Sales remain strong and insolvencies turn upwards
Well I’m back from some travels around the interior, and talking to builders and engineers around Kelowna, it’s almost perversely comforting to hear that municipalities are the same almost everywhere. Barriers to development, an ever-increasing network of rules, and a tendency to consult to death that is dragging up prices for no particularly good reason. Does this kind of regulatory creep happen everywhere or is it a consequence of an aging population in a retirement destination? I’m not here to bash government which is in general staffed by people dedicated to making our communities better, but I do think we need to make a shift to openly tracking and continually improving the efficiencies of regulatory processes.
Waiting time for development approvals is a case in point. Here in Victoria there is lots of complaining about barriers to development getting worse, while the city claims it has reduced wait times. Who’s correct? It would be possible to track if that data was easily available. The City of Victoria has made the greatest progress there with their open data portal, where for example you can download all the building permit data since about 2011 but it doesn’t seem to track how long it takes to get through the city process. However back to our previous topic on garden suites, we can pull things like distribution of indicated costs on the permits for Garden Suites, or their time to complete (median 343 days).
Meanwhile in the broader economy, a somewhat worrying trend is presenting itself, with a sharp upward turn in the amount of consumer insolvencies in the last few months. It’s not just Alberta either, with a swing upwards in BC, Alberta, and Ontario at the same time. We’ve had a number of individual provinces exhibit this in the past, but this time insolvencies in all of Canada are on a sharper leg upwards. Keep in mind it’s coming from a low rate so perhaps it’s not yet something to be concerned about, but certainly an indicator to watch.
The real estate market is having none of the darkening economic clouds though with sales continuing quite strongly into November. Sales are currently 29% ahead of this time last year which is an astonishing jump. Part of this is because of the somewhat weak performance last year but so far we may have a strong beat in the cards. It seems buyers have not gotten the message that November is when the market usually dies. We had a similar jump in 2017 but that was because buyers were pulled forward due to the impending stress test whereas this time there are no regulatory changes looming. We’ll have to see how this plays out in the rest of the month.
Here are the weekly numbers courtesy of the VREB.
| November 2019 |
Nov
2018
|
||||
|---|---|---|---|---|---|
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Sales | 49 | 202 | 498 | ||
| New Listings | 68 | 304 | 804 | ||
| Active Listings | 2547 | 2557 | 2343 | ||
| Sales to New Listings | 72% | 66% | 62% | ||
| Sales Projection | — | 642 | |||
| Months of Inventory | 4.7 | ||||
Offtopic energy/environmental new post: https://househuntvictoria.ca/2019/11/14/getting-to-net-zero/
LeoM I suspect the object is to make sure that the private sector is discouraged from building and, hence, justify more government housing projects.
In Seattle, landlords can’t pick their tenants because the laws say the first qualified applicant must be allowed to rent the dwelling.
https://www.seattletimes.com/seattle-news/politics/washington-state-supreme-court-upholds-seattles-first-come-first-served-law-for-renters/
wow …browsing some of metro vancouver lower end market list – talk about desperate fire sale ..
https://www.zolo.ca/new-westminster-real-estate/828-agnes-street/706
I’m thinking it is a deliberate deception.
It was reference to:
https://globalnews.ca/news/6162705/victoria-climate-change-activists-tickets/
Wow, a STVR is Broadmead? Good luck with keeping that. You can’t even have a “clothes line” there… covenants rule…
As much as I love staying in “Airbnbs” when traveling, they should be tightly regulated, highly taxed and only allowed in commercial or other areas if approved by local residents.
Or tape it to their car window with a note saying “You’re part of the problem”. Seems to work around here.
If these short term rentals are suite/house (not room only) based, you could also print out (page 6 at http://saanich.ca.granicus.com/DocumentViewer.php?file=saanich_17a44348faf4a0f6e61e37d7a8ef3286.pdf&view=1) and highlight the statement from Saanich and leave it in their mailboxes.
Hubs and I were just discussing the issue. We won’t be making the call but we know some folks who seem to have Bylaw on speed dial. Will be interesting to see how/ if this plays out.
Apparently a complaint should stop it.
