The affordability distribution

This post is 5 years old. The data and my views may have since evolved.

I find there are a lot of misconceptions out there about affordability.   It is, at least how I define it, a measure of the percentage of the average family’s income required to service the mortgage on the average house or condo at prevailing interest rates.  The measure is not meant to be meaningful on its own, only the relative level matters.   So if the affordability ratio is at 55% that doesn’t mean the average house buyer is spending 55% of their income on their mortgage (which would never be approved).   The ratio could just as well be calculated based on disposable incomes, which would make the percentages much higher without changing the trend.

Note chart data up to April 2018. I will update the affordability chart once the average price for 2019 settles down a bit (~1 month)

Another common misconception is that the prices of higher end properties (like single family houses in the core) are not influenced or driven by affordability because prices are so high in relation to the average family income in Victoria.   I don’t believe this is the case, and in order to explain that we need to dive more deeply into the distribution of both income and house sales.

First we have to look at the definition of the terms we are using.   Median household income means that half earn more, and half earn less.   So what kind of property might we expect the 50th percentile household to be able to afford?   A single family home in the core which are concentrated in the top third of the market?  Clearly not.

At best we might expect that a middle income household could buy a middle priced property ($625,000 last year).   What type of property does that get you right now?  Either a 2 bedroom ~1100sqft relatively high end condo, or a 4 bed 1800 sqft new build in Happy Valley, or a 70 year old 900 sqft 2 bed rancher near Jubilee hospital.  Here you can see the distribution of property sales by price.

But wait, that still ignores the fact that at a roughly 70% ownership rate, the bottom 30% of households by income are more likely going to be renting.  It doesn’t make sense to expect students or the working poor to be buying condos and if we look at the data it makes sense that the bottom 30%, making less than approximately $45,000/year will not be in the market for most types of properties.  Realistically then we need to look at the top 70% of income earners to find the set of households likely to even be in the market to buy.

It’s not exact, but the median household income of this group is more like $95,000 from the 2016 Census data.

So what can each of those households afford?  Well here is where we get a bit fudgy because we have to make a lot of assumptions and can’t correct all the data to be based on the same year of reference.  However using industry norms for maximum mortgage sizes by income, prevailing rates, and an assumed 20% down, we can estimate the maximum house price that each income group might be able to buy.   Then we can compare the percentage of households that can “afford” (or perhaps stretch to buy) the collection of properties above a certain price compared to the percentage of actual sales that happened above that price.  Here is that chart:

Doesn’t look so bad right?  Again, a lot of assumptions and guesstimates went into that chart, but overall the two curves match up pretty well with the percentage of households able to afford properties above a certain price level approximately equal to the percentage of actual sales that happened above that price.

So is everything just fine?  What’s with my incessant yammering about high prices and stretched affordability levels?  Are prices actually supported by local incomes just fine?   Well before you come to that conclusion, there are two more things to consider:

The Stress Test

The chart above is at prevailing 5 year contract rates.  Of course we have the stress test now, and that does change what the banks will allow you to borrow.  Using stress tested rates, the picture looks a little different.

Now you can see a gap opening up between the number of households that can afford properties above a certain price vs the sales distribution.   This is a large part of the reason we’ve seen such a slowdown in sales after the stress test was introduced.   It simply knocked back what people could afford if they were relying on mortgages to fund the purchase.  But there may be a more important factor.

Consumer Sentiment

The charts above are calculated based on roughly the maximum a bank would allow a household to borrow.   And during boom times when prices are going up, households are happy to borrow the max that someone will give them, because after all they are borrowing (at low rates) to buy a rapidly appreciating asset.   It’s a no brainer.

But you’ll notice in the first chart that affordability in Victoria has moved in cycles.   After a time of very poor affordability, it doesn’t just stay at those strained levels, it improves for several years while the carrying cost of houses becomes less in relation to incomes.   People simply become less willing to stretch to buy real estate.   I examined how this played out in our last correction in a previous article but this factor should not be underestimated.    Will the same real estate wearyness take hold this time around or will people continue to push the envelope when it comes to buying Victoria real estate?   We’ll soon see.

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Andy7
Andy7
June 1, 2019 12:38 am

@ DuranDuran

Pretty sure Patrick was talking about foreign-earned money, not foreign ownership. If I work for Microsoft for a few years near Seattle, teach a few courses in Japan or do project work in Dubai, why should I not be allowed to bank my earnings and move back here ahead?

Good question. If you’re Canadian and taking a few years to work for Microsoft, that’s a legit company, with a legit tax paper trail and the Canadian government knows about your earnings – it’s not shifty.

And here’s another question for you – what about the German [or insert whatever nationality you fancy] couple that come to Canada and buy a house with foreign funds. But they don’t live in it. It sits empty year-round. Then the Mexican couple comes to Canada and buys a house but only spend 2 weeks a year in it. Now the American couple comes and buys a house, but don’t live in it. Now the Russian couple buys a house, but again doesn’t live in it. It sits empty the rest of the year. No homes are rented out, even if they have a suite. Meanwhile, other people are homeless and living in RVs. Is this dynamic okay?

DuranDuran
DuranDuran
May 31, 2019 11:35 pm

Andy7-

Pretty sure Patrick was talking about foreign-earned money, not foreign ownership. If I work for Microsoft for a few years near Seattle, teach a few courses in Japan or do project work in Dubai, why should I not be allowed to bank my earnings and move back here ahead?

Andy7
Andy7
May 31, 2019 10:30 pm

@ Patrick

“Illicit funds” is one thing, but what’s your problem with legit “foreign funds”? Should we only be allowed to buy BC houses with Canadian-earned money?

Good luck verifying “legit foreign funds”.

Many many many countries in the world restrict foreigners from buying. Heck, even New Zealand did it.

If Canadians who work and pay taxes in Canada, can’t afford to buy, then I think we absolutely need to look at restricting foreign ownership, which includes foreign funds.

If I go to another country and I want to buy, but their country’s real estate market is an absolute disaster and their own citizens with decent jobs can’t afford to buy, do I think it’s my right as a foreigner to buy? No, that’s entitlement. I think it’s the right of the people who’s country it is to be able to afford to live and buy in their own country. I come 2nd when I’m in that position. It’s a bit like, if I go to Mexico, I expect to do my best to speak Spanish, and not expect them to speak to me in English.

Now, do I think restricting foreign ownership is going to solve the problem completely? No, because there’s too many loopholes around it, but it’s an option to consider as it helps make this market less inviting; the more hoops people have to jump through, the more likely they are to go to greener pastures.

I too am beginning to wonder if you directly benefit from foreign funds in the market place… Side gig working for NuStream perhaps?

stultus populus
stultus populus
May 31, 2019 9:37 pm

its friday and pictures are fun to see 🙂

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Local Fool
Local Fool
May 31, 2019 9:26 pm

BFTP:

Oh no, competition! 🙂 Okay, you’re on.

Think the crash of 1981 was caused by high interest rates? Nope. Think a low vacancy rate means they can’t satiate demand and rents will forever go higher? Nope again. The vacancy rate is usually very low at the top of the cycle – have a look at the bottom right of this May 1981 Times Colonist article…vacancy rate in Victoria was an incredible 0.1%!
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Blast from the past
Blast from the past
May 31, 2019 8:58 pm

It is a sad reflection on the state of our news media when so little consideration has been given to this most serious problem.

The unscrupulous speculator is not the only culprit in this blight on our national economy. Developers, with the aid of city planners, have been able to create an artificial shortage of building lots.

It is now the duty of our governments to restore the traditional balance in the marketplace by creating a surplus of building lots on the perimeter of our towns and cities.

What is causing the delay in the development of the Highlands? Why doesn’t the government open up some Crown land and build a Palm Springs style mobile home park?

Ben Reece,1981

Matthew
Matthew
May 31, 2019 5:13 pm

$1 Mil price drop in Victoria/Saanich today. Location: 4525 Blenkinsop Road.
Asking price was $4.8 Mil. Now $3.8 Mil:

https://www.realtor.ca/real-estate/20448554/3-bedroom-single-family-house-4525-blenkinsop-rd-victoria-blenkinsop

Local Fool
Local Fool
May 31, 2019 5:10 pm

if you bought in 1981 you recovered in real terms in 1992

You are correct. 2018 constant:

1981 Peak: $339,862

1992: $351,363

Bad wording. I was thinking of Vancouver – that actually was another instance where Victoria bucked the correlative trend, and recovered considerably faster than Vancouver did.

caveat emptor
caveat emptor
May 31, 2019 4:58 pm

Have a look at that headline – and in this instance, within a few years real prices in Victoria fell nearly 41%. A deep recession ensued, and prices took decades to recover in real terms.

According to Leo’s constant dollar graph if you bought in 1981 you recovered in real terms in 1992. Nominal recovered quite a bit faster

Local Fool
Local Fool
May 31, 2019 4:12 pm

As most of you know, Vancouver is in the process of undergoing a correction, with all the cyclical dynamics (and probably consequences) that this entails. It’s an open question as to precisely what will happen to Victoria as this correction unfolds.

Having said that, you might be interested to know that we have been here before. So, for another little jaunt through history, here’s an article from the Times Colonist in May of 1981, just as the housing bust was beginning to unfold in Vancouver. Have a look at that headline – and in this instance, within a few years real prices in Victoria fell nearly 41%. A deep recession ensued, and prices took decades to recover in real terms.

Full text of this article is below, emphasis in bold is mine. See what sounds familiar to you.comment image

A huge rise in the number of homes listed for sale and a big drop in buyers have combined to end near-panic house buying in the Vancouver area. Prices have levelled off but the lull is not expected to last.

In fact, CMHC predicts new housing starts in BC this year will soar to all-time highs while Greater Vancouver economists expect prices to begin moving up soon at about the rate of inflation. With the regional [inflation] rate at 14.7 percent, the average priced house, now at $160,000, would cost $23,000 more a year later.

The Vancouver housing market, where frantic buying last fall pushed up some prices by $1,000 per week, is returning to normal, said Maurice Butler, president of the REBGV. Board figures show there were 6,623 units listed in the first three months of the year, 80% more than the same period of 1980. At the same time MLS sales during the first quarter this year were down 26% to 1,858 units from 2,534 a year earlier.

Butler said the overall market still is healthy but the figure shows that fewer people, especially first time buyers, can afford the high-cost housing. “The prices have not fallen as much as people’s expectations,” said Butler, adding that the prices are being lowered by about five percent to get them sold. Even so, the housing still costs about double of that it did a year ago. He said some housing has been listed for more than its market value on the insistence of its owners. A dozen agents interviewed found the market had softened and prices were basically holding steady. None found them dropping.

Butler and economist Ted Mitchell of the CMHC expect prices to rise this year at about the inflation rate. Meanwhile, CMHC is predicting that the number of new starts this year should rise about 8,000 units over the record level of 1976 to hit 45,000.

“This number is simply unprecedented and shows the economic strength of the province,” Said Keith Tapping, the corporation’s BC manager. CMHC figures show that the 9,600 units started in the BC in the first three months were up 24 percent over the same quarter of 1980. That is about one-third of the Canadian total and 600 more than in Ontario and Quebec combined.

But Tapping is worried about pressure on the market by high mortgage rates. They began rising again this week and five-year mortgages are now costing up to 17.25%. Tapping said that $100,000 mortgages are becoming more common, putting the interest alone on the new mortgage rates at $17,250 a year, or $1,437 a month. Economists expect interest charges to start dropping this fall which will make it somewhat easier for the buyer.

James Soper
James Soper
May 31, 2019 3:38 pm

You’re not balding already, are you?

Age before beauty.

Introvert
Introvert
May 31, 2019 2:55 pm

Ladies first.

You’re not balding already, are you?

Koalas
Koalas
May 31, 2019 2:39 pm

Hi Leo, any change in percent over assessment sales? Last I know, sales of SFH in the core averaged 5% over assessment but that was quite some time ago.

caveat emptor
caveat emptor
May 31, 2019 1:32 pm

I like to explore.

When I am out biking I like to find narrow roads preferably ones that dead end but have trail connections to other roads. There’s a couple nice ones like that on Ten Mile Point. While I don’t think Gordon Head is the most beautiful neighborhood I do like some of the bike/pedestrian cut-throughs that exist there. Also around Christmas Hill, Camosun Interurban and in rural Saanich between Viaduct and Hector and between Trevlac and Prospect Lake (some hike-a-bike here)

James Soper
James Soper
May 31, 2019 1:00 pm

Sorry look at the map again. All but a tiny sliver of the mountain bike park is in Saanich. https://www.crd.bc.ca/docs/default-source/crd-document-library/maps/parks-trails/mount-work-regional-park.pdf?sfvrsn=d6b68fc9_8 (Municipal boundary is marked). Your determination not to admit that anything desirable or attractive resides within the municipal boundaries is admirable, if a bit odd.

Stand corrected. I’ve seen the map, misread the hydro line as municipal boundary.

Patrick
Patrick
May 31, 2019 12:54 pm

Ah, but the big question is, how much is bought by foreign and illicit funds?

“Illicit funds” is one thing, but what’s your problem with legit “foreign funds”? Should we only be allowed to buy BC houses with Canadian-earned money?

James Soper
James Soper
May 31, 2019 12:37 pm

I was joking, of course. Feel free to let us know your actual age, if it’s not too high a number

Ladies first.

James Soper
James Soper
May 31, 2019 12:34 pm

I wasn’t going to bother since it seems self evident that Saanich has lots of narrow streets. But then I decided I was looking forward to finding out from James how truly mediocre all these places are. So a random selection from different parts of Saanich:
Queenswood
Waterloo
Phyllis
Glendenning
Conway
Zinnia

Wasn’t nitpicking. Asking.
I like to explore.

Andy7
Andy7
May 31, 2019 12:05 pm

@ Patrick

In terms of the Victoria market, only 1% of homes are bought by foreigners (see June 2018 HH article https://househuntvictoria.ca/2018/07/29/foreign-buyers-drop-by-89-in-victoria/).
I’m surprised that people still talk about it as an issue for Victoria.

Ah, but the big question is, how much is bought by foreign and illicit funds? Significantly more than 1% I’ll wager.

Cynic
Cynic
May 31, 2019 12:02 pm

I really hope this dude put some money away when raking it in hand over fist in 2016. Understand Vic isnt Van but sales have slowed here as well and I bet there are a lot of peeps experiencing this right now.

