May 6 Market Update
Three business days isn’t much of a week, but here are the sales numbers to date anyway courtesy of the VREB. May is usually the peak for new listings, so we should expect at least 1500 new properties to hit the market. With the weather out there, we really shouldn’t see any excuses on that front. Last May was quite unusual in that it ended up with fewer sales than April, likely due to the fact that it was the end of any pre-stress test pre-approvals and also the introduction of the foreign buyers tax that hit that month and took some sales out. For 2019 numbers on foreign buyer transactions we’ll have to wait until June, since apparently the process is being automated and has been delayed.
I have a hard time believing we will end up with a repeat of last year’s trick for May, so I expect sales to be closer than they were for April. Looking back at previous differences between April and May, I expect about an extra 50 sales, to end the month even with last year’s total or slightly above. I’ve been expecting a month of year over year gains for a while now but this might finally be the one due to the extraordinarily weak May 2018. The first three days of the month were strong and outsold last year by a significant margin, but it’s not enough data to make a real projection yet.
| May 2019 |
May
2018
|
||||
|---|---|---|---|---|---|
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Sales | 121 | 755 | |||
| New Listings | 298 | 1504 | |||
| Active Listings | 2798 | 2394 | |||
| Sales to New Listings | 41% | 50% | |||
| Sales Projection | — | ||||
| Months of Inventory | 3.2 | ||||
It doesn’t really matter what metric you look at, the picture is the same out there. Gradually slowing market conditions across the board, approximately in the mid point between the recent hot market and previous slow one. Days to sell a house is no different, with the median house taking three weeks to change hands in May so far (unchanged from April).
There isn’t a significant difference between the core and west shore areas on the single family side, both markets cooled off significantly from two years ago, but still selling relatively actively. Where we see the big difference is in core condos vs those on the west shore. In any weakening market it’s always the marginal properties that suffer first and right now if you want or are settling for a condo, most people will prefer the proximity of downtown.
Thanks for the idea James https://househuntvictoria.ca/2019/05/08/construction-per-capita
Automatic upvote for referencing Dalio. Principles still one of my top books.
But Japan has had decades of slowly sliding house prices. So endless low interest rates don’t necessarily mean prices go up.
Well Saudi arabia ordered all their students to leave Canadian universities over a little tweet. I suspect China isn’t quite that extreme, but I wouldn’t say it’s impossible.
Selling your presales, Marko?
Another bullish article, this time from Bloomberg, pointing out the housing rebound as one of several recent signs of a stabilizing housing market in Canada. The article has a nice graph entitled “building is back”.
May 8, 2019 (Bloomberg) Housing Starts Surge 23% in Comeback for Canadian Builders
https://www.bloomberg.com/news/articles/2019-05-08/canada-april-housing-starts-surge-23-as-industry-comes-back
“Canadian housing starts (CMHC) unexpectedly surged in April, in another sign of recovery for the nation’s battered real estate market. The gain was driven by new multi-unit construction in Toronto and Vancouver. The report is in line with other recent data (Toronto bounce https://www.bloomberg.com/news/articles/2019-05-06/toronto-housing-market-begins-busy-spring-season-with-a-bounce ) that suggests the nation’s housing sector is stabilizing from a recent slump, easing concerns that some of the country’s more expensive markets like Toronto and Vancouver were poised for a major correction“
Nice to see a solid rebound (“surge”) in Canada construction starts in April 2019, including in BC, Ontario and Canada. Even Vancouver up. A good sign for the economy and construction jobs in particular.
Canada Housing Starts Surge in April (TD Bank)
https://www.actionforex.com/contributors/fundamental-analysis/196618-canada-housing-starts-surge-in-april/
May 8, 2019
“It’s early days, but April’s increase in homebuilding bodes well for residential investment and overall economic growth in Q2. Canadian housing starts blew away expectations, jumping to 23% m/m to 235.5k (annualized) units in April from an unrevised 192.5k units in March. Starts increased in B.C. (+15.7k to 51.1k units), buoyed by a 13.0k gain in multi-family starts in Vancouver.”
Seriously Patrick! Don’t you know that Victoria RE has been on the verge of crashing for at least 10 years.
Trick question. Water vapour is already water.
No house building for you! 🙂
Decent amount of stuff that’s not gonna flip well being posted on the VIF fb group today. Looks like things are picking up steam.
