COVID unemployment and real estate
The April jobs data was released on Friday, and I wrote a short piece in the Capital about the release as it pertains to Victoria. The official unemployment rate for April in Victoria was 7.2%, but you can completely ignore that number since it doesn’t reflect reality. First of all that’s a 3 month averaged figure (February, March, April), and secondly it doesn’t count the vast number of people that were not technically unemployed but had their hours cut drastically or entirely in April. Taking that into account, the effective unemployment rate for the country was north of 30% as shown by economist Trevor Tombe in a startling graph. Because Victoria isn’t big enough to get detailed data, it’s impossible to calculate the exact rate for this town, but hours worked dropped 26.8% in Vancouver so we’re very likely in the same ballpark with an effective April unemployment rate of 20% or more. 
However, unlike the Great Financial Crisis which caused unemployment across all ages and income levels, this has been a very lopsided shock, with young and low-income being hit by far the worst. In fact, a chart from Indeed economist Brendon Bernard put this into stark perspective, showing that nearly 100% of the job losses came from the lower two thirds of the pay scale.
The age profile tells the same story, with the vast majority of job losses in BC coming in the younger age groups.
When thinking about the impact on real estate, there are two primary ways that an increase in the unemployment rate can affect the market:
- Decreasing demand if current renters put off a purchase due to loss of income and
- Increasing supply if current owners are forced to sell due to the same.
To be more precise, the impact on real estate is really about what happens to the people right around the owner/renter divide. That is, if renters who were previously ready to buy (likely the highest income renters) lose their job, that would take away demand. If marginal owners (those without a buffer) lose their employment, then they may be forced to sell. Conversely a renter with no path to ownership or an owner with substantial wealth or no mortgage losing their income would not affect the market.
Of course there is also the secondary impact from a weakening rental market, and that is on investors. There are 21,030 multiple property owners in Victoria, and if a rental is non-performing (either due to vacancy or because it’s negative cash flow and not appreciating) it may motivate some of those owners to liquidate. I’ve seen a few former AirBnB units listed, but so far no compelling evidence of this in the market.
Right now we can confidently say that all things being equal, the current jump in unemployment is less negative for the real estate market than a similar jump where job losses are more broad based. Job losses are concentrated heavily amongst those that previously had no near term ability to buy. Also, as staggering as the effective unemployment numbers are, we should expect them to bounce back much of the way quite quickly. StatsCan says that two thirds of the unemployed have a direct connection to a specific job, and should be able to return to that job once businesses open up again. Although I’m enjoying reading a thesis on the Great Depression in Victoria and the high effective employment rate makes the comparison tempting, this won’t play out anything like that dark period in Victoria’s history.
That said, it will certainly take years before we are enjoying the ultra-low unemployment rate we had two months ago. We may be in for a very strange situation where unemployment in the high income / professional space continues to be low, while unemployment in other sectors is very high. I’m hoping the government continues to direct their support to those groups and the small business space during the recovery. Even the public sector will not be able to escape large budget deficits though, and employment will likely decline in the coming years. People think that the public sector is rock solid, but employment there dropped by some 6000 people after the financial crisis, more than in any other sector. I don’t expect mass layoffs, but quite possibly a very long hiring freeze and substantial declines through attrition.
About 10% of the mortgages that Canadian banks have on the books are in deferral. We don’t know how many of those are in Victoria, and we don’t know how many of those people deferring will be just fine when the deferral expires. Quite likelythe majority will be fine and return to paying their mortgage in the fall. However it remains to be seen whether there will be some increased listing activity in the fall when supports expire and real life returns.
And that’s really the theme of this shock to the system: uncertainty. If there’s one thing I’ve learned in 10 years of analyzing the market, it’s that the market will always surprise you. Predicting much about the future of the market, especially pricing, is dicey at the best of times and COVID has piled on the uncertainty. Thinking about various price scenarios for the future of the market, I can’t discount any of them and could imagine a set of circumstances that would support nearly all of them. “Official” projections are similarly uncertain, with TD projecting prices to keep climbing, while others are factoring in a substantial decline. As I’ve said before, the figures for market activity and economic indicators during the crisis are less important than the ones in the fall and beyond for the long term health of the market. Until then you can only evaluate your own risk profile and watch the listings to see if any of them make sense for you.
Market activity continues to improve, albeit slowly. We still haven’t been able to crack more than 50% of the activity from last May within Greater Victoria. However I expect strengthening in the coming weeks especially with BC’s restart plan announced.
Also weekly numbers courtesy of the VREB for continuity purposes. Note that sales that the VREB reports are for the entire board trading area, and include commercial property, which is why the percent change from last year is different than in the chart above. Inventory is down some 20% from last year.
| May 2020 |
May
2019
|
||||
|---|---|---|---|---|---|
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Sales | 28 | 124 | 848 | ||
| New Listings | 89 | 287 | 1613 | ||
| Active Listings | 2289 | 2319 | 3019 | ||
| Sales to New Listings | 31% | 43% | 53% | ||
| Sales YoY Change | -31% | -46% | |||
| Months of Inventory | 3.6 | ||||
New post: https://househuntvictoria.ca/2020/05/19/how-to-measure-short-term-price-movement/
Ks112 do you buy chance own a decent prime downtown rental condo?
@FormerLandlord : “Don’t attribute that quote to me. I didn’t write anything about protesters.”
Indeed. Apologies, @FormerLandlord. That nugget was from @ QT. Note to self to not post on my cellphone.
Since the downtown condo rental bears got a hard on for Used Vic instead of Craigslist (mind you many places are on both) I thought this one here is a slight price drop until I realized it is a 2 bed and 1 bath unit and not one of the 2 bed and 2 bath units:
https://www.usedvictoria.com/classified-ad/The-Aria—Beautiful-2-Bedroom-Condo—Steps-to-the-Inner-Harbour_35803673
🙂
Someone smrt on the internet told me that decent prime downtown condos on the seventh floor with windows facing east and south are totally the place to invest
If you ever start feeling anxious about B.C.’s finances, just remember Newfoundland. Its debt-to-GDP is approaching 75% and insolvency is a realistic possibility.
Apologies if you hit the paywall:
https://www.theglobeandmail.com/canada/article-economic-storm-brews-over-newfoundland-and-labrador/
Gee, my tenant might begin paying market rent if prices drop 20%!
“Prove to me that a sliver of the market in a small city in a small country has changed prices.”
Go prove that it hasn’t.
Anyways hope you downtown prime condo rental bears do better in your predictions than the housing bears on here 😉
“Opposing your claim so far. 1. the twqeet Leo posted. 2. The rental.ca link cited earlier 3. The actual experience of a renter posted earlier. 4. Marko’s view that places have come down in price slightly. 5. An owner who posted here saying she reduced her rent.”
Lol so basically you can’t find any actual proof right? Ya that’s what I thought. Btw, leo agreed rents wont come down right away. The other landlord that reduced rent doesn’t own a decent downtown condo which is what I am talking about, same with the other renter “quadra and bay” does that sound like a decent prime downtown condo to u?
Sure, but the question is how temporary. As someone pointed out, losing a month’s rent is a different matter than losing a year’s.
The rent control issue is a valid one but it’s little more than guesswork with respect to future market rent, allowed increases, and length of tenant stay.
I think it’s likely the BC government is going to bring in an aggressive non-profit rental housing program by next spring. The long term effects? Again, who knows.
A rational analysis would be to not lower rent right away, if the landlord believes that economic factors are temporary. Because a lowered rent can never be raised back up to market because of rent controls. (in real terms, for that tenant).
Don’t attribute that quote to me. I didn’t write anything about protesters.
A Fairfield VRBO hits the market.
https://www.realtor.ca/real-estate/21847947/3-9-moss-st-victoria-fairfield-west
Hardly firesale price though.
Bwahaha. Ks112 you are the one with the oddball claim that the biggest economic shock to hit Canada in three generations has had no discernible impact on rental rates in downtown Victoria whatsoever over the last month and a half.
To support your claim? You glanced at Craigslist.
Opposing your claim so far. 1. the tweet Leo posted. 2. The rental.ca link cited earlier 3. The actual experience of a renter posted earlier. 4. Marko’s view that places have come down in price slightly. 5. An owner who posted here saying she reduced her rent.
So I was legit rental hunting during the first bit of Covid, we found our place mid March and moved April 1. I looked mainly at usedvic and the Victoria rentals Facebook group. I still get a lot of notifications from the Facebook group and am seeing ads relisted for usually $100 – $150 less and people loosening up on pet restrictions. While I was hunting, we emailed around 15 places and viewed 6. We got 5 follow-up emails from landlords offering us reduced rent if we’d take their place. For example, a renovated 3 bedroom suite near Quadra and Bay, advertised for $2300, offered to us for $2100 and then $2000. The place we ended up getting was never even advertised I saw a comment mentioning the place and just followed up directly with the landlord. My point is a lot of this is not visible when you’re just casually viewing rental ads. But in my opinion, ya rents are down 5-10% and dropping more every month.
Came up with a reasonable way to estimate more correct unemployment rate in Victoria given the issue with the 3 month averaging and that many unemployed people weren’t counted as such due to inability to look for work. By looking at the change in unemployment by industry in BC, we can get the impact by sector. Then applying those percentage changes to the employment levels by industry in Victoria, we can estimate employment for April in Victoria relative to our labour market. That gives a total employed of 167,000 in April, or 18% unemployment, before taking into account any lost hours or anyone that wasn’t unemployed but not working.
We should see a drop from that 18% in May. Local GC said construction was some 45% slower in April due to absences / SD requirements, but that has eased to about 20-25% now.
Lol ok caveat, show me one example of a decent place downtown that’s reduced their rent currently then.
A bunch of rental listings on craigslist doesn’t prove much as to whether rents have fallen or not. Even in good times a perusal of craigslist is going to show you more overpriced rentals than not. This is simply because the average overpriced rental is going to be listed longer than a market priced rental. Either till the landlord reduces price or finds a tenant willing to pay.
Same reasoning applies to real estate listings. At any given point in time most listings are either overpriced or crap (or both). Well priced homes sell quickly so don’t languish on MLS.
@DuranDuran
So who would put their family in an Air BnB that you do not know has been properly cleaned or who last used the bed and did they cary Covid-19? Just a bit scary for some.
https://www.usatoday.com/story/travel/hotels/2020/03/18/coronavirus-road-see-how-sanitize-your-hotel-room/5041000002/
@FormerLandlord
“You have to thanks our regulatory bodies and protesters for lack of business and factories in Canada.”
I do thank protesters – they’re the ones desperately trying to ensure our planet isn’t further destroyed, that humans have rights, FN authority is respected on their land, etc.
I generally don’t thank regulators. They have largely been captured – stacked with industry insiders administrating for the interests of other countries & corporations, both domestic & foreign – not Canadians, not the environment.
For evidence, one only has to look to the oceans filled with plastics, the polluted air, heavy metals & various other toxins poisoning our air water and soil, habitat loss, species extinction, unconscionable cruelty to farmed animals & wildlife, etc. Done with impunity, and without serious consequences.
But at least we aren’t quite as bad as the countries typically favoured by the corporate offshore tax dodgers these free trade riders favour.
But I should thank you for making my point that “free” trade has been disastrous for the 99% & the planet, as it encourages corporations to head to the countries with the worst human rights and environmental protections. It’s more palatable to exploit & poison brown people, it seems.
I did not say that all or even most landlords will do the rational thing, i.e. ask for a realistic rent at the outset. But as time goes on almost all will be forced to do so.
Nor did I claim the “because” relationship. I said that the market price will go down whether or not individual landlords hold out. The reason is that some will rent right away. That may be because they’re performed a rational analysis or simply because they need the money right now.
You guys are missing the point. Air BnB rentals can make 2-3x what you get from long term rentals. Your $1500 a month condo goes for $120 a night on ABnB. It’s not always occupied, but in the good days it did very well. So the advantage of holding out is the possibility (distant at this point, for sure) of the short term rental market returning. Some experts are making a point of saying that domestic tourism will have to take the place of bigger vacations this year. So landlords are hoping that Vancouverites, Calgarians, etc may yet sign up for Victoria vacations this summer. It’s a simple risk-reward quantified rationality.
I remember a conversation with a property broker in Vancouver a number of years ago that made a lot of sense to me. For every month a property sits vacant, the landlord might as well have lowered the rent 8% because that’s what they lost by having the unit vacant for one month over the next 12 months on a one year lease. Now keeping vacancy at zero probably doesn’t always make sense if you tend to get longer term tenants but how many people live in the same rental unit for more than 2 years? My average tenancy has been 2 ears across 5 different units in my life, then I bought and settled down. The flip side to this is that as I have been told by a local RE investor, the mortgage are often collateralized by the net income/ cap rate., which I think is more the case of why things are sticky. They do want to lower the price but can’t because the mortgage contract will negatively affect them more than the lost rent.
Deb, this isn’t directed at you but for the 100th time, I am not disagreeing that rents will eventually fall if this persists. I am saying that it takes time (probably 2-3 months atleast) as prices are downward sticky (which is why you see the same ads sitting there).. Patriotz thinks this will be reflected right away because he assumes all or most landlords will do the rational thing etc…
@ks112
I never advertised my rentals on Craigslist, I always found UsedVictoria to be a better and less cumbersome site. As for rentals not going down in price the fact that there are so many examples available that have been advertised for over a month and are still vacant just proves that they are not renting and that the price will either fall to find a renter, be taken off the market to wait for better times or sold.
If you want to see what is being reduced just do a search:
https://vancouver.craigslist.org/search/van/apa?query=Reduced&availabilityMode=0&sale_date=all+dates
https://victoria.craigslist.org/search/apa?query=Reduced&availabilityMode=0&sale_date=all+dates
🙂
I mean this in the most polite fashion possible.
I don’t give a fuck.
Maybe you should retake econ 101. I am pretty sure the curriculum doesn’t feature any modules on the evil “protestors” that seem to loom large in your mind.