“Trevor Street of Keller Williams Elite Realty in Coquitlam sold 91 homes in the first five months of 2016 at the height of the Metro Vancouver real estate frenzy. Street has made no sales so far in 2019.”

https://openhousing.ca/2019/05/31/realtors-reeling-as-vancouver-real-estate-frenzy-ends/

Introvert
Introvert
May 31, 2019 11:58 am

I wasn’t going to bother since it seems self evident that Saanich has lots of narrow streets. But then I decided I was looking forward to finding out from James how truly mediocre all these places are.

Throwing out nits to watch him nitpick. It’s like feeding ducks at the pond.

Well it takes decades to gain a true appreciation for the mediocrity of your hometown.

LMAO! I almost power-washed my screen with coffee.

caveat emptor
caveat emptor
May 31, 2019 11:34 am

Soper, readers may not know, is actually 76 years old.

Well it takes decades to gain a true appreciation for the mediocrity of your hometown.

Introvert
Introvert
May 31, 2019 11:33 am

I expect to later be quoted on the fact that I didn’t deny this

I was joking, of course. Feel free to let us know your actual age, if it’s not too high a number 😉

caveat emptor
caveat emptor
May 31, 2019 11:30 am

caveat “Many narrow streets in parts of Saanich. Terrible for driving, wonderful for neighbourhood character”

Soper “Name some”

I wasn’t going to bother since it seems self evident that Saanich has lots of narrow streets. But then I decided I was looking forward to finding out from James how truly mediocre all these places are. So a random selection from different parts of Saanich:
Queenswood
Waterloo
Phyllis
Glendenning
Conway
Zinnia

James Soper
James Soper
May 31, 2019 11:25 am

As you’re fond of pointing out with various places, did you also “spend decades” at UVic?

Actually attending the school? or just sleeping on the grounds?

Soper, readers may not know, is actually 76 years old.

I expect to later be quoted on the fact that I didn’t deny this so it must be true. Much like Hawk wasn’t around to deny killing his children, or selling his house, or now buying a house.

File it under Idiosyncrasies of the Victoria Renter.

File it under Introvert’s imagination.

Introvert
Introvert
May 31, 2019 11:11 am

Maclaurin had nice benches to sleep on (plus the cafe), Clearihue was open late and had some cool rooms in A wing. Cornett was fun to get lots in. Elliot sucked.

As you’re fond of pointing out with various places, did you also “spend decades” at UVic?

Soper, readers may not know, is actually 76 years old.

caveat emptor
caveat emptor
May 31, 2019 11:01 am

It’s actually mostly in highlands.

Sorry look at the map again. All but a tiny sliver of the mountain bike park is in Saanich. https://www.crd.bc.ca/docs/default-source/crd-document-library/maps/parks-trails/mount-work-regional-park.pdf?sfvrsn=d6b68fc9_8 (Municipal boundary is marked). Your determination not to admit that anything desirable or attractive resides within the municipal boundaries is admirable, if a bit odd.

Introvert
Introvert
May 31, 2019 10:54 am

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)

“All I need is a crash . . .”
Local Fool looked around.
But, since crashes are scarce, there was none to be found.
Did that stop old Local Fool . . . ?
No! Local Fool simply said,
“If I can’t find a crash, I’ll go to the archives instead!”

James Soper
James Soper
May 31, 2019 9:46 am

I think we are going to have to agree to to disagree on the relative merits of Saanich/Victoria vs a long list of towns and cities in the Canadian Prairies

Again, lived here for nearly 2 decades. Not forced to live here. Bike to work every day, hike mt.doug often, paddle down at arbutus cove. Saanich is still just subdivisions and strip malls, natural environment is great, but of course we shit all over it. Closed Caddy bay this week.

Majority of the trails and a good chunk of Mount Work Park are in Saanich. Saanich has a good mapping app on their municipal website.

It’s actually mostly in highlands.

caveat emptor
caveat emptor
May 31, 2019 9:39 am

I’m pretty sure the trails themselves aren’t in Saanich, just the dump.

Majority of the trails and a good chunk of Mount Work Park are in Saanich. Saanich has a good mapping app on their municipal website.

I think we are going to have to agree to to disagree on the relative merits of Saanich/Victoria vs a long list of towns and cities in the Canadian Prairies

Patrick
Patrick
May 31, 2019 9:24 am

In terms of the Victoria market, only 1% of homes are bought by foreigners (see June 2018 HH article https://househuntvictoria.ca/2018/07/29/foreign-buyers-drop-by-89-in-victoria/).
I’m surprised that people still talk about it as an issue for Victoria.

Local Fool
Local Fool
May 31, 2019 9:08 am

The issue is not Chinese ownership but foreign ownership of real estate in Canada.

I can certainly agree. On the other hand, call a spade a spade. The Chinese government knows full well that their currency has been fleeing to international RE among other things, and on a historic scale. They’re desperately trying to stop it, and they’ll have to if they want to retain an economy.

Using the “race card” is the weakest form of rebuttal there is, and IMO, a lot of those people that pull that garbage are Caucasians engaging in virtue signalling or someone trying disingenuously to shut debate and scrutiny down. It won’t work. I’ll call it as it is regardless, and so should everyone else that wants answers.

strangertimes
strangertimes
May 31, 2019 8:57 am

“Both Ian Young and Andy Yan have talked about this, it’s an issue of money, not race. I think we’re past the point where talking about the issue can be swept under the rug”

Any Yan’s research was initially labelled racist by groups who were profiting from the mess in Vancouver and they used this tactic to try and shut down the debate on the role foreign money was playing in distorting the housing market so that they can keep the bubble going

“White real estate moguls and politicians like Robertson persisted in proclaiming their anti-racist bona fides and purporting to be the champions of Vancouver’s Chinese community by shutting down public debates about the region’s housing catastrophe. Brandon Yan, a civic activist and volunteer on Vancouver’s planning commission, put it best: “Let’s leave it to the rich white dudes to decide what’s racist, right?”
Vancouver’s “condo king” Bob Rennie—a primary financial backer of Robertson’s NDP-tilting Vision Vancouver team and also the chief fundraiser for the NDP’s adversaries in Christy Clark’s Liberals—had cultivated a particularly brazen habit of it. “So you had these whispers about racism being used to shut down a dialogue about affordability and the kind of city we want to build here,” Andy Yan explained. “It’s a kind of moral signalling to camouflage immoral actions. It’s opportunism, and it’s a cover for the tremendous injustices that are emerging in the City of Vancouver and across the region. It’s a weird Vancouver thing. It’s very annoying. It’s kale in the smoothies or something.”

https://www.macleans.ca/economy/realestateeconomy/andy-yan-the-analyst-who-exposed-vancouvers-real-estate-disaster/

Patrick
Patrick
May 31, 2019 8:43 am

I am going to be generous and assume that Patrick has some vested interest in having foreign money buying real estate

For the record, the answer to that is.. no I don’t.

Barrister
Barrister
May 31, 2019 7:41 am

The issue is not Chinese ownership but foreign ownership of real estate in Canada. I am not sure why Patrick keeps throwing out this red herring of racism but he is obviously trying to muddy up the waters as much as possible.

The obvious issue is to what degree, and under what terms and conditions, do we want to allow foreign ownership of real estate in Canada. Whether the foreign national is Swiss, American or Chinese is not relevant to the policy discussion. I am going to be generous and assume that Patrick has some vested interest in having foreign money buying real estate otherwise he is another example of the fuzzy thinking coming out of our educational institutions.

Patrick
Patrick
May 31, 2019 6:41 am

Alleged Canada real estate tax cheat for Chinese buyers described in Vancouver legal action
https://www.scmp.com/news/china/money-wealth/article/3012527/alleged-canada-real-estate-tax-cheat-chinese-buyers

If you click on the link, you’ll see that the story has been “withdrawn pending a review”.

patriotz
patriotz
May 31, 2019 2:58 am

If we were talking 30 years ago, we’d be caterwauling over the Japanese buying out the west coast.

It was already the Chinese 30 years ago. The previous year (1988) Vander Zalm had sold the Expo lands to Li Ka Shing, and the talk about Chinese buying “everything” goes back to the circa 1980 bubble. People meant the HK Chinese back then though.

James Soper
James Soper
May 31, 2019 12:20 am

I don’t think if you plucked Saanich up, flattened it out and plopped it down where Regina is now that it would be particularly charming. The sea, the hills, the lakes, and the Garry oak, arbutus and Douglas fir forests are integral to the charm and beauty of Saanich.

Which was exactly my point, and yet those were apparently the things that make Edmonton ugly for you. The birch trees in Edmonton were, and continue to be my favorite tree (along w/ cedar, great smell).

1) The Lochside trail and the trestles along it

You’ll be sad to know that they’ve started replacing some of these then. They did one just a couple months ago between Saanich rd & the municipal hall with some kind of weird top and coating.

4) some buildings at UVIC I don’t know the names of

I’m guessing you mean one of the older ones? Maclaurin? Cornett? Clearihue? Elliot?
Maclaurin had nice benches to sleep on (plus the cafe), Clearihue was open late and had some cool rooms in A wing. Cornett was fun to get lots in. Elliot sucked.

5) Many narrow streets in parts of Saanich. Terrible for driving, wonderful for neighbourhood character

Name some please.

7) The bike trails at Hartland

I’m pretty sure the trails themselves aren’t in Saanich, just the dump.

Saanich has a long list of buildings that they consider part of their heritage. I’ll admit that none of them rise quite to the level of the Louvre, Angkor Wat, Cappadoccia, or the Forbidden City, but not nothing either.

https://www.saanich.ca/EN/main/parks-recreation-culture/heritage/heritage-sites/significant-heritage-structures.html

I see 7? 6 really since the municipal hall really shouldn’t count, although I do really like the fonts they use there. The others I agree with, except the one at Labrick field which is dilapidated, and pretty much an eye sore.

Tsiwaangit
Tsiwaangit
May 30, 2019 11:29 pm

I must eat a fried egg sandwich, I cant take it anymore!

Local Fool
Local Fool
May 30, 2019 10:17 pm

I bet more of this will come to light with more attention on the issue and lack of price appreciation to hide the super risky deals.

Very likely. You know at what point in the cycle, especially in a bubble, where people start to open the books and invariably uncover shenanigans…

jerry
jerry
May 30, 2019 10:01 pm

Below find a cut and paste from a Vancouver rag today via His Holiness Garth.

Pity the distraught socialists living amongst us. Having pulled “speculators” out of their Goebbels grab bag they only barely managed to erode civil liberties before it is revealed that they are talking their customary cant and crap. Where will they find another demon? The pipeline play isn’t working out either. Destroying a free society appears to be a lot more work than your average ideologue imagined.

“First we were told it was foreign buyers who had driven up the cost of housing in British Columbia. Then it was real estate speculators who were responsible. Now the B.C. government and much of the public and media have turned the guns on near-phantom money launderers as the mystery bogeyman to blame for the unprecedented surge in Metro Vancouver housing prices from 2015 to 2017.

Despite all the hyperbole and headlines, it turned out that foreign home buying in Metro Vancouver peaked at less than 5 per cent of sales and has since fallen below 1 per cent. The few remaining foreign homebuyers are still exposed to a 20 per cent tax on their purchase. The provincial government then further weaponized taxes and thundered after residential speculators who it said were forcing tenants into the streets and driving up residential prices across the province.

“The speculation tax focuses on people who are treating our housing market like a stock market,” said Finance MinisterCarole James. The government then required the majority of B.C. homeowners to fill out a lengthy form on any homes they owned. Failure to do so results in taxes of thousands of dollars, guilty or not. The forms revealed that just 1 per cent of owners could be defined as speculators and most of these are B.C. families who happen to own a vacation home, often for generations.

The money launderers are an even more elusive target, primarily because it is not against the law in B.C., at least not yet, to pay cash for something. The recent government-ordered report on money laundering in B.C. real estate was vague to the point of nonsense. It could be worth $800 million. It could be $5 billion. Whatever, who knows? The report also stated that Manitoba and Saskatchewan have more money laundering in real estate than B.C., which gives an idea of how much faith we should put in its findings. Now the provincial government has ordered an expensive Commission of Inquiry into Money Laundering in B.C., which won’t report back until May 2021.

What politicians miss is that there is no mystery bogeyman to blame for high home prices. B.C. residents buy and sell more than 96 per cent of residential real estate; all the biggest property developers are B.C. born and built; and government delays and taxes have helped drive housing supply down and prices up. But it is easier, and more vote-friendly, to blame someone, anyone else.”

strangertimes
strangertimes
May 30, 2019 9:55 pm

Today, the Honourable Diane Lebouthillier, Minister of National Revenue, announced the updated results for the CRA’s audits in the real estate sector. Since 2015, CRA audits have identified over $1 billion in additional gross taxes related to the real estate sector. During this same period, CRA auditors reviewed over 41,700 files in Ontario and British Columbia, resulting in over $100 million in assessed penalties.

https://markets.businessinsider.com/news/stocks/the-government-of-canada-identifies-more-than-a-billion-dollars-in-additional-taxes-in-british-columbia-and-ontario-real-estate-markets-over-the-last-four-years-1028242728

strangertimes
strangertimes
May 30, 2019 9:30 pm

The amount of real estate related fraud happening in this province is mind blowing

“An unregistered Vancouver mortgage broker may have arranged over half a billion dollars in loans, many of which could be based on falsified income records, according to a cease and desist order issued by the Financial Institutions Commission (FICOM) May 30. ”

https://biv.com/article/2019/05/511-million-mortgages-set-unregistered-vancouver-broker-who-cooked-books-ficom

strangertimes
strangertimes
May 30, 2019 9:17 pm

Court documents say buyers and sellers of British Columbia property would exchange money overseas while understating the true price to Canadian authorities The unproven claims, which are ‘strongly denied’, are made in legal action that followed the demise of a partnership between top Vancouver property agents.
Under the supposed scheme, described in British Columbia Supreme Court legal action, buyers and sellers who were both based overseas would understate the amount being paid for a property and exchange only that portion in BC – thus reducing the buyer’s property transfer tax – while the remainder of the true price would change hands outside Canada.
https://www.scmp.com/news/china/money-wealth/article/3012527/alleged-canada-real-estate-tax-cheat-chinese-buyers

Tammurabi
Tammurabi
May 30, 2019 9:16 pm

Local Fool and others who have an interest in newspaper headlines and historical crashes may find this compilation of Irish newspaper headlines worth watching: https://youtu.be/FtbMAPcZ0Q0

Introvert
Introvert
May 30, 2019 6:20 pm

Given I don’t know what “alleviated” means, I wonder what that could mean for Canada’s economy, if anything?

I know what that could mean for my mortgage renewal!

Patrick
Patrick
May 30, 2019 6:15 pm

I wonder what that could mean for Canada’s economy, if anything?

