean…
What’s amazing is that such a small city is so expensive. Compare with Eugene, OR which is the same size, and considered expensive by US standards.
https://www.zillow.com/homes/for_sale/Eugene-OR_rb/
I have to laugh at some of the comments here on House Hunt Victoria. When I posted a house in Kitsilano (Vancouver)…. with a price tag of two and a half million, someone posted a house on “East King Edward” (Vancouver) for $1.4 million and claimed that not all houses in Vancouver are 2.5 million. It’s annoying because they clearly have no idea of the different areas of Vancouver. Comparing the east side of Vancouver with Kitsilano would be like comparing Fairfield with the farthest reaches of Esquimalt. (Actually worse…. but I’ll keep it simple.)
My point is that houses in Victoria are still inexpensive. You can still buy a house within a short bike ride to downtown Victoria…. for around $600,000.00 …which is amazing actually.
Interesting charts. Thanks Leo.
Lots of people in Victoria made much more than that, depending on the time period. I’m not going to do the math, but over 50 years my in-laws’ house went from under $20K to about $850K, and the lot has a view and location that is much harder to get now. Also, in Victoria house prices have tripled or quadrupled since 2001. Anyone calculated returns on a house in the West End of Vancouver? Way more than 6%, that’s for sure.
There is no doubt that many people have essentially won the lottery by owning certain houses over the past 10+ years. As they say, though, past performance is no guarantee of future returns. However, you can’t judge the soundness of a decision based solely on the outcome. How to evaluate the right time to buy for you has been discussed here, and where you (and the prognosticators) think prices will go is only one of the factors. Note, the criteria are different for your personal home vs. a revenue property.
When i see delusional high asking prices right now … all I am think is which desperate dumb ass realtor sold the owner a fantasy dream… we all know that the property will sit on market for 2 more months then another … time is money now .. the faster you move your property off the market the more money you can keep .. unrealistic prices will only keep your house on the market till you realise the market is lower than the realistic prices 3 months ago