Hey Patroitz, I just had a look on craigslist lol if anything I think some rentals are going up in price. Check this one out for $1875:
https://victoria.craigslist.org/apa/d/victoria-south-1st-month-free-fully/7126193606.html
Landlords at the jukebox also doesn’t seem to be phased by staying empty and they probably been empty since the building completed months ago:
https://victoria.craigslist.org/apa/d/victoria-south-modern-condo-downtown/7124613586.html
https://victoria.craigslist.org/apa/d/victoria-beautiful-3rd-floor-condo-in/7124603529.html
https://victoria.craigslist.org/apa/d/victoria-new-condo-in-downtown-victoria/7114487961.html
https://victoria.craigslist.org/apa/d/victoria-modern-1-bedroom-downtown-condo/7124949196.html
Wave landords also not giving in:
https://victoria.craigslist.org/apa/d/victoria-beautiful-modern-downtown/7120735915.html
https://victoria.craigslist.org/apa/d/victoria-large-downtown-victoria-condo/7124100735.html
or Juliet
https://victoria.craigslist.org/apa/d/victoria-spectacular-downtown-views-2b/7105004326.html
Only one i see of reasonable value is this at the Astoria:
https://victoria.craigslist.org/apa/d/victoria-one-bedroom-condo-downtown/7112235628.html
Or this one at the Falls, but its an obvious ex-airbnb short-term so won’t help if you actually live in Victoria:
https://victoria.craigslist.org/apa/d/victoria-available-1-3-months-luxe-2/7105508639.html
You could argue these ones in the Manahttan are ok, but it’s an older building:
https://victoria.craigslist.org/apa/d/victoria-south-one-bedroom-condo-in-the/7119293760.html
https://victoria.craigslist.org/apa/d/victoria-spacious-1bedroom-downtown/7121434436.html
With that said, I suppose the 2 bedroom places face more pressure as I think alot of them are rented to students and hospitality industry employees whom are roommates and that market has dried up substantially. But if you are a professional looking for a decent one bedroom downtown, there just aren’t many deals to be had if any. You could argue that I am posting anecdotal evidence, but the downtown Victoria condo market isn’t that big and I bet most of the rentals end up here on craigslist.
Alumni = a group of male graduates, or a group of male and female graduates
Alumnus = a male graduate
Alumna = a female graduate
“Nope. Any individual landlord can ask above market and let their property sit empty – until they run out of money. But they don’t control the market. If they want a tenant they are going to have to meet the market. The market isn’t going to come to them.”
Which is exactly why price discovery takes time and doesn’t happen instantly, not sure why that is such a difficult concept……
Nice to see the encouraging results from the Moderna phase 1 CoVid mRNA vaccine study. All tested participants developed antibodies comparable or exceeding levels seen in recovered CoVid patients. The study was done in Seattle. This is one of the “warp speed” vaccines that they are manufacturing now, and hope to have ready for some groups by the end of 2020. https://www.cnbc.com/2020/05/18/moderna-reports-positive-data-on-early-stage-coronavirus-vaccine-trial.html This was a small study (45 people), now being expanded. If more good news comes from further studies, I’d expect them to speed it up further by doing a human challenge https://1daysooner.org/
Nope. Any individual landlord can ask above market and let their property sit empty – until they run out of money. But they don’t control the market. If they want a tenant they are going to have to meet the market. The market isn’t going to come to them.
Looks like she lived here for a while… she was a Royal Roads alumni.
Canadians are quick at patting ourselves on the back for a job well done and tend to miss the forest for the trees. If you take a look at the PDF in the link that I provided, it make it easy to misconstrued the picture by focusing only on the overall ranking as indicated in your links because it glossed over the details.
Canada overall doing business ranking is very high at 23/190, with ease of starting a business at an incredible 3rd place out of 190, protecting minor investor at 7/190, getting credit at 15/190, and resolving insolvency at 13/190. However, factors that I described in my previous post are hurdles that stop business from functioning in Canada to down right put it into insolvency before the business get off the ground.
Canada make it easy to borrow money to start a business, business permits are easily obtain, and simple to declare insolvency.
It translate to big investor chance of losing money and declare bankruptcies easier/higher than other economies. Getting building permits is a drawn out process that cost money, get electricity to the building also is another drawn out process, then the investors are hit with protesters that abuse the poor judicial processes by drawn out the permits/claims, and then the authority make it easy for the investors to declare bankrupt and walk away. And, if investors make it past the permits and protesters (average of 1297.5 days before/during shovel in the ground), they still have the challenge of import and export goods for their products.
Welcome to econ 101.
I really hope it’s January 2021 but the problem is that’s right in the middle of flu season. I guess May 2021?
Incentives are often seen on rentals before rent reductions because then the landlord isn’t stuck at a lower rent which is then rent controlled. Better to offer first month free, free move, whatever.
How to find a motivated seller.
I don’t disagree. I don;t see the rental market improving until January at the earliest, maybe not until next summer. Also we get a pile of completions in that time frame to add to supply.
I don’t do sales. I only refer other agents if someone wants one.
What lack of business?
“ As of December 2015, there were 1.17 million employer businesses in Canada. Of these, 1.14 million (97.9 percent) businesses were small businesses, 21,415 (1.8 percent) were medium-sized businesses and 2,933 (0.3 percent) were large enterprises.”
And maybe we aren’t such a terrible place to do business:
This survey ranks us third – https://www.usnews.com/news/best-countries/open-for-business-rankings
Forbes ranks us sixth – https://www.forbes.com/sites/kurtbadenhausen/2018/12/19/the-best-countries-for-business-2019-u-s-down-u-k-on-top/#5b08644c52d5
Sure we aren’t perfect and some aspects of doing business in Canada could definitely be improved, but let’s not get all negative Nellie.
It time to put money into well deserving programs such as health, essential/skilled education, and perhaps military, and upgrade our flying wings instead of dumping it into useless programs such as drugs user lifestyle, etc… The snowbirds are obsolete 5 decades old flying death contraptions.
You have to thanks our regulatory bodies and protesters for lack of business and factories in Canada. We are rank 51th out of 190 economies for trading across border, construction permits is rank 64/190 (249 days), getting electricity is rank at 124/190, and what make matter worst is the 100/190 ranking for enforcing contracts with poor quality of judicial processes (average 910 days to resolve claim).
Doing business 2020 Canada — https://www.doingbusiness.org/content/dam/doingBusiness/country/c/canada/CAN.pdf
She was from Nova Scotia too… that province right now 🙁
I am saddened to just hear that one of the Snowbirds crashed killing one of the two pilots. This year just gets worse. My heart goes out to the family of the pilot and all of the air crews of the Snowbirds.
My search criteria was just starting tomorrow to the end of the month. I think a number of air bnb owners will only rent for 30 day minimum now so if you broaden the search criteria you would probably get more hits.
My point of posting that link was to show there are people whom are willing to forego all revenue and not drop their price enough to the point where it will be rented. I can’t get that information for rentals on craigslist so I used airbnb as a proxy. I am just trying to convey the point that not every landlord is desperate to drop their price right away and it takes time for it to work through.
RushforLife:
Well, if it’s any help, apparently last year Victoria had well over 1000 listings on Airbnb.
https://www.vicnews.com/news/city-sees-over-800000-in-funds-after-first-six-months-of-airbnb-regulations/
…. and apparently today … hmmm 300 listings …. a bit of a drop off
https://www.airbnb.ca/s/Victoria–Canada/homes?source=structured_search_input_header&place_id=ChIJcWGw3Ytzj1QR7Ui7HnTz6Dg&click_referer=t%3ASEE_ALL%7Csid%3Af0e8ece9-b30b-406c-9103-a516e42e79cf%7Cst%3ALANDING_PAGE_MARQUEE&title_type=NONE&refinement_paths%5B%5D=%2Fhomes&tab_id=home_tab&search_type=pagination&federated_search_session_id=b21ee0dd-f190-4b1d-a6f3-da8593f6bf9d&query=Victoria%2C%20Canada&adults=2§ion_offset=5&items_offset=280
300+ stays · 2 guests
Stays in Victoria
I am not doubting some places are dropping in rent. What I am saying is that this has not largely trickled down to decent condos in downtown yet despite the example Marko gave. Maybe in July it will be more wide spread.
Ks112 – I am not saying every single landlord in Victoria is running to drop their rent – especially Airbnbs who are used to receiving well above market value and can’t afford to take half the income for the next year. Of course some will wait out. I’m saying in general I think that rents are coming down in Victoria (which has been supported by anecdote and evidence if you want to call rental.ca that). Just listing an Airbnb link is not useful to determine anything – if the pool of airbnbs has not shrunk at all in the last couple months then you may be onto something but I’m not sure where you would fine that info and I don’t that’s the case. pS you will note that the majority of those listings are discounted from their normal price.
Which is why I am saying you probably won’t see any decent declines in rent until July and also why not everyone acts rational, especially the landlords whom aren’t in a cash-flow crunch. This contradicts with your position that:
“That makes the rental market very responsive to actual supply and demand.”
“One months lost rent is two years at a $100 cheaper. If you wait 3 months, like you are suggesting, instead of dropping it to $2300 now you have to wait 6 years to make up that cash flow difference – does that make sense? So no, I highly doubt there are a lot of people sitting on empty rentals waiting to see how this plays out.”
I would say because they’re delusional.
Sure, it’s going to take a while for some landlords to get real. But a month or two without rent coming in is a great motivator.
lol I am looking for confirmation bias Rush4life?? Ok since you can’t come up with any examples here is a quick search air bnb available starting tomorrow in Victoria. Why haven’t they dropped their prices to the point where they can rent them out? It’s a little too early to do a comparison for rentals on craigslist but I bet there are going to be some of the same ads on there next month as this month. Prices are downward sticky whether you like to believe it or not.
https://www.airbnb.ca/s/Victoria–BC/homes?tab_id=home_tab&refinement_paths%5B%5D=%2Fhomes&source=structured_search_input_header&search_type=unknown&query=Victoria%2C%20Canada&checkin=2020-05-18&checkout=2020-05-31&ne_lat=48.51797969364049&ne_lng=-123.31394990518174&sw_lat=48.38882745098763&sw_lng=-123.44660981519564&zoom=12&search_by_map=true
The GH house that occasionally has a Ferrari parked on the driveway is for sale:
https://www.realtor.ca/real-estate/21857340/4002-providence-pl-victoria-gordon-head
Can the new owners request that the Ferrari keep coming for visits?
Leo was your agent, I suspect.
Ks112 you obviously have a bias towards believing the market isn’t moving – you arbitrarily have chosen July as when they will, so just look for confirmation bias then. You have a realtor saying there are some prices dropping, there is rental.ca saying prices are dropping, there is plenty of reasons for prices to drop but nope, not til July.
If someone with sense had a place downtown that opened up and they knew they wouldn’t be renting to any foreign students (or any students at all) and they were going to be contending with more and more Air BNBs and the outlook for the next year was shit you think they would wait to rent their placed for 2400 rather than drop it to 2300 or 2200? One months lost rent is two years at a $100 cheaper. If you wait 3 months, like you are suggesting, instead of dropping it to $2300 now you have to wait 6 years to make up that cash flow difference – does that make sense? So no, I highly doubt there are a lot of people sitting on empty rentals waiting to see how this plays out.
@FormerLandlord : “The narrative that things were better in the past is false. In 1968 it was found 27% of Canadians lived in poverty. Programs were put in place to eleviate poverty over the years and it is now down below 10%. Just because the country used to ignore poverty and didn’t have things like food banks in place to help the poor, doesn’t mean the prevalence of food banks proves poverty has increased. Also most unions look out for their members, the “insiders” and can make it harder for outsiders to make a decent living. Unions served their purpose back in the day to get employees more rights, but their are more or less obsolete now with Employment Standards Act in place.”
It’s a nice statistic, but it doesn’t bear out. The poverty line is ridiculously low and is being reconsidered. Anyone who saw the DTES back in the day vs the war zone it is today, knows it. Governments have an incentive to pretend they’re helping the impoverished. https://www.cbc.ca/news/politics/statcan-redraw-poverty-line-1.5406874
@FormerLandlord : “It is a win win for both countries. Poor people are lifted out of poverty due to higher prices for what they produce. Poor people in rich countries are lifted out of poverty, because their meager income allows them to buy more goods.”
There are more poor, and lower income people in rich countries because many of the jobs that used to exist have been sent overseas. The days of one middle-class parent working and providing for the family are long gone.
@FormerLandlord : “By offering free trade there is a higher chance that these bright people from poor countries can make a decent living at home. Not sure how shutting them out of trade would incentivize them to stay put.”
I think you missed the “as an aside” part of my response.
@FormerLandlord : “Canada is competing just fine. Unemployment was really low before Covid-19 hit.”
The unemployment rate can’t be taken seriously. Years ago, Ottawa gamed the stat to only include those currently receiving EI. It doesn’t include those with lapsed benefits or the underemployed. Another useless statistic designed to hide the true cost of neoliberalism.
Exactly, which is why I am saying you will not see any material rent decreases right away and probably won’t until July. Price discovery takes time, the air bnb owners aren’t going to give u a deal right away if they put their unit on the market, they will put it on the market for what they think is the going rate. Only when they don’t get any hits after couple weeks or even a month or 2 will they consider lowering the price. They are most likely getting their mortgage deferred so there probably isn’t an immediate cash crunch.
Patriots, there are absolutely landlords right now making the choice of holding out for high rent/pay at risk of zero revenue. Go look on air bnb right now and see how many units u can book for tonight or tomorrow or next week. Do u think all those places are magically getting booked leaving zero vacancy when the time comes?
I think people have a distorted sense of how fast things move in both rentals and real estate. Rents generally go up around 3%/year over the long term. Down 6% in a month or two is dramatic for the rental market. Of course premium one beds aren’t about to go to $1000.
Nothing at all like the stock market. People buy stocks in anticipation of future income and capital gains. People rent accommodation to have a place to live right now. No future return on rent paid. Landlords either rent out the unit or get no revenue for the month. They don’t get more rent in the future by leaving it empty. No speculative component to the pricing.
That makes the rental market very responsive to actual supply and demand.
Prices are down a bit, but it is moving very slowly. For example, I’ve seen one-bedrooms that were going for $1,700 regularly now at $1,600 but nothing dramatic. If you take a $1,700 pre-covid condo and put it up for $1,500 you will end up with a lot of quality applications and in my opinion $1,500 is still a solid clip for a one bed. Not solid if you bought a one bed one speculation for over 400k, but if you bought when it actually made sense to buy as investment.
If you are landlord and carrying variable mortgages there is a solid probability you are better off than pre-covid19 for the time being.
Ok, so then can someone please post one ad of a decent place for rent downtown currently that is cheaper than what it would have been prior to Covid-19? My point is that prices are downward sticky, so if the current situation persists it will be probably be July before u see any significant movement.
Patriots, what you are describing is fine and makes sense but unfortunately it is purely academic. You have to remember In real life people are irrational, holes can open up at the bottom of the rental market sure, it doesn’t mean it’s going to be reflected right away throughout the chain. Just like the stock market, some stocks can be underpriced from an academic standpoint but it doesn’t mean it will play out in real life if you bought it. Hence the saying: “The market can stay irrational longer than you can stay solvent”.
KS,
It wasn’t that much, but actually, they initially wanted even more than that. Was a combination of lower prices and in my particular case, the sellers wanted out right away. The market was slow then and I put in an offer well under assessment, which my agent said was “bordering on bad taste”. But the sellers countered nonetheless, then we walked away because we still weren’t willing to pay that much for it.