If it’s a short term action, it likely won’t affect things much. If it’s a long term 25% tariff on Mexico exports to USA, that should be beneficial to Canada. Tariffs in general are such a bad idea that the whole global economy could suffer more than this though.

At a minimum, Canadians should expect a substantial drop in the price of avocado toast.

Local Fool
Local Fool
May 30, 2019 5:22 pm

Not exactly Victoria RE, just a larger headwinds note.

Donald Trump has just announced a 5% tariff on goods coming from Mexico, increasing every month to 25% in September, and will remain until illegal immigration is “alleviated” through effective actions by Mexico. Yikes. A lot of stuff comes from Mexico these days, especially cars.

Given I don’t know what “alleviated” means, I wonder what that could mean for Canada’s economy, if anything?

Patrick
Patrick
May 30, 2019 4:18 pm

James thinks the addition of a new freeway plus an interchange the size of some Victoria area municipalities has beautified the entrance to Edmonton from the south. Others may differ.

The best thing Edmonton had going for them was Mike Reilly. 🙂

caveat emptor
caveat emptor
May 30, 2019 3:26 pm

Name me one redeeming quality of the built landscape of Saanich, something that would be worth saving for posterity.

Honestly James most of what makes Saanich charming and attractive to me (even though I don’t live there) is the interplay of the natural environment and the built environment. I don’t think if you plucked Saanich up, flattened it out and plopped it down where Regina is now that it would be particularly charming. The sea, the hills, the lakes, and the Garry oak, arbutus and Douglas fir forests are integral to the charm and beauty of Saanich.

But since you asked particularly for built features I can mention some built features I like in Saanich

1) The Lochside trail and the trestles along it
2) The original building at Camosun College
3) the original SMUS building
4) some buildings at UVIC I don’t know the names of
5) Many narrow streets in parts of Saanich. Terrible for driving, wonderful for neighbourhood character
6) The Cadborosaurus, (now proposed as an UNESCO heritage site)
7) The bike trails at Hartland

Saanich has a long list of buildings that they consider part of their heritage. I’ll admit that none of them rise quite to the level of the Louvre, Angkor Wat, Cappadoccia, or the Forbidden City, but not nothing either.

caveat emptor
caveat emptor
May 30, 2019 2:53 pm

sigh

https://www.nationalobserver.com/2019/05/30/news/jason-kenney-cancels-celebration-carbon-tax-repeal-get-briefed-wildfires

Even Kenney was smart enough to figure out that cackling with glee over repealing the carbon tax against an apocalypic backdrop of wildfire smoke might be a bad look.

Patrick
Patrick
May 30, 2019 2:00 pm

Last time I looked, Muslim, Black or Jewish are not a country. (and dont try telling a Scotsman that Scotland is not a country).

Well the request was use “Ethnic Groups”, not countries. (“[MyEthnicGroup] money and laundered money”)
But it’s not important. Thanks for the reply, and I trust that ends the matter.

Patrick
Patrick
May 30, 2019 1:28 pm

Yes, that looks bad for the summer.

Introvert
Introvert
May 30, 2019 12:43 pm

comment image

This summer, most every summer going forward. Not good.

sigh

Introvert
Introvert
May 30, 2019 12:29 pm

I’m getting a bad feeling about this summer…

Chuckegg Creek fire jumps in size, now three times the size of Edmonton
comment image

The Alberta government is now reporting that the Chuckegg Creek wildfire is now 230,000 hectares in size. At last count, the fire only measured 150,000.

To put it in perspective, that’s about three times the size of the City of Edmonton.

The fire is moving south and southeast away from High Level, prompting evacuations in communities to the south.

Officials have confirmed that the fire has now jumped the Peace River, which is more than 700 metres wide.

The smoke is creating air quality concerns in across Alberta.

https://edmonton.ctvnews.ca/chuckegg-creek-fire-jumps-in-size-now-three-times-the-size-of-edmonton-1.4443966

Here’s what Edmonton looked like this morning:
comment image

I’m sure Victoria will look like this, too, in a few weeks 🙁

James Soper
James Soper
May 30, 2019 12:25 pm

James thinks the addition of a new freeway plus an interchange the size of some Victoria area municipalities has beautified the entrance to Edmonton from the south. Others may differ.

The interchange at Mactavish is much nicer than what was there previously. The only people that disagree are too dumb to use a round-about, so I’ll disregard their opinions.

Still waiting on a building of significance in Saanich.

James Soper
James Soper
May 30, 2019 12:21 pm

@guest_60138

Last time I looked Muslim and Jewish weren’t a race either.

caveat emptor
caveat emptor
May 30, 2019 12:08 pm

and they added the Anthony Henday at the entrance of it.

James thinks the addition of a new freeway plus an interchange the size of some Victoria area municipalities has beautified the entrance to Edmonton from the south. Others may differ.

Barrister
Barrister
May 30, 2019 12:03 pm

Patrick: Last time I looked, Muslim, Black or Jewish are not a country. (and dont try telling a Scotsman that Scotland is not a country).

James Soper
James Soper
May 30, 2019 11:56 am

has Calgary Trail/Gateway Boulevard improved in the last 20 years. Nope.

Seriously? The whole area is no longer industrial, and they added the Anthony Henday at the entrance of it. You’re talking out of your ass now.

Great. Let’s move on. Only on HHV would it be like pulling teeth to admit that Saanich might be a tiny bit nicer than the City of Champions.

My favorite area of Saanich is between burnside east and douglas. The whole tennyson row area – you know, the Saanich core! plus everything in tillicum and carey areas. It’s gorgeous. And you haven’t lived until you go to the Monkey Tree pub in the Reynolds strip mall.

I didn’t even say that Saanich wasn’t nicer than Edmonton. I said it was filled with “soulless suburbs and strip malls” just like Edmonton. Name me one redeeming quality of the built landscape of Saanich, something that would be worth saving for posterity. Because honestly, I’ve lived here nearly 2 decades, and can’t think of anything off the top of my head.

Local Fool
Local Fool
May 30, 2019 11:55 am

Some time ago I posted some headlines from the 1990 bust, both the peak, rollover, and descent. Most of them could be written today. If I find it I’ll put it back up.

(Note how there were sporadic upticks in activity during the overall descent. It’s part of the message – ignore the noise, watch the trends)

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)

Introvert
Introvert
May 30, 2019 11:53 am

But if either of those two have really gotten substantial in the last few years, a drop to nominal levels could be painful for the entire economy. It affects everyone.

And I bet the negative effects of slumping luxury stores in Vancouver would be governed by distance, just like with RE:

100 km away = super duper big trouble
500 km away = medium trouble
1000 km away = you might make it

Only on HHV would it be like pulling teeth to admit that Saanich might be a tiny bit nicer than the City of Champions.

It’s true.

Disputes such as this are also more likely to occur when we’re on Day One Million of no price crash in Victoria and there’s not much to talk about.

James Soper
James Soper
May 30, 2019 11:39 am

NZ is awesome. But why not move to excellent Edmonton, superb Saskatoon, marvelous Moose Jaw, lovable Lloydminster, captivating Calgary, or radiant Regina?

I have.
Not as affordable, not down-trodden enough.
I’d go to Montreal though, or Halifax, or Margaret River, or Perth, or Hobart.

caveat emptor
caveat emptor
May 30, 2019 11:39 am

called a street that doesn’t even exist any more one of the 10 ugliest in North America 20 years ago.

has Calgary Trail/Gateway Boulevard improved in the last 20 years. Nope.

Okay I concede

Great. Let’s move on. Only on HHV would it be like pulling teeth to admit that Saanich might be a tiny bit nicer than the City of Champions.

These places look like the creation of a demon who consumes the human spirit, excretes gravel, mud and diesel fumes and leaves behind shell-shocked souls to wander a Tim-Hortons-flecked wasteland.

I have to commend jerry for this poetic description. My Edmonton born wife loved this.

Patrick
Patrick
May 30, 2019 11:29 am

I don’t see how that article is racist towards people from China. There is one reference to China as you already posted.
“Losing Chinese money and laundered money would be catastrophic. Locals in the city don’t buy a lot of luxury goods, or at least not enough to support what’s there. The average Vancouverite struggles financially.”

Well there are two additional reasons that I find the article offensive to Chinese people.

  1. The article is about what might happen if BC reigns in ML, and they say “Losing Chinese money and laundered money would be catastrophic.” So why exactly would reigning in ML cause us to be “losing Chinese money” if you don’t think they are trying to ascert Chinese are involved in ML.

  2. Furthermore, they then imply that Chinese people (mostly Canadians) living in Vancouver aren’t “locals”, because “Locals in the city don’t buy a lot of luxury goods”. The story they tell is of people buying pianos. A Chinese person buying a piano in Vancouver isn’t a tourist taking it back to China, they are as local as you or I, and they are buying it for their kid to learn piano. It is offensive to assume Chinese people in Vancouver are “not local” without any knowledge.

Introvert
Introvert
May 30, 2019 11:28 am

If i’m “throwing up the white flag”, I’m going to be going to somewhere like Byron Bay, or Tauranga, Whangarai, or Raglan. Rarotonga is nice too.

Of course you are! All the places above are just as nice as every other place, right?

Because EVERYWHERE IS WONDERFUL!!!
comment image

Patrick
Patrick
May 30, 2019 11:28 am

” [MyEthnicGroup] money and laundered money” … I have replaced Chinese in the sentence with American or Swiss and I dont see the problem. I have also tried Scottish.

Try harder. How about using “Muslim, Jewish, or Black”

James Soper
James Soper
May 30, 2019 11:23 am

Find me an article in a major Canadian newspaper that mentions Shelbourne or the Pat Bay Highway as one of the ugliest streets in North America. If you can do that I will concede your point that Saanich is no different than Edmonton and every bit as ugly.

A florida blogger called a street that doesn’t even exist any more one of the 10 ugliest in North America 20 years ago. Okay I concede, Shellbourne plaza is filled with soul & Tuscany village should be granted Heritage status.

In the same article you posted:

Other parts of the city are breathtaking. Some athletes soon discovered the lush river valley, which boasts several kilometres of trails, and the trendy Whyte Avenue neighbourhood.

“I think this is a beautiful city,” said Jamial Rolle, a member of the Bahamas four-by-100-metre relay team.

Anna Edwards
Anna Edwards
May 30, 2019 11:22 am

I think you won’t find Shelbourne or the Pat Bay Highway or almost any other road in Victoria mentioned in any major news outlet either because they are pretty or ugly.
We are pretty much ignored by the by the rest of Canada here in our little corner. I know people in Victoria think we’re the best but to the rest of Canada we are hardly a blip.

caveat emptor
caveat emptor
May 30, 2019 11:13 am

I’m going to be going to somewhere like Byron Bay, or Tauranga, Whangarai, or Raglan

NZ is awesome. But why not move to excellent Edmonton, superb Saskatoon, marvelous Moose Jaw, lovable Lloydminster, captivating Calgary, or radiant Regina?

caveat emptor
caveat emptor
May 30, 2019 11:00 am

OK James the challenge is on:

Find me an article in a major Canadian newspaper that mentions Shelbourne or the Pat Bay Highway as one of the ugliest streets in North America.

If you can do that I will concede your point that Saanich is no different than Edmonton and every bit as ugly.

https://www.theglobeandmail.com/news/national/airport-route-into-edmonton-gives-ugly-impression-of-city/article25445000/

Barrister
Barrister
May 30, 2019 11:00 am

James: I have to admit that the university laundering is an interesting concept but it would be hard to move a million that way.

Victoria Born
Victoria Born
May 30, 2019 10:59 am

Speaking of affordability:

https://business.financialpost.com/real-estate/mortgages/its-going-to-be-hard-to-own-a-home-in-toronto-if-you-are-not-part-of-the-10-report?video_autoplay=true

Need household income of $140,000 in Victoria to qualify for a mortgage with 20% down just to buy the average [$750,000 or so] home – apparently there are homes selling for that, though I have not seen any. In the core, you would need household income north of $200,000.`

Money laundering has occurred and is occurring right here. Foreign inflow of capital is driving this. Latest money laundering saga hits university tuition too.

Barrister
Barrister
May 30, 2019 10:57 am

Patrick: I have replaced Chinese in the sentence with American or Swiss and I dont see the problem. I have also tried Scottish.

On a serious note,people seem to be overlooking the amount of properties that have always been purchased by Yankee Dollars here in BC.

Local Fool
Local Fool
May 30, 2019 10:52 am

Who cares if the luxury stores have to close because they can’t support themselves without laundered money.

Well the question isn’t so much “who cares”, it’s to what extent the economy has shifted towards this kind of activity in addition to RE. Chinese money isn’t going to disappear entirely, and neither is money laundering.

But if either of those two have really gotten substantial in the last few years, a drop to nominal levels could be painful for the entire economy. It affects everyone. Kind of like saying – Foreign buyers and launderers were primarily targeting high end homes, but the overall effect across the entire RE sector may have been substantial.

I think you’d appreciate this one.

Good post. It’s part of that thesis – the narratives never really change, no matter where or when – isn’t it. If we were talking 30 years ago, we’d be caterwauling over the Japanese buying out the west coast. Some time ago I posted some headlines from the 1990 bust, both the peak, rollover, and descent. Most of them could be written today. If I find it I’ll put it back up.

Introvert
Introvert
May 30, 2019 10:51 am

The saga continues. In the latest thrilling installment, acting clerk Kate Ryan-Lloyd emerges from Speaker Plecas’ office in tears:

Crisis meeting held at B.C. legislature over Plecas’s move to ‘safeguard data’

https://vancouversun.com/news/politics/crisis-meeting-held-at-b-c-legislature-over-plecass-move-to-safeguard-data

Introvert
Introvert
May 30, 2019 10:42 am

At this rate though, Sydney, Melbourne and Auckland might be in that category before long.

Blessed are the meek:

for they shall inherit unbelievably low-priced real estate any day now.

Not really. Just calling you out on being a dink.

Sorry that I don’t subscribe to your unicorn and rainbow view that every city is equally fantastic.

One of the more disturbing articles I’ve seen in BIV.

It’s interesting what disturbs people, isn’t it?

James Soper
James Soper
May 30, 2019 10:35 am

https://www.youtube.com/watch?v=FtbMAPcZ0Q0&feature=youtu.be

@guest_60205 I think you’d appreciate this one. Headlines for 5 years(2005-2010) from Ireland as their housing market started to turn. Interesting quote was that on average it took about 6 years from top to bottom.

AZ
AZ
May 30, 2019 10:19 am

That BIV article is pretty terrible. Who cares if the luxury stores have to close because they can’t support themselves without laundered money.

Patrick, I don’t see how that article is racist towards people from China. There is one reference to China as you already posted.