Condo – Listed for $399,999
Purchased for $500,000 in 2018
Assessed for $442,000
101 12075 EDGE STREET
Maple Ridge – East Central
https://www.zealty.ca/mls.php?id=R2367582&fbclid=IwAR3T0aIXP_EcS8WJiOMkAs1Ip3fi6OMX42WTkUxXOLF_XJHqdjtceOZroLg
Listed for $1,950,000
Purchased for $1,960,000 in 2017
Assessed for $1,731,000
2999 LARSON ROAD
North Vancouver – Upper Lonsdale
https://www.zealty.ca/mls.php?id=R2367278
Listed for $1,899,000
Purchased for $2,650,000 in 2018
Assessed for $2,344,700
2073 W 45TH AVENUE
Vancouver – Kerrisdale
https://www.zealty.ca/mls.php?id=R2367043
Listed for $890,000
Purchased for $1,180,080 in 2017
Assessed for $1,370,000
2504 8031 NUNAVUT LANE
Vancouver – Marpole
https://www.zealty.ca/mls.php?id=R2367512
1857 Bowker Pl has been totally renovated, both the interior and exterior and the pictures show it was well done with beautiful results. That’s why it sold well above assessed value.
Amazing, isn’t it? Like Grant said, interest rates could stay super low for a lot longer than many think.
In fact, if I’m lucky, they might stay historically low for 15-20 years—the entire duration of my mortgage!
Mortgage credit growth has been falling steadily in Canada for at least 10 years, from 13% YOY in 2009 to 3% (2019, where it is today). If you saw falling credit growth as a early “precipitating” sign of a bust, you would have missed out on a 100% run in many Canadian housing markets. It’s all shown on the Bank of Canada charts… https://credit.bankofcanada.ca/householdcredit
If the money is located, that is most definitely how it can work. It’s happening all over the world right now; Project Dragon in Australia is a notable example. Don’t think they’d do it as a “retaliatory” measure as much as to maintain integrity of their Forex reserves…
1857 Bowker Pl sold today over $2.5M. Bears hope for armageddon need more luck than sellers. Barrister nailed it, Beach Dr is an ugly house.
MLS#:407516
Price Original$2,749,000
Price List$2,749,000
Price Sold$2,575,000
Assessed Value:$2,004,000
DOM 35
That’s not how things work.
No idea on the original question – probably something like:
What is the correct term when water vapour turns to water at the dew point?
The correct answer would be ‘condensation’.
https://www.buildingscience.com/documents/digests/bsd-controlling-cold-weather-condensation-using-insulation
Can we actually do that though? I didn’t think we could extradite people to countries that condone torture?
Leo@ Stranger things have happened in Vancouver RE.
It is no secret that the Chinese Gov’t is super pissed at Canada these days (and maybe Vancouver, in particular), for our handing of the Meng Wanzhou file. They have already imprisoned some Canadian citizens in China for questionable conduct and withheld the right to counsel, and they have cancelled our canola, and penalized our pigs, and some believe that all of it is in direct retaliation for our actions on Huawei.
So, what if we actually extradite Meng Wanzhou to the USA to face a criminal prosecution? I don’t think their gonna like that too much. Maybe they are going to really over-react and order all Chinese citizens to unload their Canadian real estate, which may very well cause a serious RE crash on the west coast. It would be high stakes poker because the sellers themselves would have to take a bath, but the Chinese Gov’t is mad about this issue and quite unpredictable, I’d say. Laugh if you will, but I don’t think it’s out of the realm of possibilities.
Stranger things have happened.
Not much lower, but they could end up staying sunk for a very long time. Billionaire Ray Dalio, founder of Bridgewater, thinks that when the next downturn hits the US economy (within 1-2 years) the US Fed will:
1) Utilize monetary policy #1 and lower interest rates as much as they can (admittedly won’t be much given where they are now)
2) Go back to the well with monetary policy # 2 – QE. This will again inflate assets such as RE and stocks.
However he thinks these 2 will not be enough and that the US will face a situation similar to Japan and the EU – that the US will then turn to monetary policy # 3 and run even bigger deficits to stimulate spending, and the central bank will monetize those deficits (inflate them away)
Perpetually low interest rates, inflating asset prices and a global race to the bottom among central banks in terms of devaluing their currency. Not very healthy if you ask me, and very challenging to navigate economically and socially, but it is what it is. It’s why I’ll be staying with the variable rate mortgage for the foreseeable future.