There are several openly advertised short-term (AirBnB, VRBO) rentals in my area which is Broadmead/Cordova Bay. I’ll be intrigued to see if this practice continues for those properties.
yay low un-employment numbers
I wonder if it’s more a shot across the bow at any landlords considering STVRs. A warning that they’re thinking about it and leaning towards not permitting it so don’t get crazy
That seems to be the “fuzzy logic” of Saanich planning department (as with some other things). I just happened to overhear that comment when listening into June 18th public hearing (the quote from Shari Holmes-Saltzman is from the meeting minutes which can be found online). You can certainly confirm that with them.
Wait, since when is anything not explicitly permitted in zoning prohibited?
In Saanich public hearing meeting on June 18 this year, Shari Holmes-Saltzman (the manager of Saanich planning) stated: “Short term rentals are not permitted in Saanich. The Zoning Bylaw does not refer to or define “short term rental”, (but) based on case law from other jurisdictions, anything less than 30 days is considered to be a short term rental or temporary.”.
The enforcement of the bylaw in Saanich is complaint-based.
Good for you! Enjoy life instead of slaving away to afford a shithole here.
Thats a good point James. There’s a North America-wide reduction in work force participation rate (related to age), and this seems to be above average (lower participation rate) in Victoria.
So here in Victoria, the Labour force survey numbers tell us that Victoria has lowest unemployment rate in Canada. Great! – except this is mainly because of fewer jobs, but even fewer people in the work force, leading to a lower headline unemployment number.
It would be better for us if there was a “jobs boom” resulting in our low unemployment rate, but the numbers aren’t telling us that. Just (by analogy) more people riding on the wagon, and fewer people pulling it – leading to a lower unemployment rate.
Talked to one of the principals at leading structural firm in town, he said 12 towers in prelim stages. All rentals. Didn’t talk about specific projects though.
Keep at it Josh. I hope you find something great.
“I’m not sure what the people behind “The James” are smoking, but they’re trying to rent 680sqft for $2340/month. I have nearly twice the space for half the cost 1 block away.”
I’m guessing you’ve been renting there for a while and are enjoying the benefits of rent control as that seems really cheap. $2340 does seem high though.
I wonder what other brand new purpose built rentals are going for downtown? Haven’t really been paying attention.
Though > $2000 for <700 ft^2 does sound pretty insane, even for James Bay. Ah, I see it's a 2 bedroom. That makes some sense I guess.
It is high for sure but yea if 2 bedroom (even if size of large 1 bedroom) it makes a bit more sense.
Still keeping an eye out, still unimpressed.
totally agree on unemployment being low .. but seems like we also have problem hiring expertise onto the island. What is the point of low unemployment if you can’t employ anyone?
But if you moved in now, how much would you pay?
Rentals, heavily regulated as they are, represent an obvious market distortion, since it’s much harder (nearly impossible, legally) to raise the rent on existing renters to market rates, while it’s easy to do so with new leases.
It’s basically like people who bought houses or condos 15 years ago. Weren’t they the lucky ones!
So enjoy your cheap apartment and don’t ever move out. You may one day get renovicted. In the meantime, market rates for new arrivals to the neighborhood are probably much higher. Though > $2000 for <700 ft^2 does sound pretty insane, even for James Bay. Ah, I see it's a 2 bedroom. That makes some sense I guess.
I may be mistaken, but aren’t short-term rentals legal in Saanich? Victoria has banned them in all but ‘transient’ zoning, but I don’t believe Saanich has done so.
That’s it for us! We’ve found work in another town and are upping sticks to a place we can afford to buy a house. Thanks, Leo and the posters of HHV, it’s been great and I learned a lot about real estate from all y’all.
Josh,
How’s your househunting going? Are you still looking?
I’m not sure what the people behind “The James” are smoking, but they’re trying to rent 680sqft for $2340/month. I have nearly twice the space for half the cost 1 block away.
https://jamesbayliving.com/suites
“Barriers to development?” I wish! Where I live on the Peninsula, it seems as if developers are throwing up new multi-storey boxes willy-nilly on every little patch of unprotected, exposed land. These little towers are spoiling the character of the neighborhood. And of course, all the stacking and packing of people leads to more vehicle traffic, adding to commuter congestion. Crime is up. Whatever became of the concerns raised a decade ago by CRD reps about landfill and other infrastructure capacity issues? Where is the vision?