“Losing Chinese money and laundered money would be catastrophic. Locals in the city don’t buy a lot of luxury goods, or at least not enough to support what’s there. The average Vancouverite struggles financially.”

Not ideal the way it’s worded but it’s not saying the Chinese money is laundered, just that without it(AND laundered money) these luxury businesses will struggle. I can only assume the people working/interviewed in this article have a much better idea of their clientele than any of the readers of this article.

Local Fool
Local Fool
May 30, 2019 10:09 am

Interesting CBC article on a buyer having to pay the entire $237,000 FBT due to her Chinese husband having a 1% interest in the home.

According to the court documents, the Richmond woman paid the $2,400 that she calculated should be owing on her husband’s one per cent slice of the home, which cost them $1.6 million.

“My husband, Sixun He, is just my guarantor for my mortgage. This house is my major residence. I have a PR card. I have lived in this address since I bought this house,” she wrote in a 2018 letter of objection.

The house was sold last summer for $1.42 million. The correspondence notes that Yang has since purchased another home in Richmond for $2 million — but with no guarantor.

https://www.cbc.ca/news/canada/british-columbia/foreign-buyers-tax-real-estate-1.5154415?

Patrick
Patrick
May 30, 2019 9:58 am

One of the more disturbing articles I’ve seen in BIV.
“Losing Chinese money and laundered money would be catastrophic.

The only thing disturbing to me about articles like that is the offensive references to Chinese. Overwhelming number of Chinese in Vancouver are Canadians or permanent residents, adhering to our laws and contributing to society as much or more that any Canadians.
Yet we see these offensive references to “Chinese money and laundered money”. I feel ashamed as a Canadian to read references like that, especially given the shameful/racist history of how the Chinese have been mistreated in BC in the 1890- 1910 period https://en.wikipedia.org/wiki/Chinese_head_tax_in_Canada.

Just try replacing the word “Chinese” with your own ethnic group, and see if you would find the term ” [MyEthnicGroup] money and laundered money” offensive.

James Soper
James Soper
May 30, 2019 9:58 am

https://www.cbc.ca/news/canada/british-columbia/money-laundering-bc-report-1.5132258?cmp=rss

Here’s another one for your collection Barrister.
-How money laundering happened through schools.

James Soper
James Soper
May 30, 2019 9:36 am

That’s another “swing-and-a-miss” for you. By “steadily improving sales this year”, I’m talking about each month compared to the same month previous year.

That’s why you were referencing exceeding the previous month?

own year to date vs last year. But steadily improving during the year and now exceeding last year (may 2018) and previous month (April 2019)

Nice revisionist history.

Steady improving YOY comparisons, from down -24% YOY to up +9%.

Or you know, May was a terrible month last year, like Leo said.
Still less sales this year than last, and the year before and the year before that.
Aka LESS AND LESS SALES.

Local Fool
Local Fool
May 30, 2019 8:33 am

One of the more disturbing articles I’ve seen in BIV.

How slow retail sales would hurt economy if B.C. reins in money laundering

“Losing Chinese money and laundered money would be catastrophic. Locals in the city don’t buy a lot of luxury goods, or at least not enough to support what’s there. The average Vancouverite struggles financially.”

https://biv.com/article/2019/05/how-slow-retail-sales-would-hurt-economy-if-bc-reins-money-laundering

Marko Juras
May 29, 2019 10:07 pm

-24% Jan (2019 sales vs Jan 2018)
-23% feb
-7% March
-10% April
+9% May 2019 vs May 2018 (and May 2019 2% above 10yr May average)

I am curious as to what happens in the summer months. I am predicting we are back in the -5% to -10% YOY range. If we do see +% than the Victoria market truly is ridiculously resilient on the downsize.

Patrick
Patrick
May 29, 2019 9:57 pm

You must be new here.
It steadily improves this time every year.
Guess what’s going to happen for the rest of the year?

James,
That’s another “swing-and-a-miss” for you. By “steadily improving sales this year”, I’m talking about each month compared to the same month previous year. So no, theres no expected seasonal improvement as you suggest when you are comparing same month YOY.

Here are the numbers I’m talking about. Sales really were falling YOY in January (-24%) and have improved to where they are +9% higher in May YOY.

YOY comparisons for sales – Victoria.

-24% Jan (2019 sales vs Jan 2018)
-23% feb
-7% March
-10% April
+9% May 2019 vs May 2018 (and May 2019 2% above 10yr May average)

Steady improving YOY comparisons, from down -24% YOY to up +9%.
https://www.vreb.org/historical-statistics

Barrister
Barrister
May 29, 2019 9:47 pm

Victoria is nice but we are still moving to a smaller place.

montyb
montyb
May 29, 2019 9:41 pm

Andy7

I saw the crap box listing in Courtenay earlier today. The price seems outrageous. I’ve noticed a much nicer 3 bed place in Comox come down over $100k from around $680k to $570k. It was just relisted as “new” today.

I’m looking forward to watching the crap box linger.

James Soper
James Soper
May 29, 2019 9:13 pm

But steadily improving during the year and now exceeding last year (may 2018) and previous month (April 2019) . I wouldn’t refer to that as “fewer and fewer” sales. I’ll leave it at that.

You must be new here.
It steadily improves this time every year.
Guess what’s going to happen for the rest of the year?

James Soper
James Soper
May 29, 2019 9:11 pm

Like I’ve said before, bears find themselves in a weird position where they can’t (or won’t) let themselves get too enthusiastic about Victoria, in case they someday have to throw up the white flag and leave for a less desirable, more affordable jurisdiction.

Been here for nearly 20 years. Clearly like it, or wouldn’t still be here.
If i’m “throwing up the white flag”, I’m going to be going to somewhere like Byron Bay, or Tauranga, Whangarai, or Raglan. Rarotonga is nice too. Less desirable, more affordable jurisdictions. At this rate though, Sydney, Melbourne and Auckland might be in that category before long.

And you consistently need to pretend that all places are roughly equivalent in every way to make yourself seem as bland as possible.

Not really. Just calling you out on being a dink.

Introvert
Introvert
May 29, 2019 6:48 pm

Another one in the long and sad lineage of bears refusing to acknowledge anything special about Victoria

Like I’ve said before, bears find themselves in a weird position where they can’t (or won’t) let themselves get too enthusiastic about Victoria, in case they someday have to throw up the white flag and leave for a less desirable, more affordable jurisdiction.

it is simplistic to write off all of south Nanaimo as run down or crime ridden. There are some really nice pockets there and inland as well.

Oh probably.

I don’t know neighbourhood names but some of the areas between Hammond Bay Road

I looked at the map. Pretty sure that’s the neighbourhood I liked when I drove through (the environs of Bella-Vista Cres).

Because you can’t actually justify them [my strong opinions about different cities]

Um, I justify them frequently. Remember a few hours ago when I wrote that Edmonton, Regina, and Saskatoon suck because their spring begins in June and their best views are wheat fields?

You don’t happen to agree with my justifications, is all. And that’s fine.

and you consistently need to belittle the rest of the city/island/country to make yourself feel better about the place that you’re in.

And you consistently need to pretend that all places are roughly equivalent in every way to make yourself seem as bland as possible.

Patrick
Patrick
May 29, 2019 6:04 pm

I wouldn’t get too excited about it though. I’ve been expecting a YoY increase since January because we had such a pronounced pulling forward of demand before the stress test that i would have thought the first few months of 2019 would have been flat or up. Finally it arrived but I doubt it’s a reversal of trend.

Your projection of 825 sales for May is above the ten year May average (815).
https://www.vreb.org/media/attachments/view/doc/statsrelease2017_05/pdf/statsrelease2017_05.pdf

Patrick
Patrick
May 29, 2019 5:28 pm

we’ve been selling fewer and fewer places

Down year to date vs last year. But steadily improving during the year and now exceeding last year (may 2018) and previous month (April 2019) . I wouldn’t refer to that as “fewer and fewer” sales. I’ll leave it at that.

James Soper
James Soper
May 29, 2019 4:46 pm

We (Victoria) aren’t selling fewer and fewer places. May 2019 sales numbers look to be up 20% from April 2019 and 9% from May 2018.

Sure. What’s the year to date?

Patrick
Patrick
May 29, 2019 4:42 pm

why we’ve been selling fewer and fewer places

We (Victoria) aren’t selling fewer and fewer places. May 2019 sales numbers look to be up 20% from April 2019 and 9% from May 2018.

James Soper
James Soper
May 29, 2019 4:32 pm

I’m not following how having strong opinions about different cities makes me insecure.

Because you can’t actually justify them, and you consistently need to belittle the rest of the city/island/country to make yourself feel better about the place that you’re in. The vast majority of this world is filled with people and places that aren’t high end, places that may seem run down and poor. These are where your heroes come from, all the best writers in the world.

caveat emptor
caveat emptor
May 29, 2019 4:23 pm

Honestly, off the top of your head, can you name a higher-end neighbourhood in Nanaimo?

Lots of nice areas in Nanaimo. North generally better than the south, but it is simplistic to write off all of south Nanaimo as run down or crime ridden. There are some really nice pockets there and inland as well. Nanaimo has amazing access to a lot of great stuff on the island – would not be a bad place to live at all.

I don’t know neighbourhood names but some of the areas between Hammond Bay Road and the water are super nice. Also the area around Stephenson Point.

James Soper
James Soper
May 29, 2019 4:17 pm

James I question whether you have visited either Saanich or Edmonton if you have trouble telling the difference. Another one in the long and sad lineage of bears refusing to acknowledge anything special about Victoria

Lived in both for decades. I mean, Tuscany village I totally understand, but please enlighten me on the soulfulness of shellbourne plaza. I need to see the light.

caveat emptor
caveat emptor
May 29, 2019 4:06 pm

I’m was going to say that going to Marmot to ski from Edmonton is actually no different from going to Mount Washington here,

MT Wash – 3 hours
Marmot – 4 hours 10 minutes

The Rocky Mountain national parks ARE amazing if you love the outdoors. Weekend access to the mountains was one of the ways I maintained my sanity in AB.

Patrick
Patrick
May 29, 2019 4:00 pm

ks112: Being cash flow positive on an investment rental is really easy. Just purchase the property using cash and you’ll most likely be cash flow positive. One should always look at the cap rate spread against other fixed income investments as a benchmark.

The investments discussed back in Sep 2018 on the forum were using 20% down. (see link in previous post)

James: Please explain why we’ve been selling fewer and fewer places when there are so many positive cash flow places to be had in the city?

Noone said there are lots of cash flow places. There are some, and I found that interesting, and they were discussed in the link I sent. The ones talked about are likely sold long ago, especially if investors see them as cash flow positive.

caveat emptor
caveat emptor
May 29, 2019 3:55 pm

Caveat referring to Edmonton “OTOH large tracts of the city are soulless subdivisions, alternating with strip malls”.

James Soper “So is most of Saanich.”

James I question whether you have visited either Saanich or Edmonton if you have trouble telling the difference. Another one in the long and sad lineage of bears refusing to acknowledge anything special about Victoria*

  • and yes prices can still fall here
ks112
ks112
May 29, 2019 3:27 pm

Patrick,

Being cash flow positive on an investment rental is really easy. Just purchase the property using cash and you’ll most likely be cash flow positive. One should always look at the cap rate spread against other fixed income investments as a benchmark.

Introvert
Introvert
May 29, 2019 3:17 pm

I said I didn’t know why people like you are so insecure.

I’m not following how having strong opinions about different cities makes me insecure.

You’ve lived in neither Edmonton, or Nanaimo, and I doubt you’ve spent much time in either.

I’ve spent just enough time in Edmonton to know that I want to stay the hell away.

Honestly, off the top of your head, can you name a higher-end neighbourhood in Nanaimo?

No, I can’t. But I drove through a neighbourhood in North Nanaimo a long time ago that had nice houses, a quiet atmosphere, and overlooked the ocean—I was impressed.

I’m assuming it was high-end because I didn’t witness any men with sagging pants in the few minutes that I was there.

James Soper
James Soper
May 29, 2019 2:30 pm

Others have described investment rental cash flow positive examples in Victoria (Vic city and Langford). There was a discussion last sept with helpful posts from Marko like this

From Marko’s post that you linked.

You can’t just look at the numbers purely otherwise it will lead you to some crapbox in Langford that is cash flow positive at present.

Please explain why we’ve been selling fewer and fewer places when there are so many positive cash flow places to be had in the city?

James Soper
James Soper
May 29, 2019 2:25 pm

For the record, I slag Calgary, my hometown, too

For the record, I didn’t say you didn’t, I said I didn’t know why people like you are so insecure.

But Calgary is not as bad as Edmonton, owing mostly to views of and proximity to the mountains. Mountains are very nice—to look at and to hike in. Also to ski in, if you’re a winter outdoorsperson (which I am not). Nanaimo? Geographically, it’s a beautiful area, there’s no question about that.

I’m was going to say that going to Marmot to ski from Edmonton is actually no different from going to Mount Washington here, but it’s dumb to bother arguing about it. You’ve lived in neither Edmonton, or Nanaimo, and I doubt you’ve spent much time in either.

The higher-end neighbourhoods would probably be quite lovely to live in, but so much of the place is kind of run-down and poor. And crime has to be relatively high in Nanaimo, at least judging by the endless flow of B&E’s I read about day after day in the Times Colonist. A lot of the city, quite frankly, doesn’t seem that safe.

You sound like Trump asking why the US should be accepting immigrants from shithole countries. Honestly, off the top of your head, can you name a higher-end neighbourhood in Nanaimo?

Garden Suitor
Garden Suitor
May 29, 2019 1:54 pm

Anyone have a rough estimate for the median/avg price for a townhouse in the core or westshore?

Josh
Josh
May 29, 2019 1:43 pm

Victoria is not typical since it is a premier retirement destination. About 20% of houses are bought by out of towners many of whom are retired.

It’s amazing how ideas like this proliferate without the data to back them up. It’s every realtor’s / seller’s / bull’s go-to argument when you mention a correction.

Andy7
Andy7
May 29, 2019 1:31 pm

So this old 2 bedroom, 1 bath crap box house in the Comox Valley in a good neighborhood but on a street with fire ants (nasty critters) is being flipped for 669k.

Now the question becomes, why would you buy this, if you can buy the same type of SFH crapbox in a nice neighborhood with a yard in North Van for 750k? Or you can get a crapbox in East Van for 900k. I think the CV is going to be in for a rude awakening.

https://www.realtor.ca/real-estate/20738895/2-bedroom-single-family-house-356-2nd-street-courtenay-z2-courtenay-city

Introvert
Introvert
May 29, 2019 1:04 pm

Patrick’s command of what people around here have said in the past is impressive, and he often uses it to great effect.