Ray has an indepth (but wonky) discussion of this here
https://economicprinciples.org/downloads/MMT_%20MP3_MK.pdf
Sure, but you’re the one arguing here. I’m just asking what your justifications are.
I don’t know if i’d call 5 quarter point raises a bunch, it hasn’t even got up to half way what it was in 2008 when they dropped it from 4.5% to 0.25%.
I don’t know how it was actually worded….people send me the questions they remember from the exam and then we work on the study guide off that.
@guest_59377
Can you re-post that Builders exam question as it was actually worded?
LeoS: Thanks for the Uplands numbers; you are a wizard.
It doesn’t really matter what I or anyone else thinks. Airtight arguments don’t equate to accuracy in predicting the future. As I’ve pointed out before, plenty of folks on this blog are argument wins-rich and net worth-poor.
Well, they can get a lot lower, actually, like they were circa 2010 and 2015-2017. The Bank of Canada has raised rates a bunch of times since then, so it has some runway to reverse course should the need arise.
Doesn’t seem like you think there’s anything to support prices here except that they’ve always gone up over the last 35 years.
https://housepriceindex.ca/#chart_change=bc_victoria
Even in the last 35 years, it’s been huge increases followed by dips, but each time affordability was brought into line by decreases in interest rates. How much lower can mortgage rates actually get?
I went through all of the cities on that site you sent (https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=3410015401) , took the total being built, and divided by population.
Victoria was 1st, Vancouver a very close 2nd (nearly tied), Halifax was 3rd (11% lower I believe) and Toronto was 4th at 25% lower. Majority of cities across the country are building a full 50% less units per capita.
I actually posted it on this site, but it was the last post in a thread, so likely just missed it.
Attorney General David Eby has just remarked that revenues are expected to fall as regulations bite Casinos and other companies dealing in large cash transactions.
He’s decidedly unapologetic.
“To any casino service provider or business operator in B.C., government is not going to be changing policies related to bulk cash transactions. For those that currently are accepting bulk cash transactions, without asking questions about where the money came from and their business model is dependent on that, we will be closing the door or we’re coming. That is our commitment to British Columbians.”
https://www.citynews1130.com/2019/05/07/attorney-general-says-revenue-losses-expected-after-crackdown-on-money-laundering/
That was a great site, thanks. A bit similar to Better Dwelling today.
A lot of people seem to get confused by this. You see that on here when people make observations such as “prices haven’t moved, so nothing’s happening.”
A housing bust is precipitated (but is not always inevitable) by declining volumes and credit growth. During that time unemployment is often at very low levels, insolvencies are at or near their cyclical bottoms, and wage growth may be impressive. We’ve seen this in Canada almost every cycle of the last 40 years, the US, Australia etc. People repeatedly cite these as supportive metrics for RE going forward, but the irony is they are actually pointing out what are pretty time tested top-side cyclical dynamics.
Minor price corrections do start soon after sales volumes slide, but the larger ones tend to occur when the slowdown stats to chew out the underpinnings of the economy’s RE sector. Unemployment and insolvency rises, confidence continues to fall…and indeed, panic can set in.
Actually that bump did happen in Vancouver. I remember it well, with people coming out on Twitter parading it as the end of the correction. The bump in Toronto IMO, is not signaling a turnaround in Canadian RE. Corrections don’t finish half way with no real effects on an economy, as many Canadians seem to think.
5
2 last year same period
8 year before
14 year before that.
Current DOM: 20
Actual DOM at $2.5M: 60
Originally listed Aug 8, 2018 at $3.375M
Gonna make an offer Tomato?
Naw – we knew it. Our neighbors knew it. Newspaper articles put interesting spin on what was happening in the real estate market but you’d have to have totally tuned out to not know that prices were dropping. Prices peaked in many areas in mid-2005.
Does this take into account the cancel/relist which resets DOM? I find days to sell metrics highly suspect when a total DOM is not taken into account.
Missed this. Where is this from?
People are expecting a 2009 repeat. Or for the Toronto bump to happen in Vancouver too.
I would say it’s unlikely but I wouldn’t write off the possibility entirely. Stranger things have happened in Vancouver RE.
Speaking of the luxury market, the house I was interested in during the winter but $500k out of my budget is still for sale listed at the exact same price…… Maybe it’s not considered luxury.
https://www.realtor.ca/real-estate/20311675/3-bedroom-single-family-house-46-king-george-terr-victoria-gonzales
There still are. There are fewer of them here now, but that decrease isn’t causing our prices to crater, as we can all see. Far from it.