When their agent contacted us a week later, we knew we had them and thereafter we were able to come to terms. Relative to the market and the comparables in the area, it was a sharp price.
I did end up meeting the sellers afterwards – absolutely lovely people. Always interesting to get a sense of the home’s history and the folks who lived in it.
Ks112 my wife, who is following more closely, has seen a price drop on a place on Whittier from 2k to 1890 and many extra incentives in places like the shire and apartments on tillicum across from the mall. In general we are seeing more places in our price range. Again all anecdotal but the rental.ca article Leo posted is worth a read. This is specific to Toronto:
‘At the start of the lockdown in Toronto, there wasn’t much of a decline in rental rates for condominium and rental apartments, with minimal monthly declines in the prime unit sizes of 500 sf to 800 sf of 0.2% to 1.2%. The chart below looks at the change in the average rent by rounded unit size for condominium and rental apartment listings on Rentals.ca in the former City of Toronto.
However, that changed dramatically in April as landlords are responding to this lower-demand market by adjusting their asking rents. Every unit size range declined month over month from 300 sf to 1,400 sf, from a low of 3.7% to a high of 20.2% for suites rounded to 1,300 sf (keeping in mind the much smaller sample size of large units).
It is clear from the chart that demand has fallen more heavily for the larger and more expensive units than the smaller more affordable units.’
Renters are a lot more mobile than owners. I’d expect there will be some move up renters right now looking for a better living situation at the same or lower cost so more attractive places will have applicants.
Students have been really hard hit by covid job losses and, despite the federal support, I’d expect many who are from out of town would not return and pay rent if they don’t have to until the schools announce a return to in-person courses. When is that going to be? September 2021 maybe?
That is missing the point. Someone is only going to pay a certain amount more for the Aria than for a slightly less fancy place. Someone is only going to pay a certain amount more for that place than the next place down. And so on all the way down to a basement suite. Open up a hole at the bottom and it will affect how much renters will pay going up.
You are also missing that holes are opening up at the high end due to the shutdown in short term rentals. How are those holes going to be filled? From below.
“In my case, similar homes in my area were going for nearly 1M at their peak a few years ago. When I bought the particular home I have now, I probably paid about 100 to 120k less than if I pursued this same home during the peak in 2017.”
Local Fool, I could be wrong but I am pretty sure u mentioned before that your budget was in the $650k-$700k range. How did u get a place for almost $900k as u are implying here?
Rush4life, can u post an ad link right now that is an example of the significant rent drop?
Also regarding those high income ppl currently not working, do u actually think a dentist is going to move from the Aria to a basement suite because he or she can’t do any routine cleanings or check ups for 2 months? Why would anyone do that when u can’t get evicted atm?? Like if I can’t afford the rent due to a temporary cashflow issue why on earth would I want to pack up my stuff and move right at this moment with the rent subsidy and the no eviction rule in place? Makes zero sense.
I did reduce the advertised rent 10% from last year as I was concerned about getting qualified applicants in covid lay-off times. Had lots though – all with stable jobs – but it is a nice, legal place in a good area. After the response I don’t think I did need to drop the price to rent, but I’m fine with it as I’d rather just have a good tenant. I would not be so sure about this being the situation in September – or perhaps even now for some places.
Any program with a co-op has a bunch of summer students.
My Bad on that one Ted. I should have been a lot clearer about third party liability. Here’s my attempt on trying to be clearer.
Although you pay for the BANK appraisal, you are not my client. If you want a copy of the appraisal then you have to get it from the bank because you are not my client. I can not speak to you about the appraisal unless I get permission from the bank because the bank is my client.
I can not give you a copy of the appraisal without the bank’s permission because the bank is my client. The client – appraiser relationship lasts until they release me from being their client or the purpose of why the appraisal was done is changed. That also means I can not give a copy of the report to another bank until the first bank releases me.
If you get a private appraisal and shop it around town for the best deal them you are my client until the bank asks for a letter of release where they then become my client and you cease being my client.
The bank is not suppose to give you a copy unless they get my permission. I almost always say yes but they have to give you the report in its entirety and not pieces of the report. If you then take that bank report and use it for another purpose, like a divorce, then that becomes an unauthorized use and I am not liable, including court testimony, as the report was written for an entirely different purpose.
Most people have a lot of difficulty in understanding that just because they paid for the report that they don’t own the report. This all comes down to who has the client/appraiser relationship. The bank wants me tied to them so that they can sue me for damages. If they are not my client then they use the appraisal at their own peril as I do not have a relationship with them.
If you get an unauthorized copy of the report and sue me then you will also have to sue the bank because you are not my client. Your relationship is with the bank. I could theoretically counter sue the bank for breaking the bank/appraiser confidentiality contract I have with them or the reverse. They could sue me because I broke the client/appraiser relationship.
This makes sense if you had an appraisal done for a divorce and your spouse wanted a copy without your permission because it was paid for on your joint account. I could not give the report to your spouse because I don’t have a client/appraiser relationship with your spouse. Neither can I speak to your spouse without your permission.
Now wasn’t that a lot easier to understand.
How about a real example that can easily happen in a busy office. I perform an appraisal for the bank and the buyer calls me up to ask how the appraisal is coming along. I do not confirm that the person is the buyer but think I am speaking with the loans officer. I tell the person on the phone that the buyer is paying too much for the property. And then the crap hits the fan because the buyer does not want to go forward on the deal.
You can only work for one master at a time. Anyone that has had two bosses asking for different things from them should understand.
Heh. It’s happened here, and is still happening. 🙂
No matter how many times I say it, it doesn’t seem to matter. People expect RE = equities markets and when they don’t see something overnight, it must not be happening. In fact, improving affordability in Victoria has been a present force in the market for a few years now.
One thing I’ve learned is raw prices alone don’t tell you much. People who have a certain budget have that budget regardless of what the market prices are. You can’t spend what you don’t have or can’t service.
For example:
If I chose to purchase an 800k house three years ago, I would buy something for 800k. If I chose to buy today and my budget is 800k, I will still purchase a home for 800k. If I choose to wait and not buy, and one year from now I can afford an 800k home, I would still spend that amount. So the market is flat…right?
Not necessarily.
In this example, for that price segment of the market, the prices may not appear to have changed between each of those respective time periods, but the reality is, what you’re getting is changing. For instance, you can still buy a home here for 500k no problem; the difference is what it buys you relative to another point in the past or future.
In my case, similar homes in my area were going for nearly 1M at their peak a few years ago. When I bought the particular home I have now, I probably paid about 100 to 120k less than if I pursued this same home during the peak in 2017. But I would have had the same budget three years ago as now, or three years from now (assuming rates don’t change).
I do not believe there is less overall value in the market today than there was 3 years ago. Sales mix changes can also hide or exacerbate apparent price movements, but that’s another post.
Let’s see what things look like in 6 months. RE still needs a pretty decent haircut from here on the west coast and I’m happy to see that appears to be on the way.
engineering students are normally on campus in the summer.
It did happen in Vancouver.
Didn’t you say that you reduced your rent by $100 though?
Thoughts on 2055 edgecliffe? Selling for a lot less than assessed and dropped price quickly.
Define high income? All chiropractors, physio therapist, dentists, hygienists, optometrists, massage therapists (all of which would be getting 80K+) are out of work. Thats pretty considerable (not to mention many business owners and people who were working up north in the oil patch). So while I agree there are more ‘retail’ staff out of work i would disagree that its only impacting the low income workers.
My wife and i have been looking at upgrading recently and i would disagree with that statement – i am seeing cheaper prices than 6 months ago. (of course this is all anecdotal)
Where did you get 3 months? i don’t see why if all the students and airbnb dried up in a few weeks we wouldn’t see it sooner.
I stlll think its too early for general rent prices to come down, I would imagine this would take at least 3 months for any material declines in rent to filter through, so probably if the situation stays the same then maybe for July you would see some decent rent reductions.
I had no problem renting this month with multiple applicants. Not to say there won’t be more vacancy, how could there not be without Airbnb guests or university students?
Those units won’t be summer tourist AirBNBs this year and if the talk of mostly online delivery for universities becomes reality, well, just add more to the Covid disruption pile…
Most students would have been leaving around this time of year anyway, can they possibly make a big difference?
Living downtown in one of those nicer condos, I can say that we did have a fair number of renter’s that were international students that disappeared earlier than usual this year. Many of those units stayed rented by the students through the summer until they returned in the fall. In the building, some those units are now listed for rent or sale. Not all students were renting in the crappy low end and if the international students do not return this fall more of those units will be available.
That appraisal belongs to the bank. You might be paying for it but that doesn’t mean you are the appraiser’s client. If you want the appraiser to report to you, then you have to order the appraisal directly from the appraiser.
https://www.priv.gc.ca/en/opc-actions-and-decisions/investigations/investigations-into-businesses/2008/pipeda-2008-390/
It is, with the caveat that data quality is somewhat iffy from all these sites. Toronto which has better data is showing declines from MLS where quite a few rentals are hosted
https://rentals.ca/national-rent-report
You’re just looking at the low and high ends. There’s plenty in the middle. So the substitution can happen in small increments with the same end result.
Also I don’t think the home purchase market is a good analogy, it depends greatly on ability to borrow or capital transfers. Rental is just income, and you have much more flexibility with shared renting. Not too many people into shared buying for good reasons.
“True, although some are definitely in condos as well. More importantly though it’s all connected. Can’t have tons of vacancy in basement suites without seeing that spill over to condos. High substitution there.”
Leo, I think this is similar to house prices. The bears on here were all convinced that a drop in higher end home prices would trickle down to the the $700k-$1M range, it just didn’t happen, not in Vancouver and not here. So a bunch of basement suits and crappy apartments being vacant and slashing their prices in my opinion is not a substitute for someone with a good paying job renting a nice condo downtown. No one still employed is going to move from the Aria or the Shutters into Introvert’s basement suite even if she was renting it out for free.
“That’s the evidence. No takers at the asking price.”
Ok, so how do we know that rents are dropping if it isn’t reflected on the ads in the market place? Is there a place doing surveys on the leases actually signed? If people were that desperate to rent out their air bnb condos then I would expect people to be undercutting each other’s price left and right. Just don’t see that happening based on the ads I just saw.
Rush4life, my point is that there are pretty much no layoffs for the higher income earners (backed by evidence which everyone agreed on) so why would the high end of the market take a hit so quickly? Again, I have not seen any evidence of rents dropping for anything decent based on the ads I just saw on craigslist.
Ks112 Leo had a post a few weeks back about the rental situation – part of it is there are a lot less students – courses are online so why come to Victoria to live in the Provinces 2nd most expensive city when you can stay in Nanaimo and live at home for free. Also that guy is likely competing with a new flood of Air BNBs that are on the market. Also if you are moving there are a lot of people out of work and I’m sure the high end market is taking a hit because of it. Lastly, I agree with Patrick – downtown is losing some of its shine as people are working from home and not working downtown there is again, less reason to pay top dollar. Also have you seen downtown lately? Pandora is less than charming right now…
That’s the evidence. No takers at the asking price.
Yep, good point. I ran some numbers stripping out new builds and the pattern is actually little changed so perhaps it’s not necessary to worry about proportion of new builds in the mix. After all once they’re listed they should be reported as sold when they do so it should even out
True, although some are definitely in condos as well. More importantly though it’s all connected. Can’t have tons of vacancy in basement suites without seeing that spill over to condos. High substitution there.
But I am talking about the example in the tweet where Leo had posted, I don’t know how many students are looking for prime downtown condos. they are usually looking for basement suits and what not. I just took a quick look on craigslist and I don’t really see any evidence of rents declining for downtown condos. Decent 1 bedroom is still minimum 1400 without parking and two bedrooms are 2100 and up.
Builder advertised units not previously sold. Normally we don’t tend to see all or many of the new build units on MLS. Developers sell direct to avoid costs and minimize information available to buyers if there are price changes. I think right now they are just eager to get any exposure they can get to maximize potential sales.
Actual numbers are pretty much the same then?
Airbnb but more importantly most students are gone. I wrote about it here: https://www.capnews.ca/news/renting-covid19-victoria-spalteholz
airbnb units going to long term rental because owners have no other choice. Students going back to Mom & Dad. Combine with static rental market, i.e. renters staying put and what do you get?
Is it the pre-sale buyer trying to get out or is it the builder getting out after the buyer walked?
The reality: market rent has gone down and he’s not willing to take it.
So why is it that all of a sudden renters are disappearing? Is it because covid and people have lost their jobs so they are staying in their current place because they can’t get evicted and can take advantage of the rent subsidy? Leo in your example below, the rent for a prime downtown 2 bed condo is fairly pricey and I wouldn’t expect low income people to be in the market for that, so if there are minimal high income job losses then it doesn’t really explain the situation.
Listings up quite a bit but the high number of new build being listed is throwing a wrench into the numbers. For example last 7 days 29% of new listings were new builds (mostly presale) while the same period a year ago it was 19% of new listings.
For sure though, new lists are up from the lows.
It may be anecdotal, but I am interested to see the listing numbers in coming weeks. It seems like a few more sellers seem to be coming into the market. I wonder if these were the ones planning on listing in March and April, but held off because of the crisis?
That’s correct, when appraising a property that is being purchased the appraiser will consider the purchase price at fair market value if it lays within a range – usually 5%. In the example of the value range of $770,000 to $830,000 if the purchase price lays in that range at $830,000 then it would be fair market. Since lenders often do not accept a range of value, they want a specific answer, my opinion of value after weighing the evidence may be nearer the mid-point at $800,000.
What I would do in this scenario is explain to the lender, that in my opinion the subject sold at the high end of the market range; however the offer to purchase at $830,000 is considered reliable and reasonable for first mortgage financing not to exceed 80 percent.
If this were a second mortgage or high ratio mortgage at 95% then the lender would still be within their lending guidelines. BUT… If the offer was at $850,000 then I would value the property at $800,000 and wait for the barrage of phone calls that start about 10 minutes after sending the report.
This may also help Marko understand that after his involvement with hundreds of purchases he has never had a problem with an appraiser. But every appraiser has had discussions with irate agents and brokers over their careers, especially when the market place is rising very fast and properties are in bidding wars. But sometimes it isn’t the value that is the problem. The problem happens with comments about the property’s condition or remaining economic life. Things that could deter some prospective purchasers and lead to an extended marketing period. Things like wood and post foundations, knob and tube wiring, grow operations (illegal and legal), pools of oil in the yard or in a stream on the property, etc.
When you have to have an engineer comment on the adequacy of the building or an environmental study done, then the deal is usually dead right then.