BTW, I’m still laughin’ about Local Fool and the RBC lady 🙂

Patrick
Patrick
May 29, 2019 12:44 pm

Sounds like you’re buying in Halifax Patrick.

Others have described investment rental cash flow positive examples in Victoria (Vic city and Langford). There was a discussion last sept with helpful posts from Marko like this https://househuntvictoria.ca/2018/09/17/market-update-investor-interest-declines/#comment-49312

Rates have fallen since then likely flipping the borderline examples to cash flow positive.

Umm...really
Umm...really
May 29, 2019 12:36 pm

Can we get a review similar to the one below about the city of Victoria permitting office. I can’t imagine that the office here would have a better result.

https://www.cbc.ca/news/canada/manitoba/winnipeg-planning-permitting-interim-report-findings-manitoba-1.5152687

Introvert
Introvert
May 29, 2019 11:48 am

Don’t worry about it. People get up their own ass about living here, mostly though their either from Calgary or have never left the island.

For the record, I slag Calgary, my hometown, too. But Calgary is not as bad as Edmonton, owing mostly to views of and proximity to the mountains. Mountains are very nice—to look at and to hike in. Also to ski in, if you’re a winter outdoorsperson (which I am not).

Nanaimo? Geographically, it’s a beautiful area, there’s no question about that. The higher-end neighbourhoods would probably be quite lovely to live in, but so much of the place is kind of run-down and poor. And crime has to be relatively high in Nanaimo, at least judging by the endless flow of B&E’s I read about day after day in the Times Colonist. A lot of the city, quite frankly, doesn’t seem that safe.

James Soper
James Soper
May 29, 2019 11:33 am

To put it another way, if you’re buying a house for investment and the rental income from suites completely pays for the mortgage/expenses, then the true affordability is 0%.

Sounds like you’re buying in Halifax Patrick.

James Soper
James Soper
May 29, 2019 11:32 am

It appears sub 1% vacancy rates will be around for years to come.

Likely won’t even last the year.

You can easily find out what happens to prices during shortages.

I’m looking at the shortage in Vancouver right now (sub 1% vacancy right?). Looks promising.

Patrick
Patrick
May 29, 2019 11:18 am

Your affordability chart, at least as applied to first time buyers, does not include suite income

It’s a good point. If you’re making an average income, and you buy a house with a suite to rent, your income is going to rise with the new rental income, and the affordability of the house will improve.

To put it another way, if you’re buying a house for investment and the rental income from suites completely pays for the mortgage/expenses, then the true affordability is 0%.

James Soper
James Soper
May 29, 2019 11:04 am

And here I thought that the most important aspects of where you live are family, friends and opportunity. Personally, I love Edmonton and have for years. Unfortunately the opportunity that I was looking for wasn’t there. So I’ll stick with the mantra of “Home is Where You Hang Your Hat”. Right now the hat hangs in Victoria but family, friends and opportunity may point in a different direction in the future.

Don’t worry about it. People get up their own ass about living here, mostly though their either from Calgary or have never left the island. Same people slag other parts of Victoria too, and Nanaimo. Don’t know what they’re so insecure about.

Ie: “OTOH large tracts of the city are soulless subdivisions, alternating with strip malls”. So is most of Saanich.

Introvert
Introvert
May 29, 2019 10:38 am

In the last month I have had the misfortune to visit in short order Regina, Saskatoon, Edmonton, and Prince George. Should you ever need your faith in Victoria renewed I highly recommend a similar pilgrimage.

It’s so true, Jerry.

And here I thought that the most important aspects of where you live are family, friends and opportunity.

That’s what people who don’t live in nice places tell themselves when spring doesn’t start until June and the best view anyone has is a wheat field.

Barrister
Barrister
May 29, 2019 10:34 am

LeoS: I may have the number wrong but about 20% of properties are bought for cash. A large part of the market is not dependent on earned income and with retirees it is not uncommon that their purchasing power is much higher than suggested by present incomes.
In Toronto there are over ten thousand family’s with a net worth of over ten million not including their principal residence. As to out of town buyers, the real question is whether Victoria has a disproportionate number of out of town buyers with deep pockets compared to other cities in Canada.

caveat emptor
caveat emptor
May 29, 2019 10:17 am

And here I thought that the most important aspects of where you live are family, friends and opportunity.

Sure thing – if you are unemployed, friendless and shunned by family then Victoria won’t seem like paradise and neither will anywhere else.

I love Edmonton

De gustibus non disputandum est.

I admit Edmonton has it’s good qualities. Hyperactive festival scene, great river valley trails and XC skiing and outdoor skating in the winter. OTOH large tracts of the city are soulless subdivisions, alternating with strip malls, alternating with sprawling warehouse districts and heavy equipment parking lots.

Barrister
Barrister
May 29, 2019 10:10 am

LeoS: Your affordability chart, at least as applied to first time buyers, does not include suite income. They actually do not have the suite income until after they buy but the bank does allow for a higher mortgage based on the anticipated suite income.Come to think of it, that would apply to any buyer who is buying a house with a suite who previously did not have a suite ( moving from a condo to a house).

Introvert
Introvert
May 29, 2019 10:09 am

Wow, looks like the entire West Coast shipping industry may get shut down tomorrow…
comment image

https://www.cbc.ca/news/canada/british-columbia/port-workers-lockout-could-begin-thursday-as-negotiations-stall-1.5153557

Local Fool
Local Fool
May 29, 2019 10:03 am

One estimate from “StepUP Now”, an advocacy group in Vancouver opposing the recent policy changes relating to real estate, estimates that over 90 billion dollars in “equity” has already gone up in smoke.
comment image

Personally, I believe their number is actually higher as their calculation is based on the HPI figures, which is a lagging indicator. Actual drops to date in some regions and segments are reporting much larger declines – some sporadic, some more consistent. This is especially true in West Vancouver, which is being absolutely savaged at this point.

This is what is meant when we say, it’s never an issue with equity, and always an issue with liquidity. Equity is meaningless without a buyer to support your monetization of it.

China is actually continuing to escalate its capital controls, and some reports are indicating that folks who are caught illegally transferring funds are now getting lengthy prison sentences. Iranian funds are getting pinched now as well, some local banks are starting to report lower earnings and are missing income targets, developers that gorged on land 3 years ago are starting to cancel projects, and insolvencies among consumers are beginning to rise.

If this all sounds familiar, that’s because it is:

https://www.extension.harvard.edu/inside-extension/how-use-real-estate-trends-predict-next-housing-bubble

If this slowdown proves persistent, then it will start to chew into the wider economy. That’s when the real trouble starts, and by some reports, it already has.

RenterInParadise
RenterInParadise
May 29, 2019 9:51 am

In the last month I have had the misfortune to visit in short order Regina, Saskatoon, Edmonton, and Prince George. Should you ever need your faith in Victoria renewed I highly recommend a similar pilgrimage.

And here I thought that the most important aspects of where you live are family, friends and opportunity. Personally, I love Edmonton and have for years. Unfortunately the opportunity that I was looking for wasn’t there. So I’ll stick with the mantra of “Home is Where You Hang Your Hat”. Right now the hat hangs in Victoria but family, friends and opportunity may point in a different direction in the future.

Garden Suitor
Garden Suitor
May 29, 2019 8:44 am

BoC holds rate at 1.75%

Recent Canadian economic data are in line with the projections in the Bank’s April Monetary Policy Report (MPR), with accumulating evidence that the slowdown in late 2018 and early 2019 is being followed by a pickup starting in the second quarter. The oil sector is beginning to recover as production increases and prices remain above recent lows. Meanwhile, housing market indicators point to a more stable national market, albeit with continued weakness in some regions.

Continued strong job growth suggests that businesses see the weakness in the past two quarters as temporary. Recent data support a pickup in both consumer spending and exports in the second quarter, and it appears that overall growth in business investment has firmed. That said, inventories rose sharply in the first quarter, which may dampen production growth in coming months.

The global economy is also evolving largely as expected since April, although the recent escalation of trade conflicts is heightening uncertainty about economic prospects. In addition, trade restrictions introduced by China are having direct effects on Canadian exports. In contrast, the removal of steel and aluminum tariffs and increasing prospects for the ratification of CUSMA will have positive implications for Canadian exports and investment.

Inflation has evolved in line with the Bank’s April projection. The Bank expects CPI inflation to remain around the 2 per cent target in the coming months. Core inflation measures all remain close to 2 per cent.

Overall, recent data have reinforced Governing Council’s view that the slowdown in late 2018 and early 2019 was temporary, although global trade risks have increased. In this context, the degree of accommodation being provided by the current policy interest rate remains appropriate. In taking future policy decisions, Governing Council will remain data dependent and especially attentive to developments in household spending, oil markets and the global trade environment.

Barrister
Barrister
May 29, 2019 5:45 am

I think we are all clear now as to what Teranet does so arguing what label applies seems a bit unnecessary. Looks like another beautiful day.

patriotz
patriotz
May 29, 2019 3:45 am

Benchmark definition :.
a standard or point of reference against which things may be compared or assessed.

I was replying to your own comment, “Teranet is a benchmark house index, not a median”. Of course, a median is “a standard or point of reference against which things may be compared or assessed”. Rather hard to reconcile what was meant to be said.

Common usage of “benchmark” on this forum refers to the type of statistic used by VREB. Of course, like Humpty Dumpty, you’re entitled to whatever usage suits you from one post to another.

https://www.vreb.org/current-statistics

jerry
jerry
May 29, 2019 12:38 am

In the last month I have had the misfortune to visit in short order Regina, Saskatoon, Edmonton, and Prince George. Should you ever need your faith in Victoria renewed I highly recommend a similar pilgrimage. These places look like the creation of a demon who consumes the human spirit, excretes gravel, mud and diesel fumes and leaves behind shell-shocked souls to wander a Tim-Hortons-flecked wasteland.

caveat emptor
caveat emptor
May 28, 2019 11:53 pm

best place on earth, etc. etc.

Just got back from a few days in AB. The return reminded me that Victoria (actually most of the island) is literally a paradise on Earth.

If you live in this area, in this country, have your health, friends and family and sufficient income to met your basic needs and a bit extra then fortune is smiling upon you.

1) YMMV

2) Does not guarantee RE prices will never go down

Caveat emptor
Caveat emptor
May 28, 2019 9:55 pm

right .. it is known every one can financially pay the down payment when they are young

Mind you we are talking about a specific poster. One who told us all within weeks of first posting here that he could afford a Victoria house. One who consciously chose not to because prices were going to fall.

Local Fool
Local Fool
May 28, 2019 9:13 pm

Any bets on BoC’s decision on rates tomorrow, or is it even a bet?

I say hold…

Local Fool
Local Fool
May 28, 2019 9:09 pm

it is known every one can financially pay the down payment when they are young

It’s kind of an obvious point which I’ve made clear several times in the past. Thanks, but you don’t need to defend it. Just ignore the bait.

Funny name, by the way. I wish I had thought to pick it. 😛

stultus populus
stultus populus
May 28, 2019 8:38 pm

Right. That 22% number would be “the cost of waiting”.
That’s a term-of-art introduced to us by our young resident economist-with-training-wheels.

.. right .. it is known every one can financially pay the down payment when they are young .. and 100% sure job is stable and wont move due to life events .. young people should know better ..

stultus populus
stultus populus
May 28, 2019 8:30 pm

The question you must be familiar with is what if you bought at the earliest opportunity.

ya .. you people should of put a down payment the day you were born.. you would be retired by now ..

oh wait .. stay on topic … I shouldn’t mention things in the past .. we are currently in 2019

James Soper
James Soper
May 28, 2019 7:53 pm

Again with Vancouver. This is a site of people who reside in and love Victoria. Try to stay on topic.

Byline of the site says: Trends, information and opinions on the Victoria real estate market. It’s also not your blog. Go play pretend police elsewhere. If Leo wants, he can delete my posts, until then, stuff it.

Wolf
Wolf
May 28, 2019 6:26 pm

Deal of the day: MLS #407650 2763 Arbutus Road in SE Ten Mile Point. Nice 4600 SqFt (4 bedroom 5 bathroom) house (with a pool, hot tub, and 4 fireplaces) on a 14,572 SqFt lot in a desirable part of town. Assessed at $1,481,000, sold at $1,220,000 (-18%).
I’m not saying it’s a sure sign of decreasing prices (since we all know there are less buyers at the high end than in the middle), but wow I feel sorry for people who spent in this range in 2017. Bet they didn’t get anything like this.

Patrick
Patrick
May 28, 2019 6:17 pm

We would actually be at a net loss, depending on when in the last 3 years we would have bought.

Well of course, but since you’ve been posting here a long time, if you bought in June 2018, at the peak, you’d be down about 4%. The question you must be familiar with is what if you bought at the earliest opportunity. You’ve told us that the “RBC lady” told you that you would have qualified for $1m 3 years ago. So if caveats right and the market is up 22% since then , that’s +$220k on paper and not a “net loss”. Is that something you acknowledge, or have blocked out?

Local Fool
Local Fool
May 28, 2019 6:11 pm

Vancouver is interesting because it’s another market where people has all the same things to say.

You can bet we’ll be posting much more of that market’s decline as it occurs. It’s certainly offering plenty of material.

Patrick
Patrick
May 28, 2019 6:02 pm

Unlike the purchaser of 2073 45th Ave W , Vancouver

Again with Vancouver. This is a site of people who reside in and love Victoria. Try to stay on topic.

Local Fool
Local Fool
May 28, 2019 5:54 pm

If you have truly completed three years of posting here without a single error

Sure. You’re talking to a guy who last week forgot to remove the windshield sun screen from the dashboard before starting to move forward. Mrs. Fool abruptly pulled it down and asked me just how far I was intending to go before removing it. I didn’t have a good answer for her.

Whatever, I knew the way. Not like I haven’t driven down the Pat Bay 10,000 times.

No, Localfool didn’t buy, so not locked in.

We would actually be at a net loss, depending on when in the last 3 years we would have bought. Both of us are very glad we didn’t, a sentiment which is growing by the day.

James Soper
James Soper
May 28, 2019 5:49 pm

Right. That 22% number would be “the cost of waiting”.
That’s a term-of-art introduced to us by our young resident economist-with-training-wheels. And a number likely known to his wife.

No, Localfool didn’t buy, so not locked in.

Unlike the purchaser of 2073 45th Ave W , Vancouver who Bought in 2018 for $2,650,000 and just sold for $1,960,000. Their “cost of not waiting” was $690,000 (+ expenses).