Bring on the regulations, please! We NEED some.
You mean like regulations reducing the 300,000+ immigrants that come to this country every year? Unfortunately, with population growth we need housing and even retired people don’t want to seem to live in Port Renfrew.
There is no way they can be making $7500 a month as a legal market rental for this place. Perhaps as an illegal short-term rental which could be shut down by the City. They might want to sell to realize that huge capital gain and get rid of the headache and risk of managing such a rental.
Condo prices are honestly blowing my mind at this point.
The thing is developers are not rushing out to launch new projects at these prices as the government charges/re-zoning process and construction costs/new building codes are insane.
Currently I can’t think of an excavation site downtown. As the current projects are being finished there will be less and less cranes downtown.
Same applies to SFHs on the Westshore; prices of the finished product are quite stable but lately building lots have been super slow to move.
And the time of year. There are significantly more insolvencies in spring and fall.
I guess it depends which stats you look at. It seems like if you have a lot of consumer debt and then lose your job or get divorced this can be financially devastating. It is certainly a significant factor.
https://bankruptcycanada.com/insolvency-blog/causes-of-bankruptcy/
If you don’t qualify for a CP you aren’t in that reported stat then. Most consumer proposals are accepted because it is better for creditors – 95% or more are eventually accepted.
http://www.gothandcompany.com/how-often-do-consumer-proposals-get-rejected-and-what-happens-if-they-are/
At this point, the rise in the number of consumer proposals doesn’t seem to be related to the economy across Canada so much as it is related to the overall level of consumer debt and population growth plus 1. the rise in the amount of student debt people now have and 2. job losses if you are in Alberta or were employed in Alberta (many from the east).
The real numbers in the rise are super low though in relation to population growth, as Patrick has pointed out.
To me this rate doesn’t seem to be an indicator of an end to anything but jobs in Alberta coupled with high rates of consumer debt among those who do not own a home. Not to say that there is not an economic cycle at play that will show a decline, just that the real numbers for insolvency are too low to be a leading indicator imo.
Insolvency rates also tend to lag economic downturns as it takes about a year for people to get to insolvency proceedings from the time they are considering it.
Just saw this listing today and I have a question – MLS 417788 at 3981 Cedar Hill Cross Rd. Listed at $999,900. It’s a 2 suite house that sold in 2016 for 644,500 and is currently assess at $745,000. Clearly there have been some serious reno’s on the property since purchase. The MLS ad states that the home is currently rented for an eye popping $7500 gross a month. Why would someone want to sell a property if they can make that much in rent given the original cost to purchase? I realize that situations change but seriously that much rental income would entice most to keep the property.
I don’t know if the unemployment rate is telling the whole story w/r to jobs, since hasn’t BC been losing jobs for a while now?
Very interesting, thanks.
Neat. Thanks for that trivia, Local Fool.
A bit of historical trivia for you.
Most of you have heard of the neighborhood of Broadmead (Royal Oak), but do you know where that name comes from?
In the 1880’s, Robert Rithet purchased about 1,000 acres of land for farming in that area, then basically an extension of Mt. Doug Park. He had a passion for racing horses, and “Broadmead” was the name of one of those horses. He would regularly take Broadmead to the local horse racing track, in the area now known as Royal Oak Burial Park.
If you’ve ever gone to Broadmead Village and seen the picture of the horse at the entrance, that’s the depiction of what was once Mr. Rithet’s most prized stallion.
Also some sector slowdowns like forestry are leading to layoffs that may be compensated by gains in other areas but still cause problems.
BC housing is investing a lot. The feds and their housing strategy. Municipalities offering bonuses for rentals and affordable housing
This just in off Owen Bigland’S Twitter.
“All condos being built in Downtown Vancouver from this point on will be high end luxury units priced at $1500 sq ft and up! When you can still get in the market at $1000sq ft i would recommend you try and get you foot in the door now! #vanre #investing
https://t.co/z8nAvkQLnO”
Yes that’s right get on it while the getting is good at $1000 a sqft… Off to $1500.
How many units left at black and white in Victoria weren’t those near $1000 sqft for a wooden 6 story structure. Owen should come by some. Maybe go get some investment places in the currency house at the same time for $1700 a sq ft.