… and now the second guessing begins.
https://www.msn.com/en-ca/news/canada/business-and-health-leaders-accuse-trudeau-of-shifting-the-goalposts-for-reopening-economy/ar-BB149xPm?li=AAggNb9
I’m glad that the public didn’t allow the city to take over the democratic process, and forced Helps to backpedal.
The narrative that things were better in the past is false. In 1968 it was found 27% of Canadians lived in poverty. Programs were put in place to eleviate poverty over the years and it is now down below 10%. Just because the country used to ignore poverty and didn’t have things like food banks in place to help the poor, doesn’t mean the prevalence of food banks proves poverty has increased. Also most unions look out for their members, the “insiders” and can make it harder for outsiders to make a decent living. Unions served their purpose back in the day to get employees more rights, but their are more or less obsolete now with Employment Standards Act in place.
Source for poverty data: https://www.thecanadianencyclopedia.ca/en/article/poverty
Countries like South Korea and Taiwan have shown that hard work and freeish trade have lifted them out of poverty. Now they are rich enough to worry about the environment and workers rights. In China they are seeing a similar shift as well.
I don’t think it is altruism. It is a win win for both countries. Poor people are lifted out of poverty due to higher prices for what they produce. Poor people in rich countries are lifted out of poverty, because their meager income allows them to buy more goods.
By offering free trade there is a higher chance that these bright people from poor countries can make a decent living at home. Not sure how shutting them out of trade would incentivize them to stay put.
Canada is competing just fine. Unemployment was really low before Covid-19 hit.
Based from today’s TC article, the democratic process seems to be very much alive in Victoria:
“Cars will be banned from some roads in Beacon Hill Park through the summer to provide more space for pedestrians during the COVID-19 outbreak.
But Victoria councillors have agreed to a compromise that will open up more parking lots as well as their access roads to accommodate seniors and people with mobility challenges.
The decision followed public criticism of an earlier proposal that would have immediately banned cars from the park’s primary roads on a permanent basis.
Now, city staff will consult with accessibility groups and report back in the fall before council makes a final decision.
Mayor Lisa Helps said the changes strike a balance between allowing people to practise proper physical-distancing during the pandemic and permitting people of all ages and abilities to use the park.
“It’ll give us a sense for the summer to see what works and what doesn’t work,” she said.
“It will allow us to keep the measures that staff have already put in place, while opening up some parking lots.
“And it will allow people of all ages and abilities, including kids, including seniors, including people who use mobility devices who can’t safely [pass] each other on sidewalks right now, to use the park.”
Read the rest yourself at: https://www.timescolonist.com/news/local/partial-car-ban-at-beacon-hill-restrictions-inside-park-but-more-parking-1.24135632
I guess what I’m seeing is that most those people are still bringing in income at this point. They mostly feel like they’ll have a job to go back to. What we don’t know is whether those jobs will still be around 6 months from now, or whether those people will still be getting any income.
Better that than the dreaded “underscore recovery”
Depends on what you’re talking about. For employment? Yes. Effective unemployment was likely at least 20% in Victoria in April, maybe as high as 30%. It will be less (but we won’t have a good measure of it) going forward. Note that the official unemployment rate will almost certainly go up from the current 7.2%, but that’s because of the 3 month average and the effects from many people not being actually counted as unemployed in April that were actually unemployed.
For real estate? Sales we are past bottom. Price we have only seen a small fraction of the mid-term effects.
Do you honestly see this as the bottom?
Now only if they can figure out if money from family members for a down payment came from a HELOC. You would hope that lenders would be able to establish if people were able to save their own down payments. If a people can’t at least save the minimums to qualify for mortgages on their own they really shouldn’t be getting mortgages and the result is that we get to carry market risk for unqualified buyers that contribute to price elevation at the same time.
@FormerLandlord : “The other side of the coin is that these trade deals have lifted millions of people out of poverty in these countries. Yes, workers and the environment may not be treated the same there. But the West did the same during the industrial revolution when our society transitioned from most people being poor to society becoming rich.”
There was no broad understanding of the regional and global consequences of toxins & pollution at the beginning of the IR. That’s not the case today.
These trade deals should have STRICT conditions that require workers rights, dignified wages, and environmental protections. If not, what’s the point? Being “lifted out of poverty” while being poisoned and worked to death is hardly a decent trade off. I can’t pretend there is any element of altruism involved in these exploitative situations. Canadian labour fought long and hard for workers rights here. Blood was literally shed. Exploited workers in other countries must hold their corrupt governments to account as our previous generations did, and we should be championing them by holding their governments to much higher standards. But ultimately, this isn’t about “lifting people out of poverty”. That’s just a ruse to justify the greed of offshoring jobs.
As an aside, we are draining these countries of their best and brightest – Brain Drain immigration as we exploit their resources leaving environmental devastation in our wake (Canadian mining companies have an appalling record of this, including child labour). Our government does nothing.
@FormerLandlord : “At the same time it benefits us in the West because we get goods at the best price available, which has given us immense variety of choices of what to do with our money.”
That’s the illusion. Cheaper offshore goods mean sacrificing Canadian jobs, and Canadian standards. It doesn’t matter how cheap something is if it’s substandard, and/or you can’t afford it because you aren’t working.
We’re also choking the planet with our garbage as everything is considered disposable, with nothing made to last or be repaired. The oceans are literally filled with plastic and heavy metals because of us. We need to stop this mindless consumerism, and restructure our economy. The notion of endless growth every quarter is eventual suicide for our, and every, species.
Free trade disproportionately impacts lower income workers and increases poverty. I’ve been around long enough to remember when many things were Made In Canada. Good union jobs meant far less poverty. Food banks were few and far between. If free trade with counties using exploited workers is to stay, the streets will continue to devolve into war zones. The DTES is a disgrace, and a symptom ,not the problem.
@FormerLandlord : “The government should help with retraining people whose skills are obsolete”
For what jobs? Canadian companies can’t compete under “free” trade with impoverished countries.
@FormerLandlord : “Shutting out trade leads to less competition so companies have no insentive to innovate or improve efficiency, the government is then forced to subsidize them more and more to compete (by raising tariffs even more or direct subsidies). Either way goods become more and more expensive for the local population and eventually the country is forced to open up or goes bankrupt. This seems to be the same pattern over and over for countries that try to “protect” themselves from trade.”
I’m not talking about “shutting out trade”. FREE trade with countries without worker/environmental protections and limited social safety net is the problem. Duties & tariffs were previously used to protect Canadian employers & workers.
If we’re going to continue to pull the rug out from Canadian companies & workers, it’s seriously time to bring in a UBI, or accept that homelessness, crime, and all the ills associated with poverty will continue to fester and destabilize this country as we race to the bottom, so the elites can hoard even more money offshore.
Just do it.
I never liked any of the letters. It’s not going to be a V because it won’t be symmetrical. It’s not going to be a U because the bottom won’t be flat. It very likely will some sort of Nike swoosh recovery. The way up will be much longer than the way down.
Big banks are tightening lending standards for real estate investors: mortgage brokers
Starting to see a few more cancellations and relists popping up. Not sure if this is higher than normal or if I am just noticing because of fewer listings.
Or $0-2,000 if it is reported to the city, as Saanich doesn’t allow AirBnb/short term rental in SFH.
Don’t know why everyone is proposing a V shaped recovery.
I doubt it’s going to be as rosy as they are suggesting.
Yes, and the key point is that this range is done while not taking the current sale into account. Obviously if the house contract price falls within the range of market value, the loan will get approved. What the appraiser can’t do is “fudge the numbers” so that the comparable calculations are influenced by the contract price, influencing the “range of market value”, and I think Gordon has been clear on that.
And I’m assuming that what I call “fudge the numbers” is what LeoS is describing as “ …it’s that the sales price is influencing how the comparables are weighted and adjusted. “… because they’re not allowed to “adjust” (fudge) the comparables based on the sale price.
Gonna be a great time to start a restaurant in 12-24 months.
A “rosy” forecast For Victoria economy from the Conference Board of Canada…seems like we’ll only get a “flesh wound”..
https://www.timescolonist.com/business/economic-forecast-region-expected-to-weather-virus-better-than-most-1.24134093
“ The Conference Board of Canada says Greater Victoria’s gross domestic product will fall 2.9% this year.
“This year, housing starts and the resale market will both cool temporarily due to the coronavirus shock. “But they will recover by next year at the latest, thanks to low interest rates and supportive federal programs.”
Housing starts are forecast to hit 2,400 units in 2021, down from a 2018 peak of nearly 4,300 units, but still above the 20-year average of 2,160, and the resale market should regain its balanced position.
From my understanding of reading Gordon’s comments, the appraiser always comes up with a range of market value. This range is determined while not taking the current sale into account. However, after determining the range they will look at current sale if it is available to determine the final appraisal value.
For example the appraiser could come up with a value of $770,000 – $830,000. I assume they would normally take the middle of the range as the appraisal value: $800,000. However if there is a current sale at $830,000, they would use that as the appraisal value. So even though the market value is not influenced by the sale price (because it is a range), the final appraisal number is influenced by the sale price.
Gordon can correct me if I misunderstood what he was explaining.
This would probably also explain (in part) Leo’s graph that sees very little assessments under the value of the sale price.
The seller claims the suite generates $2,600 – $5,000 in income through AirBnb. They may need to update that to $0 -$5,000…
BC Assessment values at $761,000. Granted that probably misses renos, but no nearby property has sold for over $889K, nor any since February. This appears to be someone who made a big bet on a future that has disappeared, and is going to take a big hit for it.
https://www.bcassessment.ca//Property/Info/QTAwMDBIUEFHUg==
Gordon, thanks for the reply. That confirms what I’ve been saying here that the appraisers job is to arrive at market value “without being influenced by the sale price.”
It’s not that common to put this many units on mls. Often developers will just put a couple units on there to drive traffic to the website and sales centre. Individual developers deciding to list or not list units and then report or not report sales is a significant source of noise in the sales numbers month to month.
Leo S
…. or it’s exactly as it seems because new builds are dumped on MLS every year???
Yeah lots of new listings right now driving the Sales to list ratio down. However it’s not quite what it seems because a ton of new builds from Belmont East have been dumped on MLS. Looks like developers are needing to increase their market exposure these days.
The other side of the coin is that these trade deals have lifted millions of people out of poverty in these countries. Yes, workers and the environment may not be treated the same there. But the West did the same during the industrial revolution when our society transitioned from most people being poor to society becoming rich. As these poor countries lift themselves out of poverty they are paying more attention to workers rights and their environment and building social safety nets. When people are dirt poor all they are doing anything it takes to survive, which may include destroying the environment and getting taken advantage of. Offering the ability for them to sell their goods to wealthy western countries (at a fair price = free trade) allows them to lift themselves out of property.
At the same time it benefits us in the West because we get goods at the best price available, which has given us immense variety of choices of what to do with our money. And yes some people lose out because their skills no longer match with what society needs. The government should help with retraining people whose skills are obsolete.
Shutting out trade leads to less competition so companies have no insentive to innovate or improve efficiency, the government is then forced to subsidize them more and more to compete (by raising tariffs even more or direct subsidies). Either way goods become more and more expensive for the local population and eventually the country is forced to open up or goes bankrupt.
This seems to be the same pattern over and over for countries that try to “protect” themselves from trade.
My thoughts on this is that it usually takes a while to close, and a lot of times closure will be on condition of sale. That would lead to more listings before more sales. Or just no one is buying.
I’m sure that this does happen either intentionally or unintentionally. In Canada appraisers have to re-certify every two years and take a mandatory Professional Practice course and this topic seems to be brought up every cycle. So there is no excuse for an appraiser not to know that this is poor appraisal practice.
The appraiser is not suppose to be influenced by the purchase price. And since I do perform appraisal reviews it is glaring obvious when an appraiser is intentionally trying to justify a purchase price that is not at fair market value in order to hit a specific value. The adjustments become inconsistent and not logical.
In one of my reviews the appraiser couldn’t find comparable sales that supported the purchase price so they made an adjustment of $200,000 for the master bedroom being on the first floor rather than the second in all of the three comparable sales. When pressed on how they determined that adjustment they could not give an answer or an example from the market place. Their only comment was that the real estate agent told them this.
That is not going to work out well for the appraiser in court or if the appraisal comes up in front of an Appraisal Review Board. This would likely end in disciplinary action against the appraiser where they would have to retake appraisal courses, have their name published in a magazine seen by appraisers and other stake holders and recorded on their permanent record and possibly a fine. If they repeated this again and were brought up before the appraisal board they could be expelled from the Appraisal Institute.
This may seem harsh but an appraiser has a duty of care to the lender and to the public. This misunderstanding of basic appraisal methodology shows a negligence that could cost millions of dollars to the lender over hundreds of appraisals.
@GWAC : “Jobs move to more business friendly environments.”
You must’ve missed this part: “if Millionaires & Billionaires didn’t STASH personal & corporate riches OFFSHORE; lobby to BUST UNIONS; and send decent paying jobs OVERSEAS to enslaved workers”.
“People” aren’t mobile – most can’t buy multiple passports of convenience like the global elite.
But money now is mobile, thanks to treasonous “free” trade deals with countries where workers make peanuts, lack human rights, and there are limited (if any) environmental & wildlife protections, social safety nets, etc. We’re stuck with the garbage policies our corrupt politicians craft for the 1%, throwing us scraps, and handing out billions in corporate welfare.
The deck has been stacked against workers – we can’t just pick up and head to where the wages are best – unlike corporations that race to find the most exploitable labourers possible. And the “I Got Mine” class still feel entitled to bring in TFWs to further degrade wages, while scoffing at the tent cities ultimately created by these treasonous policies.
And how did that work out? You enjoying buying 8 million garbage masks from China because nothing is “Made In Canada” so multi-millionaires could become multi-billionaires? How about the lead poisoned children’s toys? Tainted foods?
Yeah, your agenda has worked out just great. Socialism for corporations, food banks for the rest of us, eh?
I’m non-partisan, but I’d pick the NDP or Greens over the openly corrupt BC/Federal Liberals or Cons. If only Trudeau hadn’t betrayed Canada by reneging on his electoral reform proimse. We could have had a chance at government for the people, instead of for offshore corporations.
I like that “millionaire” still makes the rich overlord list when a million doesn’t even get you an average house in a lot of neighborhoods anymore.
It’s not that they are valuing the property based on the sales price, it’s that the sales price is influencing how the comparables are weighted and adjusted. This is US data, but it is from after the reforms of the financial crisis which improved appraiser independence.