Patrick
Patrick
May 28, 2019 5:24 pm

For some market perspective current Greater Victoria prices are down from peak but well up from when you started posting (about 3 years ago IIRC). Since June 2016 median SFH prices are up about 22% (26% using the MLS HPI).

Right. That 22% number would be “the cost of waiting”.
That’s a term-of-art introduced to us by our young resident economist-with-training-wheels. And a number likely known to his wife.

Patrick
Patrick
May 28, 2019 4:55 pm

No, it’s [Teranet] a repeat sale index including all property types. Completely different from a benchmark.

Teranet refers to their index as a benchmark, because they (and most people ) understand what the term benchmark means.

https://housepriceindex.ca/solutions/public-solutions/
“the Teranet-National Bank House Price Index™ was developed to be a trustworthy benchmark for financial professionals”.

Benchmark definition :.
a standard or point of reference against which things may be compared or assessed.

James Soper
James Soper
May 28, 2019 4:42 pm

James, This site is about the Victoria market. If someone makes a comment about “the market”, you should assume they are talking about the Victoria market, not the Vancouver market.

The comment they were replying to was talking about the BC market. Vancouver is part of BC ergo…

patriotz
patriotz
May 28, 2019 4:36 pm

Teranet is a benchmark house index, not median.

No, it’s a repeat sale index including all property types. Completely different from a benchmark.

caveat emptor
caveat emptor
May 28, 2019 4:21 pm

I don’t have to adjust a single thing I’ve been saying this whole time. Somehow, as if by magic, it’s all been happening.

I’ve enjoyed your posts. A lot of good insight. And far less spittle than some of our previous “bears”. If you have truly completed three years of posting here without a single error and everything has unfolded exactly as you predicted on exactly the timeline you expected that is amazing.

Previous “bear” posters said many of the same things as you (albeit less eloquently). Their predictions suffered though as they didn’t have the timing advantage of joining the board at almost exact peak craziness (in terms of market conditions).

For some market perspective current Greater Victoria prices are down from peak but well up from when you started posting (about 3 years ago IIRC). Since June 2016 median SFH prices are up about 22% (26% using the MLS HPI).

Introvert
Introvert
May 28, 2019 4:16 pm

Clairvoyance? Dumb luck? Paying attention?

Confirmation bias?

RE bubbles and their tops are relatively easy to identify because of how they function and are naturally constrained within an economy.

Tops are relatively easy to identify? WTF are you talking about?

Way back at the beginning of all this, when crappy old houses on small lots in Vancouver started selling for $1.5M, everyone thought, “all right, that is insane and can’t carry on for long.” Then it carried on for a long time, and similar places eventually sold for $3.5M or more.

The point is, neither market tops nor bottoms are “relatively easy to identify.” Not at all.

The real hubris that needs to be wiped clean is yours when it comes to self-confidence in understanding markets and in forecasting them.

Patrick
Patrick
May 28, 2019 4:09 pm

Even you know that Vancouver is going to keep falling.

James, This site is about the Victoria market. If someone makes a comment about “the market”, you should assume they are talking about the Victoria market, not the Vancouver market.

Victoria Born
Victoria Born
May 28, 2019 4:09 pm

Good thread.

Marko – I saw your latest You Tube installment – excellent job – I think you are right on the button. Thank you.

I encourage you readers to take a read of this latest Better Dwelling article:

https://betterdwelling.com/vancouver-real-estate-sees-another-indicator-collapse-montreal-demand-rises/

Based on sales to new listings ration, Victoria is said to be in a balanced market, down from a seller’s market. Is Victoria a visitor in the 40% to 60% range OR are we here for a “long time” not just a good time? The mainland is always a leading indicator for Victoria and I see no reason why this time is any different given that our local incomes are not rising at out-sized rates, the foreign buyer’s tax is crippling foreign capital injections, the beneficial ownership Registry is not live yet, and the money launderers now know they are a target. Quote:

“British Columbia’s three largest real estate markets claimed the largest declines. Fraser Valley real estate printed a SNLR of 45.1%, down 23.1% from last year – the biggest drop in Canada. Vancouver followed with the SNLR hitting 39.2%, down 21.6% from last year. Victoria came in third with a ratio of 56.9%, down 14.1% from last year. Only Vancouver hit a buyers market, but all 3 made such a fast drop, they might all seem like buyers markets”.

LF: BC RE is the worst place in the world right now to park money extradited from a foreign jurisdiction because, to put it plainly, it is subject to seizure and forfeiture. 0% of a $3M home is a pretty poor return. This is the next step, but it will take 18 to 24 months. If Eby had any courage, he would lick his wounds from the pipeline loss and start to pick some of this low hanging fruit. Use the money to balance the BC budget and stop being Weaver’s “tool”.

Patrick
Patrick
May 28, 2019 4:04 pm

Maybe they should have looked at the teranet index for 2019 which shows almost a 3% price decline for Victoria since the beginning of the year. Prices here have been trending mainly downwards during the spring market at a time when they should clearly be going up and summer and fall are more likely to see a softening of prices

They (Central1) are predicting median prices for the end of the 2019 year, not right now.
Moreover, they are predicting “median prices” and Teranet is a benchmark house index, not median.
I have no idea where prices are going in Victoria, especially short term. Just pointing out the Central1 article/report that “umm..really” was talking about is in fact predicting rising prices in each of 2019,2020, 2021 on Vancouver Island/Coast

caveat emptor
caveat emptor
May 28, 2019 4:02 pm

Even you know that Vancouver is going to keep falling.

I hope so and I expect so. But I don’t “know” that.

Real estate markets do have a fair bit of persistence (autocorrelation) so for short term predictions you can do reasonably well most of the time by predicting a continuation of what is currently going on (whether price rises or price declines). Of course this predictive approach is useless for detecting changes in markets.

James Soper
James Soper
May 28, 2019 3:46 pm

None of the bears or bulls posting here have any clue whether the market is going to fall further, how far it is going to fall or for how long.

Even you know that Vancouver is going to keep falling.

strangertimes
strangertimes
May 28, 2019 3:02 pm

“FWIW, on page 5 of the report, “B.C. Median Price by region”, they actually predict price increases each year for Vancouver Island/Coast for 2019-21. And, “yes, that includes Victoria”.

Maybe they should have looked at the teranet index for 2019 which shows almost a 3% price decline for Victoria since the beginning of the year. Prices here have been trending mainly downwards during the spring market at a time when they should clearly be going up and summer and fall are more likely to see a softening of prices

Local Fool
Local Fool
May 28, 2019 2:14 pm

None of the bears or bulls posting here have any clue

No, but some people appear to be far more on to what’s happening than others. I don’t have to adjust a single thing I’ve been saying this whole time. Somehow, as if by magic, it’s all been happening. Clairvoyance? Dumb luck? Paying attention? Pick whichever you like; the people that watch the same metrics I do know there’s no magic to any of this. It’s not hard to see, it’s not random, and Leo’s own data you refer to clearly show this process in action over decades. For people who want to think that a RE market is entirely unknowable and random, that’s fine.

You’re right, I do think this will continue until it turns around. I also don’t think it’s anywhere near done. The bottom will be harder to determine. RE bubbles and their tops are relatively easy to identify because of how they function and are naturally constrained within an economy. Bottoms are not, although we can be just as certain those end as well.

If by miracle BC RE starts getting a massive, and I do mean massive, liquidity injection in the next little bit…well, hey, I didn’t pick my screen name for nothing. Perhaps you could say that with the capital flight in China showing some signs of escalating with many of them all skiddish over the burgeoning trade tensions and wobbly financial sector..you might be in luck. But BC’s a pretty unattractive place to park money in RE atm, so I wouldn’t count on it.

Victoria Born
Victoria Born
May 28, 2019 1:38 pm

Evan Siddall’s letter opposing relaxing B20 is a great analysis. There are no unintended consequences – what you see is what was intended – lower sales, lower prices…………..

From BNN:

Canada should be prepared for another round of weakness in the housing market as early as next year, according to one Canadian economist.

David Doyle, North American economist and Canadian markets strategist with Macquarie Group, said that while the Canadian housing market appears to be stabilizing, a wave of five-year fixed mortgage rate resets set to take place next year will spark new risks for the economy.

“Where I get more concerned about housing actually is, as we move into 2020, is that the rate reset of five-year fixed rate mortgage holders moves higher again, 75 to 80 basis points,” Doyle told BNN Bloomberg’s Amanda Lang Monday. “So that for me is a risk for 2020, that potentially, there’s another bout of weakness coming for housing across the country.”

While the same reset scenario occurred in 2018 and the Canadian economy “muddled through,” it took place after just a year of robust activity, Doyle said. The next wave, however, may come at a time when the economy is already slowing down.

“If the same thing happens in 2019 and you have a subdued growth level coming through, the question is, what does that mean for 2020? And I think there are some downside risks associated with that,” he said.

Ahead of the Bank of Canada’s interest rate decision Wednesday, Doyle said he agrees with Governor Stephen Poloz holding steady, given how the economy still faces several risks.

“There’s all these downside risks out there in part due to global trade tensions, but also because of what’s going on in the housing market,” Doyle said. “So I think for them to be in a wait-and-see-mode right now is appropriate.”

A necessary condition for the Bank of Canada to justify a rate hike would be if the energy sector – which has struggled amid low Canadian oil prices and regulatory uncertainty – rebounded, according to Doyle.

“If you think the next move from the Bank of Canada will be a hike, a big part of that would have to be some strength from the energy sector. It’s such a big swing factor in our growth, it would have to be something like that that causes enough momentum to justify a hike.”

Patrick
Patrick
May 28, 2019 1:10 pm

Does anyone have an actual copy of the up to report referred to in the story above?

https://www.central1.com/wp-content/uploads/2019/05/ea-2019_02-BC.pdf

And yes the BC that the authors are referring to includes the city of Victoria.

FWIW, on page 5 of the report, “B.C. Median Price by region”, they actually predict price increases each year for Vancouver Island/Coast for 2019-21. And, “yes, that includes Victoria”.

Introvert
Introvert
May 28, 2019 12:53 pm

BC’s RE market is clearly getting weaker and weaker, and some people’s rather transparent chorus of, “Vancouver doesn’t affect here” is just goofy.

The goofiest thing of all is the certitude with which Local Fool predicts the future.

Matthew
Matthew
May 28, 2019 12:38 pm

15 price drops in Victoria for today (courtesy of YVR Pulse):

https://www.yvrpulse.com/d/price_drop_1_days_ho?fbclid=IwAR3EtW1hJ8-Wh4pOjApRRuqxIDlavqmn-dEnBRNweS1B0kdMaT6GmdGFTcg

Click the word “Region” at top left area of the site to see the price drops according to the city.

caveat emptor
caveat emptor
May 28, 2019 12:33 pm

The trend is not going to stop until it’s run its course

A tremendously helpful piece of market advice that can be rephrased as: “The market will continue doing what it has recently done, until it starts doing something else.”

Public Service Announcement:


None of the bears or bulls posting here have any clue whether the market is going to fall further, how far it is going to fall or for how long.


But following Leo’s analysis will at least show you that waiting to buy is low risk right now and might show you when the market turns back to strength (though there will be blips up and down).

Alternatively maybe local fool will invent the hubris-o-meter that will tell us when “the hubris has been wiped clean” and it is safe to buy again 🙂

Umm..really
Umm..really
May 28, 2019 12:29 pm

Saw the story and then went looking for the report.

https://globalnews.ca/news/5324502/housing-sales-decline-two-years-bc-central-1-credit-union/

However could only find a report from December below.. Does anyone have an actual copy of the up to report referred to in the story above?

https://www.central1.com/news/housing-market-in-b-c-to-remain-subdued-following-policy-induced-housing-sector-recession/

Local Fool
Local Fool
May 28, 2019 12:12 pm

And yes the BC that the authors are referring to includes the city of Victoria.

One of the interesting observations from that article is how rapidly the SAL ratio has fallen in each of the bubbliest markets including Victoria. Not only that, but just how symmetrically inverse it is to what happened in the run-up. The ones that shot up the hardest, are now getting hit the hardest.

Still, there are a lot of people who are and will probably continue to, confuse the speed of a RE market with that of an equities market. Just because Victoria’s prices haven’t dropped 30% in the last month it doesn’t mean the downturn isn’t happening. Just because there’s a metric somewhere that temporarily bucks the trend, it doesn’t mean that the trend is not already in place and moving accordingly.

BC’s RE market is clearly getting weaker and weaker, and some people’s rather transparent chorus of, “Vancouver doesn’t affect here” is just goofy. Even more telling is the folks who seem to think that price drops at the high end of the market have little or nothing to do with the lower market tiers.

History, common sense and simple observation of the last 5 years contradicts this premise entirely – these segments are interconnected, not insulated silos. The run-up in BC started at the top, pulling up everything underneath them, all the way down to the mold-infested condos. Now the reverse is occurring, and is increasing pressure on the lower segments as the price spread between them narrows.

The trend is not going to stop until it’s run its course, just like it did on the way up. Those people who think it’s run its course already might take a remedial lesson from history. Only now are the very first articles appearing, indicating that BC’s wider economy is starting to feel the pinch of a faltering RE market. Only now are the seeds being sown for what will eventually be an epic run of another cyclical dynamic – the blame game.

There’s no real argument anymore that the RE market isn’t turning quite dramatically in BC. There was never a real argument that the colossal debt run up with consumers pushed to the brink would not have consequences. You can point to pretty oceans, evergreens, big 5 economists, Juwai, Genworth and any number of the now legions of distractions that those in the Plunge-Protection-Team™ are doling out in high gear these days. None of it makes any difference.

Unlike in 2008, we don’t have a front row seat to a significant market event. We’re the stars of the show.

Cynic
Cynic
May 28, 2019 12:08 pm

Ref the conversation around construction and time of construction, anyone know of a handy list of pros/cons for each decade of construction and what to look for / be aware of? (I.e. be aware of asbestos up until 85 ect.).

I’m assuming some good realtor sites / property inspection sites might have some good lists.

Marko Juras
May 28, 2019 11:54 am

I have a feeling we will have a ton of new listings in June……the photo/floorplan companies are incredibly back-logged right now.

Introvert
Introvert
May 28, 2019 10:17 am

CharlieDontThink

Barrister
Barrister
May 28, 2019 10:06 am

CharlieDont: That is nice about the article but when I look at prices and sales I dont see any bloodbath at the moment. Sales are slower than the crazy peak a couple of years ago but but will the prices increases have stopped I dont think that SFH prices are really down more than a notch or two. We can all agree that Vancouver is a very different story.