No gargantuan price increase in Victoria due to foreign buyers = no gargantuan price decrease in Victoria due to lack of foreign buyers. It’s fairly simple.
“Huge spillovers” are hard to quantify. The increased few who cashed out there to buy here helped drive our prices to an extent, but to what extent is uncertain. And the mania in Vancouver obviously affected perceptions of/in our RE market, but to what material effect is largely unknown.
There is no “normal” rate at which prices rise. For periods, they go up a little, or a lot, or down a little, or down a lot, or stay relatively flat.
I think so, but I haven’t been paying close attention.
An unbroken 35-year run of prices (nominal and real) flatling or going up, but never going down significantly. It’s not a guarantor of future price behaviour, but it’s certainly interesting.
In the entire US RE inventory doubled between 2004 and 2007. Individual markets were quite a bit faster. Nationally it was more spread out because not all markets were in sync.
https://www.calculatedriskblog.com/2007/05/more-on-existing-home-sales.html
Calculated Risk Blog between about 2005 and 2009 is a treasure trove of detailed information on a housing bust unfolding.
Tomato: 2805 Beach Dr, if I am not mistaken had been listed previously by Jason Binab and someone else before that. In other words it has been on the market for months. The house is sort of in the twilight zone where it is too expensive to knock down, too expensive to try to fix and with too much of a “Home Depot” feel to sell as is.
But if your point is that things are slow in the luxury market I suspect that you are right. Maybe one of the real estate gurus here can tell us how many sales there have been in the Uplands so far this year. My own feeling is that not much has sold this year but I could be wrong..
I think this listing is pretty telling.
https://www.realtor.ca/real-estate/20570047/4-bedroom-single-family-house-2805-beach-dr-victoria-uplands
Definite best value in the 2mil+ range and it’s been listed for quite a while. Does any one have DOM?
If this doesn’t move at this price point… good luck to all others in that range.
You only get panic selling in the late stages of a bust. Most people in the US didn’t even catch on that prices were falling until 2008, when in fact they had been falling since 2006.
This ties in with rising unemployment and foreclosures lagging falling prices, not leading them. Prices can decline for a couple of years but most people still think things are “normal”.
Seven price drops in Victoria in one day according to this website. One dropped 15%. That would be 2270 Arbutus Road. From $2,294,000 to $1,950,000.
https://www.yvrpulse.com/d/price_drop_1_days_ho?fbclid=IwAR3EtW1hJ8-Wh4pOjApRRuqxIDlavqmn-dEnBRNweS1B0kdMaT6GmdGFTcg
Also, realtor Mary Cleaver in Vancouver is selling a condo. She has publicly stated that the asking price will drop $20,000 every Monday until it is sold. My opinion of this? She is an intelligent, honest realtor who realizes the true nature of the situation. She is providing a good service to her client:
https://globalnews.ca/news/5231210/vancouver-april-real-estate-prices/
In Victoria condo pre-sales are stalling, several developments have been canceled due to recent construction costs and slow sales. Most projects in the estimating phase are large scale rental properties.
@Koalas
1461 Pembroke is not typical, however I’d say the other current listings at the moment are pretty standard Fernwood.
Ya, but that’s different than a market panic, although it is a necessary prelude. I suspect the first market segment that will show panic is condo pre-sales. I honestly think that’s going to be a disaster for so many.
@guest_59389
Gotta say, some of the sales in Vancouver look like panic selling. There was one recently (1153 Eyremount Dr, West Vancouver)that was bought for 11.2 million in 2016 that sold for 5.5 million.
Ahh, i see it’s already been mentioned.
< I took a quick look at Fernwood this morning (not an area I follow) and was actually shocked to see the number of houses with an asking price over a million. Something seems to have changed.
I am by no means an expert (have only lived in Vic for 1.5 years) but my sense is that this influx of 1 million or more priced homes in Fernwood is an anomaly. In addition, save one, the houses are quite large and probably targeting investors. Still, they seem overpriced to me. I certainly would not dream of buying them if I had that kind of money. Plenty of other homes in that price range in other neighbourhoods I would go for. And that is coming from someone for whom Fernwood would be my number one choice if possible.
There are many individuals who are definitely panicking, but I agree the market writ large is not.