“This empirical concern is addressed in the current paper by using a
unique database of residential properties that were appraised twice within 6
months between 2012 and 2015, where one of the appraisers was uninformed
of the contract price. Significant differences were found between the two
appraisals, where the appraiser aware of the contract price used a different set
of comparable transactions, price adjustments, and weights of adjusted values
of comparable transactions to justify appraised values which confirmed contract
price”
Full paper here: https://www.fanniemae.com/resources/file/research/datanotes/pdf/working-paper-102816.pdf
“Finally, the post-contract appraisal was
on average 4.2% higher than the pre-contract appraisal for the identical property, after controlling for
differences in local home price index between when the two appraisals were completed.”
4221 Springridge Cres price reduction…. From 1.5 now 1.2
Surprised that sales haven’t gone higher yet. They really haven’t budged since beginning of the month. I was thinking we’d see a continued slow ramp up. Maybe it’s still coming.
You shouldn’t be valuing the property based on what it sold for. That’s wrong on so many levels.
You select the comparable sales and then adjust for the differences between them and the subject. Then you review the adjusted value range. Only then would you look at the accepted offer. If the offer lays within that adjusted range it’s at fair market.
What you don’t do is look at the accepted offer and then try to find sales that justify the offer.
So if there is a typo in the accepted offer it wouldn’t matter, the comparable sales would be indicating market value because you did your job without being influenced by the sale price.
Public Service Announcement:
Here, again, is the BC CDC’s COVID-19 Survey:
http://www.bccdc.ca/health-info/diseases-conditions/covid-19/covid-19-survey
I just completed it. It was very thorough and well-crafted.
Gordon,
Thanks for the detailed answer. But I’m looking for an answer to a simple question….. the appraisal ends up with a number, a dollar value.
Q. And is that dollar value going to end up to be different if the contract price is different ( but everything else is the same).
For example, if the contract price is $800k, and you’re about to appraise the house at $805k. And then you hear that “whoops”… a typo was made, and the contract price is really $830K, but everything else is the same. Do you stick with $805K as the appraisal, or might you change it to something like $835K?
Wow a true leftist fantasy. Must be card carrying NDPer. Fortunately what happens is jobs and people are mobile and move to where they are taxed less. Your utopia is unrealistic and dangerous and the opposite will happen when policies are implemented to introduce that vision. Tax base disappears. People hide assets and revenue disappears. Jobs move to more business friendly environments. You are about to see what government over spending and high taxes produce. The next 5 to 10 years will be brutal on the environment and the poor. Not my choice but government Fiscal mismanagement will have created this.
Socialism does not work and makes people poorer.
@GWAC – if Millionaires & Billionaires didn’t stash personal & corporate riches offshore; lobby to bust unions; and send decent paying jobs overseas to enslaved workers, our government would have the resources to fund the social services required to facilitate a more civil society, with a robust universal healthcare/pharmacare/education system; dignified housing for all; decent paying “Made In Canada” jobs; infrastructure; and environmental protections, so folks making peanuts don’t have the need to stash tips, because they’d be making a dignified living wage to begin with.
Well Patrick it isn’t possible to give you an answer just on numbers. It depends completely on the data and analysis. I have seen some really strange things in appraisals where I have WTF moments trying to understand what that person was doing.
A $30,000 difference between sale price and the appraiser’s opinion is just 3.6%. And really if the difference is under 5% why pick this hill to die on? I suspect that there is something else going on if the appraiser is digging their heels in on this.
One of the most common things that happens is that the appraiser goes to the high end of their range thinking that if they get close to the sale price everyone will be happy.
-nope
Now the appraiser is caught between a rock and a hard place. A difference of 3.6% isn’t much when the lender is lending on 80% of the value. Things would have been better if they had called it as they may have originally seen it at say $750,000. A difference of $80,000 or nearly 10% is sufficient to go to war on. Or for the lender to get a second opinion.
When estimating values the difference between $800,000 and $830,000 is impossible to clearly distinguish especially if the home is 30 plus years old. That $30,000 difference can just be the difference in depreciation of the assets at 30 or 35%. In other words it’s too close to call.
Morrisey yes when government over tax than people should do what they can to avoid. They get caught if illegally then they pay the consequences. We are at that point. Just like the middle class when they accept cash payments or don’t declare their tips and so on. Taxes are out of control.
To your originally point. The top 1% and the top 20% pay more than their fair and I would say it’s excessive. Governments need to control their spending and get smaller. Hopefully this event will force them to do that.
There should be no handouts including foreign. Not sure where you think I said that. I want smaller government. Lower taxes and those able paying for their own shit.
Too many people think the government should be subsidizing them. Why no idea.
What buildings? Do you have some data supporting this? Seems very unlikely to me given the fact that many foreign students live off-campus and all foreign students living on campus would be paying rent to the university. If you are talking about university learning spaces, extra students doesn’t translate directly to extra buildings but foreign students certainly pay way more tuition.
Not to mention that foreign students are a very good source of educated, English-speaking new immigrants to Canada.
https://www.westerninvestor.com/news/british-columbia/the-university-effect-make-the-grade-with-student-housing-investment-1.23963154
https://www.cicnews.com/2020/02/642000-international-students-canada-now-ranks-3rd-globally-in-foreign-student-attraction-0213763.html#gs.6k8bag
Patriotz:
https://www.cbc.ca/news/business/bank-of-canada-thursday-1.5569391
Then there are the other lenders.
https://business.financialpost.com/news/fp-street/equitable-braces-for-spike-in-loan-defaults-when-canadians-face-higher-debt-costs-after-deferrals-run-out
There’s @gwac – cheering tax evasion & foreign handouts – dreaming of the good ol’ Dickensian days, when the undeserving poor lived and worked in squalor, begging in the streets for alms from the deserving elites.
The portrait in your attic must have quite the stench.
If you rent a property to someone who can’t afford to buy it, the property is costing you more than it’s costing the tenants.
So you think you’ll make it up when you sell? What’s that called?
“This would be a huge loss for Colleges and the Universities. As a huge amount of funding comes from those foreign students. And also, my wife would be out of a job.”
——-‐‐————–
Loss of jobs would be unfortunate, but getting out of the foreign student education sales business, and delivering university education online, is the only sensible future for education.
Sell off excess, pricey RE to make up for loss of funding, and give every capable student the opportunity to obtain an education in their own community, be it a town, island, city, or First Nation.
No one would give a hoot about where you went to school, and tuition and student debt would be lower. No more 200+ students in crowded lecture halls.
Some programs would still require face-to-face components, of course, but I don’t see us going back to the old model.
Mortgage arrears rate could spike to double what it was in 2009, Bank of Canada says
That is, people who got their mortgage payments deferred aren’t being counted as in arrears – for now.
This is ingenious:
10-4: How to Reopen the Economy by Exploiting the Coronavirus’s Weak Spot
https://www.nytimes.com/2020/05/11/opinion/coronavirus-reopen.html
Barrister, are you suggesting that schools and universities are building buildings they wouldn’t have built just to house foreign students? Even if that argument stands there are jobs and economic benefits to Canada associated with constructing those buildings.
Its real cute that you think they don’t pay their fair share. Good they hide some of it when the Governments are over 50% in all provinces after 250k except alberta. Still they pay more than their fair share even after that. The taxation rate for over 220k is a complete joke in Canada so glad people are finding ways to hide some from Governments. Its a disgrace the tax rates in Canada.
The left always wants others to pay for their stuff, 🙂
Gordon,
Thanks for all the information that you’ve provided. Could you answer the following question please?
If you are preparing an appraisal according to recommended standards, should the final appraisal $ result be different if the contract to purchase is for $800k vs $830k (but everything is identical in terms/conditions and all other respects)?
GWAC, it’s cute that you think the 1% actually declare all their income.
“Wealthy Canadians hiding up to $240B abroad, CRA says”
https://www.cbc.ca/news/business/cra-tax-gap-foreign-holdings-1.4726983
Morrisy
top 1% pay 17% of total taxes put only earn 10% of total income. So the 1% BS is BS.
https://www.fraserinstitute.org/sites/default/files/measuring-the-distribution-of-taxes-in-canada.pdf
The 1% is paying for the bottom 50%.
Yeah Right: Actually, foreign students are a net loss to the country when one includes the capital costs involved in providing the buildings. From the university bureaucracy point of view they are a positive on a cash flow basis since capital costs for buildings and facilities come from a separate budget.
great for your wife, bad for the country
Sounds like one of those intelligent concerns.
Unlike several European countries, offshore tax dodging corporations WON’T be automatically disqualified from bailouts.
Foreign students displace Canadians in programs & housing availability, with LOWER standards of Uni entry than are required of Canadians & an unknown number with language barriers, ensuring essay writing services are kept afloat. They are getting $500/week in benefits.
Both have been used as a means to keep the 1% from paying their fair share of taxes, putting the burden on the middle class.
THAT’s the CERB scandal – not that Canadians, in a pandemic, are taking money from a program with arbitrary barriers, a program that SHOULD have been universally applied. Again – this government is giving money to foreigners & tax dodgers – leaving Canadians out. And that’s just a small sampling of the ways the sellouts in Ottawa show disdain for citizens of this country.
Honesty has become a liability in the New Canada.
https://business.financialpost.com/diane-francis/why-publicly-funded-universities-should-stop-pursuing-the-international-student-bonanza
Shut Out: How Families Have Fallen Off the Housing Ladder
https://thetyee.ca/News/2020/05/14/Families-Falling-Off-Housing-Ladder/
Contextless excerpts:
• “I just get the sense that everyone’s thinking, ‘I’m going to buy the dip, like this is my opportunity,’” Saretsky said. “Prices take a while to come down.”
• Based on previous policy decisions, Saretsky expects senior levels of government will intervene to prevent housing prices from falling too far.
• But Tal doesn’t believe the city will ever again have affordable real estate prices. Instead, he says, residents who want to stay will have to come to terms with being life-long renters.
• Density has been steadily increasing, she said, with no impact on prices.
July 2018 was the market high Marko so that Broadmead sale is not unsurprising. Pretty much 2019 levels. Surprised not a tad lower.
BTW economically and fiscally Canada is so screwed. IMHO more so than what I thought a week ago. Tax base will take a decade to get back and spending is so out of control. Companies will not hire back so quickly. The immigration card used to keep the economy going is impacted big time.
Patrick not eligible means squat. Cant wait for the auditor generals report on all these programs and the abuse.
Yes, but that’s balanced if not exceeded by a lot people out of the workplace due to CoVid that aren’t getting CERB. For example, people who, because of CoViD are in any of these situations:
– quit their jobs
– are getting EI
– Didn’t earn >$5k in the previous year
– Got laid off, but are making more than $1,000 per month (odd jobs)
… aren’t elegible for CERB
@Barrister
This would be a huge loss for Colleges and the Universities. As a huge amount of funding comes from those foreign students. And also, my wife would be out of a job.
Patrick most of the time the system works well. Like Marko said he has had zero trouble with his properties not “appraising out”. And this is an issue that is contained mostly in mortgage appraising. Most if not all appraisers try to be honest in their valuations, it’s just that too many people have a stake in the outcome and there is no body that an appraiser can report a real estate agent, broker or lender to, that is putting pressure on the appraiser to come in at the value.
The solution has been to put a middle man between the appraiser and the lender. Unfortunately that appraisal management company takes a substantial fee for that service that comes out of the appraisers’ pocket. If that fee were paid by the lender instead of the appraiser or the mortgagee then you would see an increase in quality and turn around times. The management companies should be paid a flat fee for their service not a commission that comes out of each appraisal. Because you are not going to get quality and service out of someone that at times is earning less than minimum wage.
A lot of people who previously would not be counted as “employed persons” are eligible for CERB. There are over 24 million people between the ages of 15 and 64. Those 65 and up who were not retired would be eligible too.
Well Marko I will give you an example. As an appraiser I perform a cursory inspection of the property. I am not a building inspector and I am not an engineer. Most of the time we never get a copy of the Contract to Purchase to review. Within that contract may be that the seller has agreed to reduce the price to allow for the removal of a hidden oil tank and soil remediation.
Because that information is not disclosed to the appraiser, they would value the property assuming that there are no hidden or unapparent conditions that would make the property more or less valuable. If they know that there is a hidden oil tank then the appraisal would be subject to removal of the oil tank assuming that the cost to remediate will not exceed an amount of say $10,000. If they believe that there may be considerable contamination (pool of oil in the back yard) then they should have their appraisal subject to an environmental study.
If the cost to cure is small relative to the value then the lender will most likely go forward with the loan. If the cost to cure is excessive then the lender might back away from the loan. But to be properly informed the lender has to know the discount from market value that is being applied. A $10,000 discount on a $1,000,000 property is not serious. A $200,000 discount from market value is noteworthy. Just putting the value in at $990,000 or $800,000 is not informing the lender of the risk of making the loan and they don’t know if the appraised value is considering or not considering the oil contamination.
That’s the type of misunderstanding that makes a court case. And for those type of appraisals where I am reviewing another appraisers report or a real estate agent’s possible negligence for damages I charge $2,000 and that does not include court time.
I prefer to keep my clients out of court, but they can pay me now or they can pay me later if they rely on an ambiguous appraisal that goes to court. Much cheaper to pay me now.
I used oil as an example but it could be the square footage of the home or land, views, easements, right of ways, etc. where the purchaser was under the assumption that what they were purchasing is different from what they got.
As a post script to another one of Marko’s questions. Often the real estate agent will not know if the appraised value was under the sale price when the buyer is putting down a large down payment. The banks are under no obligation to inform the client of the appraised value or to give the purchaser a copy of the report. That appraisal belongs to the bank. You might be paying for it but that doesn’t mean you are the appraiser’s client.
If you want the appraiser to report to you, then you have to order the appraisal directly from the appraiser.
.
Canada workforce (pre CoVid) was 19 million. https://tradingeconomics.com/canada/employed-persons
That’s 8/19= 42% of the workforce.
– If there are 11 million non-CERB workers left, their share of the $64 billion would be $64bn/11m = $5,800 per worker, or $1,450 per worker, per month extra taxes for every worker to pay for CERB. That’s just for CERB, other govt programs double those numbers.
Both of those statements are a “sad but true” commentary on the current role of appraisals in the market.
As an appraiser why would you go much higher than offer for a lender appraisal for financing on an accepted offer transaction? Really no point whatsoever, you just increase liability. On the lower end you don’t want to go too low and blow up the deal either as that is not beneficial for seller, buyer (just wants to secure financing, buy the house and move in), realtor, mortgage specialist, etc., etc., etc.
I can’t get my head around that I’ve been in business for 10 years and never had an issue with an appraisal on an accepted offer property and I’ve been involved in lots of deals where it was obvious someone is overpaying (emotional purchase) or getting a great deal (seller makes panic decision)….appraisals still within 2%. If appraisals blew up 1 or 2% of my transactions I would see a lot more value in them on accepted offer deals.