CharlieDontSurf
CharlieDontSurf
May 28, 2019 9:48 am

In the Better Dwelling post today, the term bloodbath was used to describe the BC housing market. And yes the BC that the authors are referring to includes the city of Victoria.

Marko Juras
May 28, 2019 8:33 am

Re construction quality I think you need to assess on a house by house basis versus going by year. A lot of people make up non-sense along the lines of “construction was busy that year, so all the houses were slapped together because there was a shortage of trades, etc.”

Also, so many moving variables. For example, baseboards, melamine kitchens, hardiplank, etc., are considered “cheap,” but I go into a 1970s home and the baseboards still turn on/off and work with no servicing for 50 years. I go into a 1990s house and the melamine kitchen is still standing and functioning and I go see a 20 yr old home that has had zero maintenance and the hardiplank is in good shape.

Then I’ll go to an inspection on a 10-year-old higher end home and the heat pump fan coil is blown, the house need a $15,000 cedar re-staining job, and the super expensive kitchen with top notch build quality is already dated as style preferences have changed.

Also, the 1950s homes are “built like tanks” is a good one. Yes, but have fun dealing with the drain tiles, ungrounded wiring, asbestos, casting iron plumbing, etc. ,etc.

That is why I would go on a house to house basis. A 1950s home is great is everything has been upgraded, not sure otherwise.

QT
QT
May 27, 2019 11:43 pm

A monoculture of concrete and claustrophobia. Barf!

You are right that the majority of new builts anywhere in Victoria are characterless sardine boxes, but that is what the public (city policy makers) asked for. However, there are beautiful treed 1/4 acre or larger lots in nice area that can be had, but you have to pay for it (Millstream Village/Thetis Lake, Florence Lake, Glen Lake, and Langford Lake).

Dad
Dad
May 27, 2019 9:46 pm

“Second, GH houses may be rectangular and boxy, but at least there’s some variation house-to-house…”

My favourite variation is the Swiss chalet A-frame entry-way treatment, followed by classic 70s Tudor. Such an eclectic neighbourhood.

Dad
Dad
May 27, 2019 9:39 pm

“Marko, who has seen a house or two in this town, and whose dad builds houses for a living, doesn’t think the quality and finish of the Langford sardine special is super great…”

I know what you mean. Every time I see a 50s bungalow with floors sloping 15 degrees to port, it screams quality. Stuff was so much better then.

Marko Juras
May 27, 2019 9:09 pm

Rather, the 2010-2014 40% Vancouver run up that resulted in the run up post-2014 in Victoria. There is an obvious and logical time lag.

I would agree with your logical time lag theory if Vancouver went flat in 2015, but the Vancouver market continued to go up 2015 onwards at the same pace as Victoria.

Marko Juras
May 27, 2019 8:59 pm

The other item of interest is that it costs so much to build here. Now some of this is good news – the fact that we don’t have a desperate illegal labour underclass willing to work under lousy conditions for $50 a day is probably a good thing. But you know, compared to places like California and Texas it makes our construction very pricey.

On top of that, bureaucracy is completely out of control. Right now I am working on two entry level SFHS in Colwood that now have to go through a development permit for Colwood to approve colours/etc. Found out today I need to hire a landscape architect as well to submit the DP. This non-sense that has been added in the last year will cost $6,000 to $8,000 and a 4 to 6 week delay and it is equivalent to throwing a bunch of cash on the table and setting it on fire.

Once the owner moves in they can paint the home whatever colour they want and a lot of these entry level subdivisions people barely have time to cut the lawn let alone maintain landscaping designed by a landscape architect.

Apparently in all of their wisdom now Langford requires a development permit as well for all lots smaller than 6,000 sq/ft. Surprised Saanich and Victoria haven’t brought this in, yet, so city staff can spend their time analyzing colour palates.

I already have over 50 files in my OneDrive for each house and we haven’t even applied for the permit yet.

Patrick
Patrick
May 27, 2019 8:15 pm

I am actually quite stunned to learn that there are posters on this blog that believe the recent run ups in Van and Vic RE markets are mutually exclusive.

Over the period 2015 to 2019, Victoria is up about 40%. Canada overall up about 30%. Several Canadian cities also up 40%. They all had big rises, and that doesn’t need to be because of Vancouver. Victoria is actually up (since 2005) less in % terms than the Canadian average. (Teranet data).

James Soper
James Soper
May 27, 2019 8:09 pm

Last I checked, Vancouver vacancy rates were still low. (under 1%), so not sure what your point is.

I’m guessing that’s out of date, considering rental prices are dropping.

Introvert
Introvert
May 27, 2019 7:29 pm

however the quality and finish of the houses today is higher than the 80s rectangular stucco GH houses.

Marko, who has seen a house or two in this town, and whose dad builds houses for a living, doesn’t think the quality and finish of the Langford sardine special is super great. I’ll probably go with his opinion on this one over yours.

Second, GH houses may be rectangular and boxy, but at least there’s some variation house-to-house (not to mention an actual front and back yard):
comment image

Whereas newish builds in Langford look like this:
comment image

A monoculture of concrete and claustrophobia. Barf!

DuranDuran
DuranDuran
May 27, 2019 7:24 pm

The scandal isn’t that housing is expensive here – it’s that incomes have been stagnating for years, and frankly suck in terms of matching with inflation (they haven’t).

The other item of interest is that it costs so much to build here. Now some of this is good news – the fact that we don’t have a desperate illegal labour underclass willing to work under lousy conditions for $50 a day is probably a good thing. But you know, compared to places like California and Texas it makes our construction very pricey.

freedom_2008
freedom_2008
May 27, 2019 7:24 pm

Developers created large lots to flock the negative holding because the market crashed during the 80s. Many GH house were quickly banged together (aluminium wiring and poly-b among questionable workmanship) so they can be sold for less of a lost.

Not only that, these GH houses also have the “wonderful architectural” box design of 1980s. But boxes are efficient and practical, if not stylish 😉

I would bet it would show that Victoria is the 2nd or 3rd most expensive place in the world, based on our local incomes, to buy real estate.

If so, Great Victoria area home ownership rate should be around 55% or lower like most other expensive places in the world.

CharlieDontSurf
CharlieDontSurf
May 27, 2019 7:14 pm

I am actually quite stunned to learn that there are posters on this blog that believe the recent run ups in Van and Vic RE markets are mutually exclusive.

Barrister
Barrister
May 27, 2019 6:42 pm

Victoria Born: Even little Lugano is more expensive in terms of affordability than Victoria.I am sure not in your case but I often get the feeling that some people in Victoria just have never traveled much. It is like when people describe the “horror” of the Callwood crawl. Try spending a few weeks driving in LA. Or the Death Valley Parkway in TO during rush hour.

People keep floating this idea that Victoria is grossly overpriced but I am not convinced that the statistical evidence really supports that. We anticipate moving to Lugano and prices there, compared to incomes, are even higher for a condo.

QT
QT
May 27, 2019 5:57 pm

I would bet it would show that Victoria is the 2nd or 3rd most expensive place in the world, based on our local incomes, to buy real estate.

Try 189 place in the world.

https://www.numbeo.com/property-investment/rankings.jsp

Victoria Born
Victoria Born
May 27, 2019 5:43 pm

Nice analysis, Leo. But the subjective fudging undermines the analysis somewhat, but I think the conclusion is sound. Here is an alternative way to look at it:

The OECD says that Canada is the most expensive place to buy a home in the world based on local household incomes.

https://betterdwelling.com/canadian-housing-is-the-least-affordable-in-the-world-for-local-incomes/

We all knew that and I had been saying this ever since I joined. However, the base ratio [100] of the index is set at 100 for the year 2015 [hardly a normal year]. If one were to set it at 2010 as a normal priced year, Canada would be even more expensive. [truth: their analysis does show that from 2015 to date, no place in the world had inflation in housing prices, when comparing to growth in local incomes, than Canada]. Secondly, if one were to just look at places like Victoria, Vancouver and Toronto [3 of the places were a housing asset bubble is more pronounced] and compare them to the rest of the country using their local incomes, you would find that these 3 places are the most expensive places, based on local incomes of those cities, in the World: Vancouver, Toronto and Victoria – in that order. No, no asset bubble here………….yeah right.

Leo, you likely have your finger-tips on the data that would allow you to compare affordability using the OECD model of affordability [it is not new, it is the tried and true way of looking at this issue and has been for decades]. I would bet it would show that Victoria is the 2nd or 3rd most expensive place in the world, based on our local incomes, to buy real estate. One can thank our governments for selling out to foreign money and money laundering.

QT
QT
May 27, 2019 5:09 pm

No, when Saanich planned Gordon Head its goal was not to squish as many properties as possible into the space. It also wasn’t stingy when it set aside land for parks and green space. The build quality of the houses was probably higher back then, too.

There were lots of empty land back when GH was developed, therefore the lots were larger. Developers created large lots to flock the negative holding because the market crashed during the 80s. Many GH house were quickly banged together (aluminium wiring and poly-b among questionable workmanship) so they can be sold for less of a lost.

IMO, we have smaller lots and lack of green space on new development currently is due to the local policies and NIMBY demand, however the quality and finish of the houses today is higher than the 80s rectangular stucco GH houses.

Patrick
Patrick
May 27, 2019 4:53 pm

Yes, because this is exactly what we’re seeing in Vancouver right now.
Checks amount of building happening in Vancouver
Oh no wait, 18% of all new starts in the country last month happened last month in Vancouver.

James,
I said construction would stop when the vacancy rates start rising dramatically, as described in my post. Last I checked, Vancouver vacancy rates were still low. (under 1%), so not sure what your point is.

James Soper
James Soper
May 27, 2019 4:29 pm

That would be an excess of 1500 units, and given we have about 160k units now, but only 40% are rentals, should raise the vacancy rate by 2% (from 1% to 3%). Of course it could also/instead attract more people to Victoria or cause households to de-densify (kids move out of parents’ basements). And new construction will stop as soon as there is a sign of this happening.

Yes, because this is exactly what we’re seeing in Vancouver right now.
Checks amount of building happening in Vancouver
Oh no wait, 18% of all new starts in the country last month happened last month in Vancouver.

DuranDuran
DuranDuran
May 27, 2019 4:03 pm

Rather, the 2010-2014 40% Vancouver run up that resulted in the run up post-2014 in Victoria. There is an obvious and logical time lag.

Nope. Vancouver outpaced us before and after 2014. Victoria was on its own, the weakest market in Canada, with a drop of over 9% while the rest of the country grew at +13%. Only Edmonton came close….

Hey look – you were there!
https://househuntvictoria.blogspot.com/2014/01/jan-13-market-update.html

patriotz
patriotz
May 27, 2019 3:53 pm

You mean like the 2010-2014 40% Vancouver run up that resulted in -2% in Victoria?

Rather, the 2010-2014 40% Vancouver run up that resulted in the run up post-2014 in Victoria. There is an obvious and logical time lag.

Introvert
Introvert
May 27, 2019 3:23 pm

I’ve given you an example where 40% up in Vancouver made no difference in Victoria; therefore, I don’t think it would be irrational to think that a 20-30% drop in Vancouver might not impact Victoria to a large extent.

The bears need to pin their hopes on something. All they’ve got left is the Vancouver 100 km away thing now that interest rates aren’t rising anymore.

Marko Juras
May 27, 2019 3:09 pm

Sadly, you’ll have other things to worry about as you get older, and it won’t be how much you’re house is worth on paper.

+1

Marko Juras
May 27, 2019 3:08 pm

Marko,

Just to be clear. So the recent run up in Victoria real estate had nothing to do with the run up in Van? You seriously think that?

You seriously think the Vancouver and Victoria market are perfectly correlated? I’ve given you an example where 40% up in Vancouver made no difference in Victoria; therefore, I don’t think it would be irrational to think that a 20-30% drop in Vancouver might not impact Victoria to a large extent.

Not to mention I am noticing affordability is huge right now as everyone has been compressed by the stress test. I don’t necessarily think a $4 million-dollar home in Vancouver dropping to $2.5 million has much of a trickle-down effect on the core SFH Victoria 800k home.

CharlieDontSurf
CharlieDontSurf
May 27, 2019 2:41 pm

Marko,

Just to be clear. So the recent run up in Victoria real estate had nothing to do with the run up in Van? You seriously think that?

Patrick
Patrick
May 27, 2019 2:02 pm

I’m not attempting to time the market perfectly but I have been waiting patiently for the market to slow and for prices to decrease so that when we do buy we do not spend the next 5 years watching the market crash.

 If the worst scenario happens, and you buy at the absolute peak of the Victoria  market, I don’t think it would be so bad. I say that, because I’ve bought at market peaks  twice in my life, and I didn’t  even realize it until years later. For starters you aren’t even thinking about house prices after you buy, and if you aren’t planning to sell, it’s not going to cause you to lose any sleep.

I’m not saying your life worries are over. It’s just that you’ll worry about other stuff, like your  kids or your aging parents etc.

Remember, when you buy a house, you have 25 years to pay it off completely. If you do that, you are guaranteed a big profit, which is the value of the house in 25 years. If you buy a house for 800k, and in 25 years it is still worth $800k, you owe  nothing on it and your profit is $800k

Sadly, you’ll have other things to worry about as you get older, and it won’t be how much you’re house is worth on paper.

Marko Juras
May 27, 2019 1:37 pm

Marko, the huge event that you speak of that will seriously impact the Victoria market is going to be the colossal crash in Vancouver.

You mean like the 2010-2014 40% Vancouver run up that resulted in -2% in Victoria?

Andy7
Andy7
May 27, 2019 1:10 pm

Looking forward to seeing the month end numbers:

Victoria SFH Sales:

May 2019 – ?
May 2018 – 333
May 2017 – 437
May 2016 – 597
May 2015 – 488
May 2014 – 355

Grant
Grant
May 27, 2019 1:10 pm

I am not attempting to time the market perfectly but I have been waiting patiently for the market to slow and for prices to decrease so that when we do buy we do not spend the next 5 years watching the market crash.

I don’t think you’ll get a satisfactory answer as those two things are opposed to each other. You might need to continue waiting, or if you find what you want and can afford it for several years to come, just bite the bullet and grin when some declines come along. We bought last May at what I figured was likely the top of the market, but the house was a match and I don’t regret it. I was (and still am) resigned to a future where I’d probably be better off not paying attention to the RE market. However (for now at least) in my neighborhood prices are still holding if not rising. When the next major economic downturn comes (~ within 2 years if you believe Dalio and others??) is when we’ll really find out how inflated RE has been and how resilient the Vancouver Island market is (or isn’t).