In fact on that scale, sellers are actually recoiling from listing even more than before, but buyers are recoiling far more. The latter is why inventory is growing. This is not an unusual dynamic, and it’s something the US saw in spades a decade ago, especially in its coastal markets.
Do keep in mind, these markets do move very slowly. Despite what many perceive and believe, Vancouver went bust over 3 years ago. The change crept in slowly, imperceptibly, at first. A little volume drop here, and little there. Then 15 unconditional offers as opposed to 20, then 12, then 7, then…
At this point, most people know something has changed, but plenty are thinking a V-shaped recovery is imminent. IMO, it’s not. There are no metrics or historical precedents to support this, at these prices. Then again, VanRE doesn’t necessarily care about either, haha.
When this starts to chew into the wider economy and at this point I suspect it will, the degree of confidence will fall further. Panic doesn’t look the same as in an equities market; it takes a lot longer for the momentum to build…but the momentum of a RE market is a force to be reckoned with once the trend is in place. I trust we’ve all seen the truth of that right here at home over the last few years.
Were there foreign buyers here?
Yes.
Was there huge spill over from Vancouver that made people do crazy things like buy a house with no conditions at all?
Yes.
Did prices rise at a rate way above normal?
Yes.
Is there over building going on in Victoria?
Yes. Most per capita in the country.
What reasons are there for Victoria real estate to continue to cost the same as it currently does?
Vancouver new listings are in the normal range. However, sales are dead. Total listings rising fast. Most properties that are currently being removed from listing are due to expiry, not sale, and will eventually become a new listing once again. If there are no sales the increase in listings is inevitable. Just follow sales.
The characteristics of panic selling would probably be a scenario like this:
– a rapid spiking increase in new listings for several months (exponential), then
– total listings climbing each month (exponential), then
– a gradual spike in sales (exponential),
– the pattern would continue for at least eight months with signs that it will continue.
That’s my description of emerging panic in the market; rapidly increasing inventory with only a few buyers thus creating a situation where sellers start competing with each other for the buyers attention.
That’s just my opinion LeoS, I’m not an expert. I’m presuming that sales will slowly begin to spike as sellers accept lower and lower offers as inventory keeps increasing.
What would characterize panic selling?
The only reason to panic when selling is if you lost your income and can no longer support the house or are forced to sell for some other reason.
That’s what eventually drove the US markets down further. Lots of foreclosures, and of course it was also in the middle of the financial crisis, so spike in unemployment.
Vancouver real estate prices certainly seems to be falling, but it’s orderly, albeit people who bought within the past three years who are now selling are likely losing money.
Vancouver is not even close to panic selling according to the Vancouver Real Estate Association’s website. The number of properties listed, sold, and total listings seem ordinary and orderly. Condo listing are starting to spike, but house listings seems normal. Taken together, activity seems about normal, so far…
Am I missing something?
https://www.rebgv.org/market-watch/summary-of-homes-listed-and-sold.html
Victoria will suffer very little damage from what’s happening in Vancouver. None of the factors that made Vancouver prices skyrocket existed here, so it makes no sense that Victoria would crash and burn like Vancouver. That’s just wishful thinking.
Barrister
I am not into arguing or explaining a step-by-step processes of how to convert cash and launder money in BC on a message board. However, money laundering and financial schemes have been going on since the dawn of time there are a few large scale businesses that operate in Victoria that acquired assets, real estate, and established a now reputable Canadian controlled private corporation with the proceeds of illegal money. This process continues and Canada has some of the most relaxed rules and regulations.
This is just saying what has been said here all along, that housing demand is highly speculative.
I do recall your earlier posts, that often just said, “bloodbath”. Haha. 🙂
It definitely is over there, for many sellers. There are so many people losing so much money now, that posting them is losing its punch. Six digit losses are now as common as dog mess. The low side of seven digit losses are becoming easier and easier to find.
There was a local analyst the other day saying, “there are signs the trough [in VanRE] was in”, and you have to wonder if these people all hail from the peculiar planet of flying cars and trucks, pointing to “we are here?” charts.
Some well-known Twitter threads tracking the carnage are Mortimer_1 and VanREflipflops.
Not sure how many repeats of that staggering loss on 1153 Eyremount Drive there will be, but I suspect we haven’t seen the end of it. At the peak of the bubble, some homes were being flipped for 1M + in 8 months, over and over and over. There was one home I recall that went from 1.5 to nearly 8M in 3 years just sitting there, doing nothing.