I think appraisals have a role and purpose for certain things, but I just take the argument of COV paids $10 million for a property on Pandora and it is worth $10 million because the appraisal said so with a grain of salt.
Even though deaths per day seem to be slowing down in most places with the shut down, it still only took 20 days for the last 100,000 deaths.
That’s bananas.
That’s the one that always boggled my mind.
There were always nicer places available for the same price it seemed.
Home in Broadmead purchased in 2018 for $1,410,000 just resold for $1,320,000.
As they should…..people renting out crappy basement suites for $1,500 was getting a little rich imo.
Weird. Image disappeared after edit.
Looks like rental rates are going down.
Especially liked this section of the article:
No idea.
I don’t come here to speculate on that type of stuff.
The price a property sells for in the marketplace isn’t an “indicator” of price. It is the price.
What a property sells for is its market price or if bought from a contractor the contract price.
Market price is when the property has been exposed to the public for a reasonable period of time. Contract price is what is negotiated with the builder and that property may not have been exposed to the market.
Then there is Market Value. And that is a range made up of market prices of properties that have sold on the open market which does not include the subject property. The more similar the recent sales to that of the property being appraised then the more narrower the range in market prices. The market value range may be between $163,000 to $176,000. That range allows for the motivations of most buyers and sellers such a short or longer closing date, etc. What it won’t include are non real estate items like golf memberships or creative or beneficial financing where the vendor gives a second mortgage to the purchaser as the down payment, etc.
In the previous example if the property sold anywhere within this range then the market price is market value. If the property sold below that range at $153,000 then it would have sold below market value. Most people don’t have a problem understanding this. The problem is when the property sells for over market value. Then there is a problem. Because that has the potential to ruin commissions, loans, etc. that put bread on a lot of people’s tables. This is the number one reason why appraisers and real estate agents differ in their interpretation of value. To a real estate agent what the property sold for is its market value. To an appraiser what a property sold for is its market price which still has to be tested to see if it that price lays within a reasonable range of other comparable properties that have sold.
For mortgage financing, the appraiser knows what the offer to purchase is, but may not be given the contract to purchase explaining the terms and conditions of the sale. These terms and conditions may have an effect on price. For example I have seen boats, cars and home businesses included in contracts. I have also seen vendor financing or contractors leaving the landscaping up to the purchasers which would constitute the down payment. These will have an effect on the price paid.
Now we come to the REAL WORLD. The appraiser on a purchase sale after commissions and fees paid to management companies and their bosses might only make $120 on an appraisal fee charged to you of $325. And they have to pay their expenses, like car and E & O insurance out of that $120. The world of a real estate appraiser is one of volume. The more appraisals done, the more likely they are to put bread on the table this week. When an appraiser values a property under market value the crap hits the fan and they are inundated with calls from all the parties that have a stake in the sale. That’s lost time to an appraiser and lost income. Then that appraiser has to decide is it really worth the additional stress to nuke a deal? As I said at the beginning. A good appraiser might make $60,000 a year – a bad appraiser can make double that amount.
So you take an example of Marko and me squaring off against each other on a sale. His commission may be $20,000 while mine may be $120. That kind of commission buys a lot of clout with lenders where agents can influence lenders and brokers who choose which appraiser to use.
Ethics can be such a bitch at times.
Interesting look at median expenses by income group and owner/renter
Haven’t seen this data before:
Bank of Canada financial system review looking at COVID impacts https://www.bankofcanada.ca/2020/05/financial-system-review-2020/?utm_source=alert&utm_medium=email&utm_campaign=FSR200514
Gordon,
Thanks for the detailed message.
We’ve been told here in this forum that the contract to purchase $ price is “the most powerful indicator of market value (a willing buyer offering a certain price on the exact property) I’d [an appraiser would] have to be a masochist not to weigh that most heavily.”
Is that statement correct?
What weight (if any) do you as an appraiser in fact put on the contract to purchase $ price in arriving at the final appraisal number? For example, if you are preparing an appraisal, should the final appraisal $ result be different if the contract to purchase is for $800k vs $830k (but everything is identical in terms/conditions and all other respects)?
Is there something wrong with consultation with the public?
Or it is better to lower the bar and compare ourselves with a mediocre backwater country such as Vietnam, or maybe a step further and compete with North Korea?
Every appraisal must meet minimum standards of appraisal practice as set out by the Appraisal Institute of Canada (AIC). If the appraiser does not meet those minimum regulations they can face disciplinary action from censure to expulsion from the AIC. All appraisers must carry no less than $2,000,000 in errors and omission insurance and every appraiser must re-qualify with the AIC every two years by obtaining 24 education credits in that period.
Every appraisal report will have a section that deals with the sales and listing history of the property for a minimum of three years. As an example taken from one of my reports is…
“The property previously sold on 2013/02/06 at $117,000. Since the date of this transaction, the four month median for all types of housing within a four kilometer radius of the subject has increased from $367,250 to $579,900 or 58 percent. As a cross check to the final estimate by the Direct Comparison Approach, this historical sale of the subject was adjusted for changing economic conditions to a calculated current price of $(117,000 x 1.58) = $184,750 or $178 per square foot.
-And then the appraiser must discuss any agreements for sale, options or listings. For example
“The Property has been listed for 32 days with one reduction in price to $159,000. There is an accepted offer to purchase at $153,000 ($147 per square foot). The appraiser was not provided with the signed Contract to Purchase and therefore has assumed that there are no terms or conditions in the contract that would make the property more or less valuable.”
-These are mandatory requirements in every appraisal. Failure to disclose this information to the client may lead to disciplinary action by the AIC.
As a footnote. I determined that this property undersold at $153,000. The data presented in the report indicated a higher market value and I appraised it at $165,000. However under the Bank Act only the lesser of the purchase price or appraised value may be used for financing.
The final reconciliation was therefore:
“This analysis presented a sample of three recent sales that the appraiser judged to be similar in most physical and locational aspects to that of the subject. Current Market Value assumes that the subject has hypothetically been offered for sale along with these comparable properties. And these listings would have been alternative properties that a prospective purchaser may have purchased instead of the subject.
These economic indices, supported by a price per square foot of $160, were concluded to provide a reliable and reasonable indication of the subject’s market value. The subject’s market value would therefore lay between $162,000 to $176,000. Any offer within this range would be considered at fair market value. The intended use of this appraisal is for purchase financing. In the appraiser’s opinion, the reported offer to purchase at $153,000 would be reliable and reasonable for first mortgage financing.”
-This was a leasehold town home complex that had very little market activity over the last two years. I left out the section discussing how the $160 a square foot rate was estimated for brevity.
Some two months later comparable properties were selling for $25,000 and higher in this complex.
-An appraiser isn’t just looking at a small sample of three comparable sales, they are looking at all aspects including trends that have an effect on value. They reconcile all of this information to provide a supported opinion of value.
Anyone can have an opinion of value but they do not always have a supported opinion that is fair, equitable, reliable and reasonable.
As in every business, there are people that cut corners. And possibly some appraiser may try to adjust the comparable sales to fit the sale price. But my experience has been that when an appraiser does this it is glaringly obvious. As the adjustment does not make sense. For example adjusting $50,000 for the difference between a den and a small bedroom. The only difference between the two is a closet which costs a lot less to build than $50,000. If there were other examples within the body of the report that were similar, I would suspect that the appraiser is fudging to get to a specific number.
pardon any grammar errors -it’s late and I’m tired.
Haha, that is yours and yours only.
VREB definition is: “The VREB region we call the Core, an area of approximately 173 sq. km., is comprised of 7 VREB districts: Victoria; Victoria West; Oak Bay; Esquimalt; View Royal; Saanich East; and Saanich West.”
Check it out yourself online (found it via very quick google search): https://www.vreb.org/buying-selling/about-victoria-bc/the-vreb-core-region
I am not James, but the land value is assessed at $580K (July 2019 BC assessment). Maybe the seller would go for the assessed land value only (= 96.683% of the asking price)? At the end, the market will decide it.
It wouldn’t be ethical for an appraiser to base his appraisal on a factor that he “doesn’t list” on the written appraisal. And “professional pride” wouldn’t be an excuse there.
The Canadian appraiser code of ethics is quite clear on that ….
https://www.aicanada.ca/wp-content/uploads/CUSPAP-2020-1.pdf
“When completing a Real Property Appraisal Report, a Member must comply with the Reporting Standard [see sections 6, 7], and must:
8.2.8 describe and apply the appraisal procedures relevant to the Assignment and provide reasoning for the exclusion of any of the relevant valuation procedures;
8.2.9 detail the reasoning supporting the analyses, opinions and conclusions of each valuation approach;“
==//==///=
If he wants to base his appraisal on the accepted offer price, he would need to disclose that in the written appraisal.
Although you consider the accepted offer to be the “most powerful indicator of market value”, you’re not going to find that to be an accepted valuation method by appraisers. So you’ll never see it on a written appraisal.
Huh? I never said that. It’s clear that they use it, the fact that they don’t list it is likely some hint of professional pride or perhaps there’s some other reason but it seems like semantics to me. If my job is to estimate market value, and I have the most powerful indicator of market value (a willing buyer offering a certain price on the exact property) I’d have to be a masochist not to weigh that most heavily. Then my job is merely to cross check the offer against comparables to ensure it isn’t out to lunch, and verify that the offer falls into the typically motivated category.
Well yes, the most important tool an appraiser uses is comparable sales. You got that part right. (There are other methods too like the cost approach.)
But where we disagree is when you assert that any appraiser in the written report includes the current accepted offer as a “comparable sale”. Because they don’t, for the obvious reason that it isn’t a sale, it’s an accepted offer. And you can refute that easily by telling me about an appraisal that you saw that did list the current offer as a comparable sale in the comparable sales calculation. Simple yes/no, have you ever seen an appraisal that includes the current offer as a comparable sale in the written appraisal?
Btw) Here’s a standard appraisal form for thousands of US appraisals, Canadian ones are similar https://singlefamily.fanniemae.com/media/12371/display
There are hundreds of articles on the internet that back me up on this. They describe the “comparable sales method”. The whole point is that they are comparing sales to the subject property, not including the subject property for example https://study.com/academy/lesson/the-sales-comparison-approach-to-property-valuation.html
“ The comparative sales approach looks at a selection of similar recently sold properties near the subject property. The property being appraised is the subject property. Similar homes are called comparables. These comparables are ideally as similar as possible houses that have been sold very recently. Comparables have to be actual sales. People can ask any price they want for a house, but actual sale prices are factual and provide a true benchmark for comparison. If a long time has passed since the sale, the estimate of value will not be as precise. The same is true if there are many major differences between the properties. Real estate agents , as mentioned above, use the comparable sales approach a research method to help sellers determine a reasonable listing price. An agent could also estimate comparables for a buyer to make sure they aren’t overpaying for a house.”
What written appraisal methodology? The comparable sales method in appraisal which is what is used for residential property is entirely based on estimating market value based on comparable sales. What is the sale of the property itself if not the ultimate comparable that requires zero adjustment? It would be quite silly to take the set of comparables and throw out the best one based on some principle that not doing so would be more sporting. If my goal is to shoot fish then I’d rather have them in a barrel than in the ocean.
How you do explain the written appraisal methodology making no reference to the contract price? Shouldn’t the appraisal disclose this in the described methodology?
James, what do you suppose that $599k house on Darwin should be listed at to be a fair deal?
US hit 85k deaths today.
Will likely hit 100k by the end of the month.
More people live in Saanich than Victoria.
Also, Darwin ave is like a km from the Victoria border. How are any of the places on say rudledge or villance st any more core than the one on Darwin?
Isn’t this where you trot out the line about everyone becoming an epidemiologist?
On the topic of appraisals. There is some data on appraisal accuracy out there, especially this chart is interesting comparing appraisals before and after a contract price. Clearly knowing the contract price has a big affect on the appraisal (as it should). Pretty wide spread in appraised values pre-contract, but it’s about a bell curve with the median pretty close to the sale price.
Another thing to consider is that a residential appraisal costs a few hundred bucks. You get what you pay for, and that’s perhaps a drive-by if you’re lucky. That’s quite different than a commercial appraisal that was certainly done on the Pandora properties.
Good info in this article: https://realestatedecoded.com/the-untold-truth-of-home-appraisals/
Too much fraud and taking advantage of these rushed out programs. No need for a general tax deferral . CERB is a mess with fraud. I personally now people making a lot of money delivering food and on CERB. The senior program is a joke. People making 100K don’t need 300 dollars. Companies only
losing 15% of sales in March got 75% of their wages covered. Why did the province have to add 1k to people on cerb.
There will be a day of reckoning for all levels of government and their reckless spending before and after. UBCM members need to clean up their own mess in too many employees and too high salaries. Victoria/ CRD and CVRD all need to get their act together. The cash cow from tax payers has ended.
UBCM has asked the province for the property tax deferral to be extended to all residential owners. Ridiculous.
Don’t Bet on a Vaccine
https://thetyee.ca/Analysis/2020/05/13/Vaccine-Not-Likely/
Ha ha….you real think I am that dumb, thanks.
Lots of investment properties (rental houses) in this part of Gordon Head.
The interior of the house is probably dated (no doubt there is wood paneling on a basement wall!), but the location is very walkable — 10 min. to University Heights, Torquay Village, Tuscany Village, Gordon Head Rec Centre, and a short bike ride to UVic on side streets.
I’ve always understood “the core” to be roughly the area that includes Victoria, Oak Bay, Esquimalt, urban Saanich, and maybe View Royal.
I would say at least still being in Victoria as the core and maybe not Saanich.
Supports my claim that in my entire career I’ve never has an appraisal issue on a transaction with an accepted offer and guaranteed in 800+ transaction many of my clients have substantially overpaid and many have obtained below market deals so you would think there would at least one appraisal redflag.
It’s a 5 minute walk to uptown.
What’s your version of the core? the 1 square km around the parliament buildings?
Swan Lake is part of the core now? And cute is the new name for teardown?
https://youtu.be/-Nc88_ZEfxg
Its interesting that the lender doesn’t specify which appraisers to use or provide a list to choose from where they had been vetted. Seems like a loophole ready for people to exploit and one they could close to de-risk.
Barrister, I agree I don’t think that Rockland house is worth $1M more than the uplands house I posted couple weeks ago.
GordonC, thanks for that very enlightening commentary. Having just gone through several appraisals (for several properties, for several different reasons) your comment opened my eyes to some of the things going on in the background. Very useful information to know- thank you.
Introvert: Sorry to hear that you are still in what seems to be a state of being perpetually perplexed. As you may recall I bought in 2013 when prices were much more reasonable.
The price seems high to me compared to other properties that are available today on the market. But I was looking for other opinions since I am not sure of that.
Thanks for playing.