CharlieDontSurf
CharlieDontSurf
May 27, 2019 1:08 pm

Marko, the huge event that you speak of that will seriously impact the Victoria market is going to be the colossal crash in Vancouver.

freedom_2008
freedom_2008
May 27, 2019 12:26 pm

When my parents came to Canada in the mid 1990s we were renting a suite in the Oaklands area and when they bought their house in the Oaklands area it had a suite.

when I was studying in UVic in late 80s, suites were very common in Mt Doug, GH and Mt Tolmie areas (I stayed in 3, one in each area) . When I bought my first SFH near Vic General in 1991, not only it had a one bedroom out walk suite with a big concrete patio, the suite kitchen even had a nice dishwasher (I think the house was built in 1980s). So the concept of mortgage helper has been here a long time ago, especially in neighbourhoods that are near University and hospitals and are more tolerate.

Marko Juras
May 27, 2019 12:03 pm

I have a feeling this winter might be the beginning of, at the very least, a soft landing after years of ridiculous growth.

I agree. My personal theory is for a large correction to happen is it needs to happen relatively close to the peak unless there is a huge event like stock market crash, devastating earthquake, etc.

We’ve already been flat for a year and the market is holding in there currently (sales are ok, inventory isn’t high) and it would take approximately another year for inventory to climb into a serious buyer’s market so that would make it two years of flat.

I am personally thinking we are going to see a very boring market for the next 5 years with +/- 2% year to year fluctuations. In my books nothing wrong with a boring market.

Marko Juras
May 27, 2019 11:58 am

Does anyone know roughly when so-called mortgage-helpers began to proliferate in earnest? It wouldn’t surprise me if it was the 1990s.

When my parents came to Canada in the mid 1990s we were renting a suite in the Oaklands area and when they bought their house in the Oaklands area it had a suite.

Marko Juras
May 27, 2019 11:56 am

Busy week.

Went to an open house with a suite under 800k and an open house at 650k (no suite) and both were nuts, couldn’t find parking on the street….both ended up with offers (one multiples).

Super strange market….I was super confident we wouldn’t see a YOY month higher than last year. I still think summer will be lower YOY but not trending that way for the time being.

Introvert
Introvert
May 27, 2019 11:50 am

I am wondering if the prevalence of suites in SFH that has arisen over the last few years has actually permanently changed the metrics of affordability?

Suites were definitely already commonplace when we moved here from Calgary circa 2007. Does anyone know roughly when so-called mortgage-helpers began to proliferate in earnest? It wouldn’t surprise me if it was the 1990s.

Leo wrote an excellent article a while back suggesting the best way to mitigate risk in RE is to buy with the plan to hold for at least 10 years

TBH, it’s not just a good plan because it mitigates risk; it’s a good plan because you’re not throwing tens of thousands of dollars in realtor fees and PTT down the drain on top of the hassle and stress.

Viola Payne
Viola Payne
May 27, 2019 11:04 am

@guest_60160

“I have a feeling this winter might be the beginning of, at the very least, a soft landing after years of ridiculous growth.”

I think this started last year – but i am not at all the numbers guru on this site. Personally I think many people were waiting to see if Victoria would follow Vancouver (to a lesser extent) but it hasn’t happened (yet?).

How do you define “crash”? For me any decline over 10% is significant, but I’m not sure if that would even count as a crash. If you can’t tolerate any risk of decline then there will never be a good time for you to buy because there’s always a risk of decline.

Leo wrote an excellent article a while back suggesting the best way to mitigate risk in RE is to buy with the plan to hold for at least 10 years:

https://househuntvictoria.ca/2019/04/23/mitigate-risk-by-holding/

Introvert posted the long term graph in the comments of the article before this one showing that in any given 10 year period there is little risk to buying (historically) Victoria RE.

Barrister
Barrister
May 27, 2019 10:23 am

LeoS: I am wondering if the prevalence of suites in SFH that has arisen over the last few years has actually permanently changed the metrics of affordability? Far from a total game changer but nevertheless a good nudge on the scales.

Anne Wilson
Anne Wilson
May 27, 2019 9:59 am

Hello,

Thank you for sharing your research. My husband and I have been renting in Victoria and waiting for the right time to buy a single family home. We have two little children and are excited to plant roots in one community. Our budget is 750k. I have been watching the market in BC for many years just simply for interest but now I am watching for the purpose of buying. I am not attempting to time the market perfectly but I have been waiting patiently for the market to slow and for prices to decrease so that when we do buy we do not spend the next 5 years watching the market crash.

I have a feeling this winter might be the beginning of, at the very least, a soft landing after years of ridiculous growth.

What do you think?

Introvert
Introvert
May 27, 2019 9:31 am

More or less discussed in this article: https://househuntvictoria.ca/2018/05/04/musings-on-future-affordability/

Oh, yeah. Thanks.

I believe we’ve had a couple Bank of Canada rate increases since that post, and I’m not sure what’s happened to house prices and wages since then, so I haven’t a clue where we are today 🙂

Basically, according to all your scenarios, between now and 2025, worst case is 20% price decline and best case is 5% price decline.

Bad planning. They should have gone with standard 6000sqft lots instead of mostly 8 or 10.

I disagree. But I will fault Saanich for some poor planning: there aren’t nearly enough sidewalks in GH.

Introvert
Introvert
May 27, 2019 7:30 am

Probably what everyone said about Gordon Head in the 70s.

No, when Saanich planned Gordon Head its goal was not to squish as many properties as possible into the space. It also wasn’t stingy when it set aside land for parks and green space. The build quality of the houses was probably higher back then, too.

Introvert
Introvert
May 27, 2019 7:14 am

Leo, assuming interest rates will stay close to where they are now, what kind of price decline to do we need to see for us to hit that lower band of affordability?

Dad
Dad
May 27, 2019 12:19 am

“It might be “affordable”, but it is not desirible. Poor urban planning, over built, small yards, rushed poorly constructed builds, terrible commutes and prices more susceptible to flucuations because of demographics eliminates the “makes sense” part of the affordable equation. There’s probably a lot of folks from the base that are going to be stuck with West Shore properties when they are posted out because of a stagnation in the market that will cause a loss on the properties they purchased over the last several years. Why would it make sense for someone to take on the Langford risk unless it’s an insane deal? Also, having to say that you live in Langford…….“

Probably what everyone said about Gordon Head in the 70s.

Patrick
Patrick
May 26, 2019 4:38 pm

Also i can’t speak to the rental market percents but based on previous posts i had thought that the building of rentals was up 1000% right now we are likely to see vacancy rates rise in Greater Victoria

Yes, if as expected G. Vic population in a year rises 5000, we need 2500 new units, and we are ramping up to completing about 4000 units per year. That would be an excess of 1500 units, and given we have about 160k units now, but only 40% are rentals, should raise the vacancy rate by 2% (from 1% to 3%). Of course it could also/instead attract more people to Victoria or cause households to de-densify (kids move out of parents’ basements). And new construction will stop as soon as there is a sign of this happening.

rush4life
rush4life
May 26, 2019 3:59 pm

RE Investor Leo talks about how muddy the method is but the chart does show some consistency. Even someone with “grade 3” math should be able to see that. Furthermore for every rich person buying homes that have dropped in price there is a rich person selling it – “losing” money from what they could have made 2 years ago. So it works both ways.

Your concerned about PTT but the last few years of crazy buying and FOMO in the market was never going to last – it never does. And there had to be relief for that – unless your preference was to have home prices totally disconnect from income everywhere in BC and have the hard working citizens be priced out completely. Seems a little short sited. I would think the PTT this year is still going to be higher than the 10 yr average.

Unfortunately to bring house prices back to some sort of reasonability there has to be some pain. But with that price drop we will get added stimulation from the first time buyers who suddenly can afford to purchase again – whenever that balance occurs. I see this as a long term necessity and overall beneficial. I don’t want anyone to lose their shirts over this just to be clear.

And i noticed you mentioned many things that circumvent Leo’s graph but one thing you forgot to mention is debt – someone with a $500 car payment suddenly drops 100K off their mortgage affordability. I don’t think Leos graph accounts for those types of things either.

Also i can’t speak to the rental market percents but based on previous posts i had thought that the building of rentals was up 1000% right now we are likely to see vacancy rates rise in Greater Victoria – perhaps Patrick, Leo or James can speak to that they seem more in the know then me about rentals.

Umm... really
Umm... really
May 26, 2019 3:04 pm

Barrister: That would be a great plan..lol.. It’s mostly the idea that a person should purchase to the max of their affordability or the feeling they have to buy tends to be the issue. Simply affordable shouldn’t be the only factor. If it is, it may lead purchasers to regret buying a property simply because what they could afford at that moment in time and forgetting to consider other factors. It would be unfortunate for a person to be trapped in an illiquid in place like Langford that prevents a savings plan that could lead to a more desirable asset in the future. Unless the Langford property was such a good deal it mitigates the negative factors of the area and allows savings and potential asset growth at the same time is the only way it makes sense.

Or just wait for Oak Bay to pull a Vancouver and declare all of Uplands duplex zoning…..

Barrister
Barrister
May 26, 2019 2:38 pm

Umm Really: Well you have a point about Langford so just save up your cash until you can afford the Uplands, preferably on the water.

Umm... really
Umm... really
May 26, 2019 2:06 pm

RE: Patrick “Langford”

It might be “affordable”, but it is not desirible. Poor urban planning, over built, small yards, rushed poorly constructed builds, terrible commutes and prices more susceptible to flucuations because of demographics eliminates the “makes sense” part of the affordable equation. There’s probably a lot of folks from the base that are going to be stuck with West Shore properties when they are posted out because of a stagnation in the market that will cause a loss on the properties they purchased over the last several years. Why would it make sense for someone to take on the Langford risk unless it’s an insane deal? Also, having to say that you live in Langford…….

RE investor
RE investor
May 26, 2019 10:36 am

Comparing average prices to average incomes is an incomplete method of understanding market dynamics. Retirees, move-up buyers, downsizers, basement suites, bank of mom and dad, all contribute to pricing.

One has to assume people in government know this, and either willfully use the misdirection for political posturing… Either that or they must admit incompetence for using 3rd grade math to formulate policy.

So I think it’s extremely important to question what impacts this sort of false policy guidance actually has on housing, because so far what we are seeing is 1) lower prices for the ultra rich, 2) drastically lower transfer tax revenue, 3) the beginnings of a recession due to dozens of projects being cancelled, and 4) a small increase in “affordable units” being built.

We know that over 90% of renters rent from the private market, and yet the supply of those types of units is being cannibalized, very similar to the effects rent control has had for the last 40 years. It appears sub 1% vacancy rates will be around for years to come.

You can easily find out what happens to prices during shortages.

Viola P
Viola P
May 26, 2019 9:28 am

Spoke with my friend in Vancouver. She’s still waiting to buy there, thinking that doing so will probably save her 40k over the next year.

“That describes us perfectly. We’re saving hard and intend to buy in the next year or so, but if prices stay like this we won’t be buying here, we’ll go up island or into the interior. I dislike winter far less than I dislike owing the bank half a million bucks for a dungheap.”

The dungheap purchase is only a total problem if all the cash was used up to make the purchase. Otherwise, the dungheap can be a golden opportunity to make something you truly like while building equity. I personally would never choose winter over these house prices. If you are thinking of moving up island though, I have a friend in banking here in Victoria who told me there are some solid opportunities in Ladysmith. It’s a cute little town about 20 minutes south of Nanaimo.

Personally I think the market will remain flat-ish for the next 5-8 years. That’s what I hope happens anyway so that incomes can maybe catch up a bit while also not putting people who bough recently (myself included) into a very crappy situation.

Thanks for the great article Leo.

Patrick
Patrick
May 26, 2019 9:24 am

What is there to buy that is affordable and makes sense??

Langford.

From LeoS chart, in 2018 it looks like there were 100 Westshore detached house sales under $500k, and 300 under $600k.

Tammurabi
Tammurabi
May 26, 2019 8:52 am

“People simply become less willing to stretch to buy real estate.”

That describes us perfectly. We’re saving hard and intend to buy in the next year or so, but if prices stay like this we won’t be buying here, we’ll go up island or into the interior. I dislike winter far less than I dislike owing the bank half a million bucks for a dungheap.

Paul
Paul
May 26, 2019 8:01 am

And the truth is revealed. Even taking out the bottom 30% of working people (because why would they matter?) only at $200k could the remaining 70% of income earning people participate fully. At $400k, only 30% of the remaining 70% of potential buyers are still participating. At $500k.. less than 50% of the top 70% earners can participate. That means only 35% of the total population can participate in buying up to $500k. Of course this assumes that the remaining 35% can come up with 20% down or $100k. Maybe a condo at $400k then?… nope, strata fees at $350/mth take you down to $350k. What is there to buy that is affordable and makes sense?? Sorry, I’m still saving up that $100k down payment.

Barrister
Barrister
May 26, 2019 7:45 am

Great chats Leo. An additional factor for affordability which may make up the small gap is the prevalance of basement suites and other “mortgage helpers”. Considering that such percentage of houses have mortgage helpers this shifts the range of affordability for first time buyers.

The second point, in terms of affordability and market pressures is that Victoria is not typical since it is a premier retirement destination. About 20% of houses are bought by out of towners many of whom are retired. Their purchasing power is totally disconnected to their incomes.
My impression is that overall prices are supported by local incomes outside of the premium areas like Oak Bay, James Bay, Fairfield which are dominated by by retirees.

Your charts seem to lean towards a minor downward push on prices but not a crash unless other forces come into play.

Patrick
Patrick
May 26, 2019 7:41 am

Great post!

Barrister
Barrister
May 26, 2019 7:16 am

Patriotz: You are absolutely right that the day were a single income could support buying a house seems to have passed with my fathers generation. One of my neighbours daughters, who is in her late twenties, and who has just graduated the bar is thrilled because she has found the what apparently is called “the golden husband”; I found it a bit disturbing that there is actually a term for a man that can afford to support a family just on his income. As she put it, whoever thought that pushing paper for twelve hours a day is liberation is a bloody idiot. The fact that all three of her friends who were with her seemed to whole heartedly agree really took me back a bit.

patriotz
patriotz
May 26, 2019 5:01 am

Median household income means that half of families earn more, and half of families earn less.

A family is not the same as a household. Statscan defines a household as any group of people living in a single dwelling. But most non-family households by far are singles.

“Census family is defined as a married couple and the children, if any, of either and/or both spouses; a couple living common law and the children, if any, of either and/or both partners; or a lone parent of any marital status with at least one child living in the same dwelling and that child or those children.”

Some families are single income but most aren’t and the median family income is bigger than the median household income. Thanks for the excellent post, just wanted to point out that this distinction matters for the topic at hand.