Without large injections of new liquidity, I reiterate that VanRE is in possibly more trouble than its seen in over a century. In that event, the spillover markets (ie, ours) will be little more than collateral damage.
Wait ’till the next Provincial election, when “making housing awesome again” will surely be the Party cry of someone. Don’t fall for it. The NDP can’t create affordability, the Liberals ain’t gonna make you rich, and no one on earth can create RE affordability without serious economic pain in the process.
“Wasn’t that full report supposed to come out soon? Haven’t heard much on that front after the one chapter was released”
Second part of the report was released today
https://www.cbc.ca/news/canada/british-columbia/bc-money-laundering-report-eby-german-may-2019-1.5126386
Great article from Better Dwelling that shows how a small amount of money laundering can have a large impact on inflating real estate prices
https://betterdwelling.com/how-a-little-money-laundering-can-have-a-big-impact-on-real-estate-prices/
Ah yes LF, the bloodbath that is the Vancouver real estate market. Still has a long way down to go.
I was told that not too long ago you actually could do this before reporting requirements were tightened. I have no idea whether that is true or not.
If I was doing a private sale now is there anything that would stop me from accepting 8000 $50 bills (weighing about 8 kg) as payment for the $400,000 condo I am selling? Not suggesting I think this would be a good idea, just curious if it is “legal”.
GC: With all respect, lawyers cannot take large amounts of cash in small bills and deposit them into their trust accounts. Had I tried to put 50k in twenties and fifties into one of my trust accounts then the bank would have reported me.
I am unclear what you are talking about regarding the bank and a mortgage.
No lawyer is going to accept a few hundred thousand in cash in small bills to be put into trust. Even the stupidest most desperate lawyer knows that he cannot walk into a bank with that sort of cash.
If you are looking for a traditional laundry try the escort services. You have forty girls working each of which report a couple of thousand in cash transactions from John Smith each week. Cash along with John Smith clients is the norm in that industry. The girls are independent contractors and half of them are named Crystal Love.
The other side of the coin is trying to show a legal source of income, which you have paid taxes on, if you a drug lord in Canada. A major suspected drug kingpin is also a known artist whose modern art painting have sold at a number of auction houses for hundreds of thousands to an elite group of apparently foreign buyers. He is a very prolific artist who has sold millions each year. Considering what modern art looks like who is to say what the paintings are actually worth. To add insult to injury a number of the painting have been donated to actual galleries and actually put on display. Before someone asks bear in mind we have liable laws.
Money laundering is a fascinating field I suspect particularly in a world were cash is used less and less.
Funny quote from someone talking about VanRE…
“There’s nothing subtle about this data. The transactions have ground to a halt – in April no less. Today’s buyer would be like the inattentive wildebeast eating grass alone after the pack has moved on.”
As posed that question doesn’t even make sense.
making house affordable again 🙂 four more owner-builder emails this morning
Hi Marko
I wanted to thank you very much for your help, xxxxx did pass the test that he took April 17th did not get results till April 25th as it was easter. Sent into xxxxx for building permit still waiting on them to approve all building plans and here we are in May, all these delays will put him on the roof in December and January in xxxxx heavy snow fall then , but apparently you have to start within 5 months off passing test so we will move forward anyway. The whole process was very stressful bought a computer for xxxxx so he could feel comfortable as he doesn’t use computers, and when you have bought land there is so much on the line and then to test a guy under that kind of stress is bullshit, totally disgusted with the whole process.
Thank you for being a voice for all the honest people just trying to live there dreams!!!!!
Here is a question
That should help any guy build a better house Complete Bullshit
These financiers are unregulated and unlicensed and the loans they grant are in cash, and charge abnormally high interest rates due to the risk. The cash is paid to a lawyer in trust and then the bank gets paid when it holds the mortgage. Canadian lawyers willing to participate in these transactions and under the current system there is very little enforcement and the lawyers police themselves. Lawyers don’t have to report any suspicious transactions to FinTRAC, because the Federation of Law Societies of Canada fought that requirement in the Supreme Court of Canada and won. The Law Society argued that reporting on their clients would violate a solicitors’ obligation to keep matters confidential. Canada also allows companies, trusts and nominees to purchase real estate without disclosing beneficial ownership
Fresh form the press (G&M) today: A ‘foul mood’ in Vancouver, a ‘floor’ in Toronto, a ‘new normal’ in Ottawa: The state of Canadian housing,
“Conditions, Mr. Hogue added, “were still definitely soft in Victoria,” as well.”