Gordon, interestingly, I was looking at that same comment and I thought some poor sap was going to end up paying an additional $300,000 because of a “friendly” appraiser.
In order to find out who these friendly appraisers are … follow the money.
Hopefully, the other person involved doesn’t read HHV, Marko.
Well Marko you certainly gave me a lot to break down of what is true and what is a myth about appraisers and appraisals. Like all businesses there are good appraisers and bad appraisers. When I started as an appraiser I was told that a good appraiser can make $60,000 a year but a bad appraiser can make double that.
So those “friendly” appraisers are gambling that they don’t get caught in a law suit. I just find it a lot less stressful to call things as I see them rather than accept an assignment that has a predetermined value estimate as a condition of getting paid. And that means that I do nuke some real estate deals. Not many say 1 or 2 out of every 100 appraisals on purchases that I do. And Marko, I have done a couple of your listings too, but they fell within the range of reasonable for lending purposes. But if they hadn’t…
Those properties that fail to be fair, equitable, and reasonable of the market place also tend to be the odd ball properties. The last one was a sale that I valued well under its purchase price that happened to back onto a golf course and came with a golf membership. Listing agent pissed with me, selling agent pissed with me, broker pissed, vendor and purchaser upset. I stood my ground and they went elsewhere after spending unpaid hours on the phone talking and justifying my valuation. Two weeks later another near identical property backing onto the same golf course comes up and listed for $300,000 less than the sale price of the previous one. And it is still listed today. If I had not stood my ground the lender would have over lent on the property based on its inflated purchase price and they would have been at a greater risk if the loan went sideways on them. And if the lender loses money because of “friendly” appraisals they do sue those appraisers. In Canada I think it is around $40,000,000 a year that is paid out in insurance claims against appraisers. And the appraiser is on the hook for their valuation for the next 7 years. Five years from now you might choose to sue an appraiser because you lost money based on their negligent valuation and get paid out of their E & O insurance. I’ve seen appraisers sued for 4 million dollars for a job they charged $500. But that is the mortgage business where appraisals are cheap and the turn around time is the same or next day to have the report completed. Where in the morning you’re inspecting a condominium that has water problems that is under court order to sell and in the afternoon you are valuing a waterfront equestrian farm on 15 acres for a divorce. And the clients want the report in the next day or two. That means a chance that there are a lot of errors made that could end in a law suit.
I do get calls from people that have had problems with appraisers and my advice to them is to sue the appraiser and to lodge a complaint with the Appraisal Institute of Canada (AIC). Because the only way you get rid of bad appraisers is to sue them out of existence or file a complaint with the AIC that will make their lives a living hell for the next two years.
Generally, mortgage appraisals are the lowest level of service that an appraiser will perform. This is where new appraisal students learn the trade. As the appraiser gains in experience the work gets more complicated and litigious. Foreclosures, divorces, partial takings, contamination and court work against negligent appraisers and real estate agents.
It’s a rewarding career for those that are interested in digging deep into what makes value. Then they can use that knowledge to buy and sell real estate themselves. But you’re not going to get rich doing just appraisals. If you want to get rich then be a real estate agent.
Also another deal: $599.9K at 936 Darwin Ave(core SFH with 7000sqft land and a nice cute house, BC assessment is $669.1K ):
https://www.realtor.ca/real-estate/21781715/936-darwin-ave-victoria-swan-lake
This is a parking restriction, not locking people up or going to war. If people don’t like it, they can elect someone else next time. Can they do that in Vietnam?
It is a rental now (up and down separately), probably not in tidy/clean condition. But the land market value alone in that area is probably in ~600K range.
No pictures of the inside is never a good sign.
Never waste a good emergency.
CMHC uses a few formulas. A number permit 100% of net rental income to be used. 100% of gross rental income can be used if it is a single legal suite.
https://www.cmhc-schl.gc.ca/en/finance-and-investing/mortgage-loan-insurance/mortgage-loan-insurance-homeownership-programs/rental-income
Virtually every listing you cast your gaze upon is overpriced, I’ve noticed. I’m therefore perplexed that you were able to find a suitable property at a suitable price in this city.
Expecting a bidding war Or ? for 4014 Osgoode Pl
https://www.realtor.ca/real-estate/21837304/4014-osgoode-pl-victoria-lambrick-park
Forecast: Region to weather virus better than most
As Greater Victoria businesses anxiously await further reopening of the economy, a new forecast Tuesday suggests the B.C. capital will weather the pandemic storm slightly better than most cities in Canada.
The Conference Board of Canada says Greater Victoria’s gross domestic product will fall 2.9% this year.
…
Calgary will see a 5.5% decline and Saskatoon is expected to fall 4.9%, Winnipeg and Vancouver 3.0%, and Montreal and Halifax will slip 3.6% and 3.4% respectively.
…
The Conference Board said Greater Victoria’s temperate climate and a large government presence have enabled the region to post GDP growth faster than the national average for five consecutive years and put its population growth above the Canadian curve in each of the last eight years. The share of the region’s output generated by public administration is more than twice the national average.
https://www.timescolonist.com/business/forecast-region-to-weather-virus-better-than-most-1.24134093
For those who want to add your voice to BC Covid related matters, here is your chance:
http://www.bccdc.ca/health-info/diseases-conditions/covid-19/covid-19-survey
I noticed that 1745 Rockland avenue just came on the market, At 3,75 million the price seems really over the top to my mind. Any thoughts?
I was talking with my wife and we tried to come up with a priority list of things that we would like to see open up. Also a list of things we could do without. And this is a personalized list
On the priority to open:
1) Full hospital services and doctor offices
2) Dentists and related medical services.
3) Parks, with social distancing enhancements and exclusive senior hours.
Things we could do without:
1) After talking about it together, we dont really miss restaurants or bars, really low on the list.
2) Movie theaters, concerts and jammed sports arenas.
3) Cruise ships
4) Actually if the tourists never come back we cannot say we would really miss them; come to think of it life is better without them
5) While we are at it foreign students would be no real loss either.
I would not take on a management job for that kind of money. Not much more than I’m making now and way more stress.
IMHO that’s exactly why they allow only a % of rental income not all of it.
Victoria mayor seeks expedited patio permits, permanent ban on vehicles in Beacon Hill Park — https://vancouverisland.ctvnews.ca/victoria-mayor-seeks-expedited-patio-permits-permanent-ban-on-vehicles-in-beacon-hill-park-1.4934375
“Victoria city councillors will vote on a motion this week to permanently ban vehicles from Beacon Hill Park.
The motion will also recommend that council direct staff to seek further opportunities to allocate more outdoor space to pedestrians in the city’s downtown core and village centres.
Helps said Friday.
“We’re not going to be doing a whole bunch of public consultation. We need to act quickly. We’re coming out of an emergency situation.””
I don’t know how we got here, but it seems as if democratic process is dead.
Wow that’s such a waste of money.
No wonder things cost so fucking much.
Deal. I bet they won’t give me anything though
Not weird at all….Northen Junk developer has been sitting on it for like 10 years with 6 failed concepts.
Victoria and Saanich decent probability you are sitting on it for 3 to 10 years….not development friendly.
And yes they proposed a 114 unit condominium and there is no way on earth a developer would pay almost 100k/door or anything close to that in that location.
Have the developers actually done anything to develop that lot Marko?
Would be a little weird if they bought it 4 years ago and have just been sitting on it no?
Great post Barrister. And perhaps City Hall read it, because they’ve made an exception and the main parking lot (near the petting zoo) will stay open for people with disabilities.
https://www.vicnews.com/news/beacon-hill-park-traffic-could-be-limited-to-allow-for-more-physical-distancing-space/
May 12: The motion also recommends the city implement a “pedestrian-only” approach to Beacon Hill Park for the summer, but would leave the main parking lot open to allow access for people with disabilities, by using “inexpensive and implementable means.”
Children of anti-vaxxers worry about growing up.
If the property wasn’t on the market and the City went and knocked on Kang & Gill’s door to buy the place then I can see how they paid above market. But anyone would have had to pay above market in that situation, you just don’t have any leverage. Maybe Kang and Gill asked for $15M and the city talked them down to $10M, who knows. Maybe Kang and Gill valued their alternative of developing the site at $10M so it was a take it or leave it and the City had to have that site due to its location. Did the site get re-zoned for additional density after Kang and Gill purchased for $3.6M?
Actually the reverse it true. It’s actually “crazy for you to say” that they are taking the accepted offer into account, because they document the methodology within the appraisal. And there is no mention of the current offer in that methodology. It is based on previous sales, and then other methods using value of the land and buildings. And those just magically add up to the current accepted offer, with no explanation.
If they did what you said, and the written appraisal documented the methodology of using the current accepted offer as the “best available measure of market value”, then I would agree with you. But they don’t, because that admission would make the appraisal unacceptable in many cases.
This is my issue….I’ve done 100s of MLS accepted offer deals in my career and not once has an appraisal been an issue. It is always +/- 2% at most.
Off market stuff without an accepted offer the appraisals are way off like a solid 30-40% of the time.
Few years ago a client calls me and she says “my boyfriend is moving into the house and the appraisal only came back at $1.5 million.”
I am like what..your house is worth $1.8 to 1.9 million and the comparable sales are just complete trash (I had been through 2 of the 3 comparables personally) So I call a mortgage broker friend who recommends a friendly appraiser and that appraiser comes in at $2.2 million.
My client needed a high appraisal for family law reasons, but goes to show two licenced appraisers 700k apart within 10 days of each other.
Biggest practical issue I find with appraisals is I can often tell based on the comparables the appraisers weren’t physically in or on the comparable properties. Today for example I have 7 showings in total. I am guessing most appraisers don’t go through 7 properties in a week.
I’ll give you a $100 to put in an FOI 🙂 I am really curious.
I highly doubt it.
Their job is literally to determine market value. If there is no sale, then that would be estimated primarily via comparable recent sales and adjustments thereof. Somehow no one has a problem with that. If there is a recent sale then it would be crazy to say that they shouldn’t take the best available measure of market value (i.e. what the market actually valued it at) into account in their appraisal.
In a fully efficient market, sale price = market value. The appraisal is basically a sanity check to ensure the deal that just went through reflected market value and wasn’t subject to undue pressure that would distort market value. So if those deals were not influenced by such pressure, then the appraisal should be very close to the sale price.
What is the accuracy of appraisals prepared before a sale? Of course it would be less accurate than one prepared after a sale. Just like realtors often recommend a listing price that is not reflective of market value.
You gotta be kidding. Do you believe “doing their job” includes the appraisal matching consistently within $10k of an accepted offer price, or do you think that was a co-incidence? The appraisal describes in detail how they get to the number, and do you see them reference the offered price?
When buyers use potential rental income to qualify for a mortgage, does the lender’s formula take into consideration vacancy rates, etc? Because if it does, and the rental market in Victoria opens up, then I wonder if buyers using potential rental income to qualify for their mortgages are going to start qualifying for less?
No question. But what do you expect? Sales should be close to market value, so if the market is functioning properly (adequate exposure, no extenuating circumstances, reasonably motivated buyers and sellers) then the sales price is a good measure of market value. To make the argument that appraisers are not doing their jobs you would need examples where something sold for clearly outside of market value but appraisal still came in close to purchase price. The appraisal report on a commercial property would have a lot of detail on how they justified the valuation. Without access to it (is this FOIable?) it would be tough to determine if they were out to lunch or not.
In the last little while I’ve represented three buyers on approx $1.5 million purchases (you can verify my stats since you have access to our system).
I kid you not all three appraisals came with 10k of accepted offer price. Appraiser calls listing or buying agents and aims to build something close to accepted offer.
That is just how reality works.
Well there are developer voices on there, and usually VV can be counted on to take the anti-government side. The fact that they aren’t necessarily piling on here adds to my thoughts there is more to the picture.
I’m not really coming down on either side of this. It could be that:
Or it could be that there is more to this story than we know. I’m just weighing the probabilities here.
You just said VV was wrong on the purchase price, but they are right on market value? 🙂
Also who goes uncondtional on a deal in so much real estate market uncertainty. It’s not like this acquisition will accomodate anyone for 3 to 4 years.
I had two commercial properties under contract when covid19 hit and both my buyers bailed.
When I was in highschool working for my dad who was a stone mason at the time I hated carrying rocks and mixing mortar so I would do all the estimates. If it was anything to do with city, ICBC, harbor authority, any sort of government or large institution I would literally do the quote, multiple it by 2x and we would get the job more than 50% of the time.
and this was me as a teenager….now just imagine experienced business people dealing with the city….of course the city will get taken for a ride.
I have a Landcor Real Estate Appraisal account.
Just the one lot was already over $3 million assessed when Kang and Gill paid $2.6 million.
Government incompetency is the story here; BC Assessments likely changed assessment forumlas and started assessing air-space for future development, but of course wouldn’t have factored in the location which is completely different from being three blocks over.
The developers Kang and Gill, I’ve seen one of them on two occasions doing traffic control helping a cement truck back into one of their developments and these guys are building like 5+ buildings. Good luck getting city staff exempt or not hustling to finish a project.
This is going to be a complete disaster like the bridge.
VV folks disagree with you. The one guy that seems to have somewhat insider info on the deal (even though his reported sale $ was off) says it’s market value, and apparently appraisal came in even higher.
I am not pretending to have any expertise here, but your assertion that city somehow disastrously overpaid by $6M is extremely unlikely.
Sorry my point was two fold
i/ I think the way the city is run is ridiculous.
ii/ Adding to your point that there are a lot of 80-150k jobs in Victoria. Not in terms of %, but certainty in terms of absolute numbers and unfortunately in terms of absolute numbers the number of SFHs in the core is essentially fixed.
Marko, I think you got it mixed up. I was the one saying that 2 professional jobs in Victoria can afford a SFH in the core, it’s the others on this forum whom was saying house prices are too high for wages here, those jobs are super hard to get, blah blah blah.
How do you get sales history past 3 years from BCA?
Doesn’t explain the $8M assessment. I bet there is more to this story.
No it wasn’t. Look up BC Assessments. Kang and Gill paid $1.1 for 926 Pandora and $2.6 for 930 Pandora Nov 2016 and based on BC Assessment notation this was consider market value trade (wasn’t a family deal or similar). There is no way something went from close to peak market to middle of global pandemic and increased 240%.
Re assessment value….common, you think the folks at BC assessment have any clue as to what is going on. The developers are also smart enough where if bc assessments mis-assesses it and they know the city is interested they won’t be appealing the assessment that is for sue.
I know what developers are paying per condo door and it certainty isn’t anywhere close to 100k/door.
It’s not the just the salaries it is the incredibly poor value you get out of those salaries. Takes 3 to 6 months to get a building permit to build a home when it should take 5 to 7 business days tops.