Condo prices are honestly blowing my mind at this point. The more and more I sit around watching though the more and more I feel the government and central banks are going to keep stoking this fire until they print money into oblivion and QE fails and then finally the sky falls.
They can’t raise rates, they’ve gone back into buying assets on their books after the stock market pullbacks of last December and this summer.
I saw an article today saying investors just switched gears from recession worries into FOMO, highest level of investment since after the presidential election.
https://money.cnn.com/data/fear-and-greed/
Should be an interesting next few months or weeks in the markets.
I’m the end I don’t think it matters too much how we debate what will happen to housing prices because in the end we represent the fraction of 1% of people informing ourselves on the subject. The majority are going after easy money and buying like it can never go down on leveraged down payment mortgages.
Then again $100k in apple in 2009 would be worth 1.3m today. Let the QE keep on riding!
Perhaps other phenomenons are in play as well as employment, such as an uptick in family bread winner death and/or divorce.
BC still has all time low mortgage delinquency rates 0.14% about one in 700. Thats much lower than any other region except Ontario. https://cba.ca/mortgages-in-arrears
And no sign of it rising at all, in fact it’s sitting at an all time low at 0.14% as of July 2019 and has fallen in 2019. Delinquency rates were double In BC about 3 years ago, and are about 10X higher in the USA.
https://cba.ca/Assets/CBA/Documents/Files/Article%20Category/PDF/stat_mortgage_db050_en.pdf
None of this fits the narrative we’ve read from some members here about homeowners under increasing financial stress to keep up the mortgage payments.
Sorry, which rental incentives are you referring to – or are you talking about some other kind of incentive?
The boom in rentals continues. All the incentives from various levels of government are clearly working. Very interested to see the new CMHC rental report which should be out soon.
One of the outcomes of a declined CP is bankruptcy. More importantly they are symptoms of the same thing. Stripping out consumer proposals from bankruptcy stats as Patrick would like to do is missing half the picture.
The point is not anything to do with home owners, it’s that an uptick in insolvencies is not exactly a great sign. Just add it to the other indicators that the 10 year bull market may be nearing an end. Could be a blip, but there are clearly a number of signs now that this might be about played out.
Losing your job is the biggest reason. So it’s interesting that with a record low unemployment rate we are seeing an increase in insolvencies.
“Barriers to development?” I wish! Where I live on the Peninsula, it seems as if developers are throwing up new multi-storey boxes willy-nilly on every little patch of unprotected, exposed land. These little towers are spoiling the character of the neighborhood. And of course, all the stacking and packing of people leads to more vehicle traffic, adding to commuter congestion. Crime is up. Whatever became of the concerns raised a decade ago by CRD reps about landfill and other infrastructure capacity issues? Where is the vision?
Bring on the regulations, please! We NEED some.
I don’t think that’s a particularly relevant distinction unless you’re looking at it through a legal lens or just looking to argue. The point is, both are tangible symptoms of financial distress that cyclically rise and fall with the economy – with all the personal and societal implications associated with that.
They are an alternative to bankruptcies. The majority of proposals are not annulled and turned into bankruptcies.
Bankruptcies have declined in many provinces year over year. Consumer proposals have risen almost everywhere. Homeowner insolvencies were about 35% of all insolvencies in 2011, now they are about 5% ie. 95% of insolvencies are among those who rent. Millennials are filing insolvency at a much faster rate; faster than their entry into the workforce would seem to warrant (37% of all insolvencies). Seventy percent of those who are insolvent are single.
https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br04148.html#tbl1
https://www.hoyes.com/press/homeowner-bankruptcy-index/
The most common reason for insolvency is abuse/overuse of credit cards.
so i guess all bc owners are equal and all lands in BC is the same
Great, that looks fine now. Thanks for the discussion. Now I better go make some money, before I become another statistic 🙂
You’re not graphing total bankruptices, you’re graphing the changes in bankruptcies. If you graphed bankruptices instead, we could see the numbers of bankruptices and look at the numbers from the amplitude and look at the slope of the graph to see how fast they are changing.