The article is for G&M subscribers only, but you probably can access it via library reading board.
GC: So what does the Chinese newcomer do with a million dollars in dirty twenties? I know that the loan would be less and possibly a little money might get cleaned that way. But once again this assumes that the Chinese newcomer is probably cleaning the money at a casino and it really has little to do with purchasing real estate. Nor does it seem to be at a possible scale that would influence the real estate market. We seem to have just circled back to casinos.
The scheme you described is essentially lending to Chinese newcomers who use the cash to gamble. The fact that real estate may be used to secure the loan is mostly tangential to the fact that the cash is being cleaned by the casino not by real estate.
Wasn’t that full report supposed to come out soon? Haven’t heard much on that front after the one chapter was released
1 -Canadian drug dealers sell fentanyl and other street drugs to addicts who pay in cash
2 – Private lender lends cash to Chinese newcomer who puts their Canadian property up as collateral
3 – Borrower wires loan payments to private lender’s account in China where lender or associates collect it as clean money
4 – Lender or associates can use money received in China to buy more fentanyl to ship to Canada or if the Borrower fails to make loan payments so private lender files claim against property in Canadian court and can collect debt plus interest as clean money in Canada when property sells.
I know that I asked before but how do criminals launder money in the real estate market. It is not like you can buy a condo with a suitcase of twenties. ( I know about the casinos but what has that to do with laundering money through real estate? I know some of the laundered money once clean might be put in real estate but it is just as easy for them to buy Pepsi shares or TD bank shares.
So can anyone explain how real estate is used to actually launder money as opposed to just being an asset to buy once the money is clean?
We’ll never know for sure to what extent laundering has juiced prices in a given market, but I don’t know what effects a diversion in laundered money would have. Toronto would seem to be a more obvious target than Moncton, Winnipeg, Regina etc.
Toronto has indeed seen a spike in activity and prices in April, but that’s a month worth of data (ie meaningless to draw inferences from), and is actually still well below its long term trend. But could a torrent of this money pull up prices there?
I think it’d be a lot harder than people suppose. While the Vancouver market is quite small, the Toronto market is absolutely gigantic. The amount of fufu cash it would take to do that in the face of what is a generalized, national housing downturn would have to be historic in scale. Sure, there’s the principle of the marginal buyer. Nevertheless I just don’t see it happening beyond being a background effect.
No idea, just an intuitive guess.
Ash: I took a quick look at Fernwood this morning (not an area I follow) and was actually shocked to see the number of houses with an asking price over a million. Something seems to have changed.
“And as British Columbia begins to crack down on the washing of dirty money, the author of the new report, retired corporate lawyer Kevin Comeau, says failure to change national laws just means the crime will go elsewhere in the country.”
Well that’s a start 🙂
https://www.cbc.ca/news/business/money-laundering-canada-1.5125078
@Koalas:
Agreed there’s not much out there. Have you viewed 2206 Belmont (duplex) or 1436 Denman? Denman looks like it needs some work. Also gave me a chuckle that they used the picture of Vic High while the description shouts “Proposed catchment: Oak Bay High!!!”
As you may know, I did five-year fixed rates the first two times and didn’t even consider a variable. This time, the decision will probably come down to what makes the most sense in terms of the spread. We’ll see what the spread is this fall. Variable is very much on the table now that I’ve wised up.
I’ve found RateSpy.com to be very informative.
This will be my second-last renewal before the mortgage is paid off 🙂
Decided whether you are going variable or fixed yet?
I love Steve Poloz. He’s arresting interest rate hikes before I renew my mortgage!
Exerpt from BoC Governor Stephen Poloz’s speech today…
Risk Sharing, Flexibility and the Future of Mortgages
“Our research shows that the big rise and fall in housing resale activity in British Columbia and Ontario can mostly be explained by shifts in house price expectations. When house prices are rising rapidly, people tend to extrapolate that experience and buy houses early to avoid further price increases, or to profit from them if they are speculators. In other words, markets become frothy. However, when those price expectations are revised down, demand for houses can cool suddenly. And this is what has happened.”
Full text at:
https://www.bankofcanada.ca/2019/05/risk-sharing-flexibility-future-mortgages/