I consider graphing only the changes in data to be sometimes a way of obscuring data, not revealing it. Most of that graph is below the 0% line, indicating how bankruptcy numbers have been falling more than rising over the last few years. The ups and downs are just seasonal, introduced by you changing to a 3 month data instead of 12 months as I used. For example, BC rose in October last year just like this year, yet we were falling in the spring in both years.
According to your graph, Canada # of bankruptices are currently rising at +1% annualized rate rise in the last 3 months –that alarms you? It is below population growth of 1.4%, so still falling bankruptcies per capita.
The story of Canada bankruptcies told by the green line of your graph is that they’ve been falling per capita for almost 3 years, including the present time. As you’d see if you graphed total bankruptcies.
Actually if you only look at bankruptcies the picture really doesn’t change. Absolute rate is low I agree but there is a substantial uptick recently. This is all 3 month averaged data by the way, which is the minimum you need to get anything sensible that’s not just noise.
Way back in 2017 🙂
https://househuntvictoria.ca/2017/11/27/nov-27-market-update/
The two are commonly grouped together under insolvencies by the Office of the Superintendent of Bankruptcy. I’ll change the title to “insolvencies”. Proposals are a pre-cursor to bankruptcy so very important to look at them as a leading indicator.
BC Bankruptices are flat YOY (down -0.1%). Canada down -1.5% YOY (last 12 months vs previous 12 months). Ontario -1.4%. Quebec -4.8%). Bankruptices are down more per capita given Canada’s 1.4% growth rate.
https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br04148.html
Consumer proposals are up, but those aren’t bankruptcies. Proposals aren’t typically involving mortgages (for a start there’s a <$250K total debt limit to even apply, and most people's mortgage is higher than that. Moreover, banks don't refinance mortgages inside a proposal). Proposals being up indicates stress on the consumer (credit card debts).
About one Victoria homeowner declares bankruptcy per month, and this hasn’t changed. Wake me up if that tiny number hits two homeowners per month and I’ll pay attention. Homeowner bankruptcies are tracked by the Hoyes index, and is still at historical lows. August 2019, only 4% of bankruptcy filings are from homeowners, 96% from non-homeowners. This means that of the 356 bankruptices filed in BC last month, 4% x 356 = 14 would be expected to be a BC homeowner, and (given Victoria is 7% of BC population) about 7%x4% x 356 =1 of them would be expected to be from Victoria. Of course the bankruptcy from the one homeowner per month in Victoria could be from anything (illness, accident etc) , unrelated to housing.
https://www.hoyes.com/press/homeowner-bankruptcy-index/
“The Hoyes Michalos Homeowner’s Bankruptcy Index is currently at historical lows. The dramatic decline in the percentage of homeowners filing insolvency is not because homeowners no longer carry credit card debt. Rather, the drop in our HBI reflects a rise in home prices since insolvent homeowners purchased their home, and the resulting increase in their home equity. Homeowners with significant unsecured debt are currently able to refinance this debt through a second mortgage or home equity line of credit.”
Well the rising bankruptcies tell the simple tale of a real estate cycle actively turning. Any bankruptcy trustee will tell you their work is cyclical, and once it starts up, it has to run its course.
Despite the uptick in sales volume, prices at this time aren’t likely to be shooting up further. I suspect as the knock on effect from the deteriorating construction sector grows, the effect on the economy and RE prices will get more dramatic.
Rates have, in absolute terms, very little room to fall to absorb the correction. Wage growth has actually been decent, but in some markets it’s still so far from what the economy can sustainably support it’s almost metaphysical.
That leaves prices. Question is, how much? This last spring market was pretty unremarkable, but I bet the bottom is still 2 to 3 years away. For those of you looking to buy in that time frame, I suspect some good deals will await you.
Just don’t run out today and buy a 600k 1 bedroom condo, unless you’re really rich or plan to live in it for a long, long time…
When was the last November with a increase in active listings?
Thank you for the new post Leo, hope you enjoyed your time in the interior.
I looked at the weekly numbers and I wondered if the sales/new listings for last week (both being high) could be related to new condo developments being released for sale. How are the single family sales, is it possible to pull that information and see if there is a big jump in that area too.
I do know a couple of people who have just started looking at homes again after waiting months. They both say this time of year is the best time to buy. What are your thoughts on that?