Only took a global pandemic for them to allow submission of building plans electronically. Last time we built a home in the COV I spent close to a 1k at Island BluePrint even thought I had a PDF of every single file that could easily have been emailed.
The policies are just so incredibly dumb, not one gives crap because they are on salary and they have a monopoly. A private company wouldn’t survive 60 days being run like the COV.
And how many multiplicities do we have locally? That is just the municipal government…now add provincial, feds, uvic, military, etc., etc….gives you an idea of who is buying in Victoria 🙂
Relax Marko, the ones getting flex Fridays aren’t making $100k to $200k, they are probably making $60K, only ones making 6 figures are the exempt employees. Below is a list of exempt employees making over $75k a year (first set of numbers is salary followed by taxable benefits and then expenses with one space in between). From what I can see the at a quick glance, salaries are pretty reasonable compared to market, not sure how they can get anyone to do those jobs if they paid less:
Managers at around $105K,
directors at around $140k
senior executives at around $180k
City manager topping out at $227k.
Exempt
Atkinson, D Deputy Chief – Operations 139,227.07 15,212.49 9,683.70
Banton, P Manager – Streets Operations 108,353.54 4,209.10 6,424.45
Belfie, B HR Systems and Records Specialist 81,973.03 3,240.74 200.62
Brehaut, J Manager – Recreation Services 106,342.57 9,979.43 52.80
Bruce, P Fire Chief 185,150.07 11,887.30 9,729.43
Campbell, L Manager – Park Planning, Design and Development 107,257.04 4,092.99 753.10
Carroll, R Manager – Real Estate 107,269.24 5,688.47 597.86
Coates, C City Clerk 153,911.46 18,266.83 1,712.82
Daliran, T Manager – Civic Services 119,417.53 17,106.47 3,951.10
Dawe, J Manager – Energy and Climate Action 95,317.31 2,252.71 9,207.55
Dellebuur, B Assistant Director – Transportation 139,227.10 14,021.89 713.16
Eisenhauer, W Head of Engagement 151,670.99 13,450.61 134.53
Fisk, N Talent Specialist 71,768.70 3,879.02 203.05
Frost, M Manager – Operations and Fleet 108,353.55 5,339.03 1,080.55
Gauld, N Event Manager – Victoria Conference Centre 85,302.68 3,291.97 345.00
Getty, T Manager – IT Operations 108,353.54 10,761.53 –
Havelka, C Deputy City Clerk / Manager Legislative Services 93,933.56 7,265.12 2,226.35
Hayes, L Event Manager – Victoria Conference Centre 92,765.25 5,222.79 345.00
Heinz, M Manager – Surface Infrastructure 97,862.35 3,843.37 3,555.75
Hennessey, K Manager – Supply Management Services 113,365.75 6,002.36 6,030.12
Hudson, A Director – Sustainable Planning and Community Development 144,406.83 6,972.09 6,353.65
Husu, I Manager – Parking Services 108,353.59 4,236.63 3,421.13
Jenkyns, J City Manager 227,524.98 35,864.30 6,828.94
Jensen, J Head of Human Resources 151,939.43 4,304.48 521.44
Johnston, N Manager – Bylaw and Licensing 115,312.29 9,858.67 495.00
Lebedynski, M Senior Account Executive – Victoria Conference Centre 90,485.47 7,490.24 –
Lee, D Manager – Administrative Services 112,216.87 4,848.30 932.02
Lockhart, J Manager – Revenue 106,452.91 4,313.46 3,042.84
Meyer, A Assistant Director – Development Services 136,488.88 5,031.12 2,688.52
Mitchell, L Human Resources Advisor 89,886.13 5,371.20 889.38
Moffatt, C Assistant City Solicitor 106,495.55 3,912.88 3,514.94
Moore, K Manager – Strategic Relations / Business Development 116,658.32 6,391.31 7,758.16
Morhart, R Manager – Permits and Inspections 108,693.56 5,823.65 5,248.57
Mycroft, C Manager – Executive Operations 92,833.54 9,304.25 1,293.47
Newman, D Manager – Construction and Parks Infrastructure 101,286.30 5,489.55 689.74
O’Connor, E Senior Account Executive – Victoria Conference Centre 90,525.51 5,196.16 –
O’Connor, J Manager – Financial Planning 136,488.84 7,622.94 4,622.53
O’Halloran, J HR Consultant – Learning and Development 100,985.35 5,553.42 –
Olak, S Manager – Human Resources 84,109.55 6,126.21 –
Palmer, M Chief Information Officer 139,227.10 12,190.65 3,942.01
Parkinson, T Event Coordinator – Victoria Conference Centre 78,249.87 3,826.61 345.00
Patterson, T Emergency Program Coordinator 101,458.26 4,182.21 17,564.19
Paul, J Assistant Director – Engineering 136,489.19 14,022.65 1,891.74
Rantucci, P Head – Strategic Real Estate 139,227.08 11,476.45 984.30
Robertson, E Assistant Director – Public Works 136,489.53 4,131.12 932.14
Royle, C Deputy Chief – Administration 139,227.05 14,087.28 10,828.15
Sandhu, M Head – Service Improvement and Innovation 108,693.56 7,667.85 –
Sidhu, N Assistant Director – Parks, Recreation and Facilities 131,568.47 8,820.29 8,031.58
Soulliere, T Director – Parks, Recreation and Facilities 187,723.04 19,631.95 2,038.45
St. Jacques, D Executive Coordinator 77,634.92 8,374.60 665.00
Stark, B Manager – Parks Construction, Arboriculture and Natural Systems 109,931.85 6,634.84 1,034.10
Sutic-Bata, K Manager – Underground Utilities 107,394.21 9,248.32 2,876.47
Thompson, S Deputy City Manager / CFO 190,535.71 24,495.37 1,726.58
Tinney, J Director – Sustainable Planning and Community Development 148,803.02 12,332.64 7,929.77
Tooke, T Manager – Sustainability, Asset and Support Services 91,318.98 2,200.73 12,815.24
Villanueva, S Manager – Facility and Event Operations Victoria Conference Centre 110,867.13 11,799.71 65.92
Webb, S Manager – Sustainable Transportation, Planning and Development 101,008.46 3,531.53 7,387.96
Westinghouse, L Manager – Accounting 108,353.54 5,540.81 2,819.69
Williams, J Manager – Health and Safety 105,379.03 4,596.29 3,855.54
Work, F Director – Engineering and Public Works 184,030.77 9,047.48 21,525.70
Zworski, T City Solicitor 216,477.35 21,161.21 3,870.04
Where’s the info from about the $3.6M purchase in 2016? VV info was wrong about the purchase price now. Total assessed value for those two properties is $9.5M
Bit of a strange sentence. Of course it’s not all doom and gloom, but increased vacancy rate and maybe lower rents is a clear negative for landlords. The fact that it is a positive for renters is switching horses halfway through the race.
Well the schools are opening up in a few weeks. Good luck implementing effective distancing there.
Re investment homes I’ve been noting on HHV for the last 5 years the reason small time amateur investors aren’t being flushed out in my opinion is ultra low interest rates. Same situation with covid19 now…..sure your rent may or may not drop 10-20% but if you are in a variable mortgage it is offset by savings in interest. I am holding a mortgage at 1.25% on one of my rentals….tenant is still paying the same rent. It is not all doom and gloom…if anything I am seeing some positives out of this. Rents were kind of ridiculous imo.
If interest rates climbed to 4-6% I bet you would see a huge flood of listings including amateur landlords.
https://www.timescolonist.com/news/local/city-buys-pandora-land-for-9-595m-has-housing-plan-1.24133479
TC is reporting the purchase price closer to $10 million!
Classic…express concerned over displacing street people and then overpay $5 million for the property.
Now the city plays developer where the only thing on everyone’s mind is flex Friday (it’s a common conversation at front desk in building department when I’ve been down there dealing with permits). Guaranteed they spend $10 million more on the build than an experienced developer would, book it. Everyone knows they aren’t capable so they will get taken for a ride at every single junction. Also gauranteed they need to hire more staff to oversee the development.
I guess everyone is content pay 100-200k/year salaries so the city can pull this kind of crap.
Lots of people own two properties but I wouldn’t consider them investors in the traditional sense. As I pointed out in the previous thread, I personally haven’t had someone buy a rental SFH since 2017; however, just in the last 12 months I had three buyers buy places for their kids to live in.
That just isn’t true. The federal large corp program does include O&G and they are taking criticism for it. For example:
Ottawa’s large business aid plan targets the oil patch with big risks for taxpayers
The above is some of the milder criticism – the GP and BQ are saying O&G shouldn’t get anything, period.
It may take a spike in cases for people and the govt to adopt stricter measures, such as mandatory masks and enforcement of social distancing.
There has been a total of only one CoVid case diagnosed in the last 7 days in Vancouver Island Health Authority (population 785,000). Currently one person in hospital. Zero in ICU.
I see that city hall wants to banish cars and parking in Beacon Hill Park. Great, so us old folk who cant bike are being effectively banished from using the park which is a great place for social distancing. It is alright for druggies to camp out there but really wrong for me to park by the animal farm in order to walk and enjoy the park. At the least they could change the parking to handicapped only.
Seems like the mayor and council really dont care about either older or handicapped people. If you are not a homeless druggie or a bike crazy then you dont count.
LeoM: You are right that we will have another spike of the virus as soon as we open up. Actually, I am impressed by how most people have followed social distancing rules but one cannot expect this to continue for long especially amongst the younger people who are rarely at risk.
Basically if you are over 60 or have an underlying condition you need to really figure out how to protect yourself. Many older people will simply take the risk rather than being in a state of forever quarantine. The goal is still primarily to flatten the curve as much as possible while praying that we dont get a huge spike that will flatten the hospital system instead.
The ‘re-opening’ or ‘opening up’ being reported on every news site around the world seems to indicate that many regions are already starting to ease up on major restrictions and open up for business as usual, albeit with minor restrictions.
This will likely lead to complacency, cause the ‘second wave’ and prove the old adage:
“common sense is not as common as stupidity”.
So much for Covid-19 saving the environment. Countries that are opening up are seeing car usage up, while everyone is avoiding public transport.
I wonder how long it will be before people feel comfortable taking public transport again.
https://www.bloomberg.com/news/articles/2020-05-10/the-car-is-staging-a-comeback-spurring-oil-s-recovery
Also I feel like a 2nd wave is inevitable – my friend went to Gonzalez this weekend and took a a pic and half the beach is packed – no social distancing at all. It’s ridiculous. I think now that people know its opening back up the thought is “well its open in 10 days so whats the difference if we go out now”. The government should have waited to release the dates if these dates matter – i realize it would have allowed businesses to have less time to prep but now its just a reason for people to stop following the current guidelines.
Wonder if they will change the mortgage deferral to principal residence only soon. I wonder what the impact that would have on the number of ppl who must sell.
Another great article, thanks Leo.
To me, the most compelling story that’s emerging is this: The corona-recession isn’t likely to crash the housing (or any) market, and its effects will be disproportionately felt by those at the lower rungs of the ladder. Rather than being a great equalizer, this event will probably further the growing divide between rich and poor.
Sure, there we are beginning to see things that may take a significant bite out of demand (immigration down; yield on rentals maybe down; lower employment income making it more difficult for first-time buyers)… etc.
But I don’t underestimate the power of low interest rates, a very strong cultural/psychological preference for home ownership, and people with deep enough pockets to weather a little storm. My friends with empty airbnb’s right now are cautiously considering the long term rental game, but I don’t know of any who are feeling forced to rent at a loss or sell ASAP. (Most people with multiple properties don’t run their margins that thin…)
So my wife is out of work as a hygienist and who knows when she will go back. Yes the Province will allow it in a week but trying to get PPE and what not for health care outside the hospital I’m sure will be challenging.
In the meantime I spoke with my mortgage broker and he noted that since my application is CMHC insured that they will not accept any income from my wife as she is getting the CERB – meaning they won’t look at her history or take the CERB as income. So even if we find a house in this Time we are hooped until she can start steady work again.
Interesting times for sure.
A bunch of multi-property owners have a second home up island (or on one of the islands) that is their vacation home. Also for some Victoria is actually their vacation home. Not all multi-property owners use their second home as an investment.
Also I wonder how many of these multi-property owners are a family member that is on title to get qualified for the mortgage.
The longer this lasts the further up the food chain the unemployment will reach. The senior managers will be the last fired. It’s almost always so in a down turn. The highest levels are often never fired even in bankruptcy but are in fact rewarded for managing the entity through bankruptcy. Such is the life of the modern corporate executive suite employee.
James Soper:
Now, why would you think that 22 to 23% of Victoria’s population purchasing investment homes would push up prices?? I’m sure these people wouldn’t do that … well, unless mortgage rates were pushed down, property was skyrocketing, they had lots of equity and they got good investment advice.
I fear that the talk of reopening is premature on both sides of the border and Atlantic and Pacific. We saw that just this weekend in South Korea. We are certainly looking at a Fall second wave – that is a certainty, and the only question is the severity. Trudeau and his side-kick unveiled a “large corp” program of loans – lots of conditions [executive pay, dividends, share buy-backs; and no financial sector loans], aimed at protecting jobs. But, nothing for oil / gas – shame on them.
The housing sector will be hurt very badly. I see that the transparency registry has decided to delay the roll out to October 2020. Strange indeed – they have all of the data and must have been close to launch when COVID hit the fan. Read an article today that AirBNB owners are heading for the exits and listing to sell – ooops, too late, take your lumps.
I fear that many, many of these lost jobs will not come back – that is a good bet. Unemployment will keep rising. May 2020 is predicted to bring another 1 million job losses in Canada. We will near 20% unemployment on the definition being used. However, one must bear in mind that the current numbers do not include (a) those that gave up looking for a job because there are none and (b) those getting the pay via 75% wage subsidy but not working any hours. If you include those, surely we are at 20%.
I think Canadian mortgage deferrals are even higher than 10% now. Latest figures I’ve been able to find quote 670k (14%) of mortgages in deferral (and these figures are dated by about three weeks).
https://www.reuters.com/article/health-coronavirus-canada-banks/update-1-canadian-banks-have-processed-670000-mortgage-deferrals-in-first-month-idUSL1N2C510H
I can see the allure of an investment property. It was once my goal when i was a bit younger. However, nowadays i would be wary as price appreciation might not be what it once was and the math (cap rate) doesn’t seem to work as a great investment without that price appreciation.
Not to mention the fact that UVic just stated that fall programming will be predominantly online ( i would expect royal roads, VIU, and camosun to be much the same). So your rental pool is now mostly limited to those who are being affected by unemployment the most. Add in airbnb in the dumps and you may have a whole lot more rental supply coming online.
I would say if you have good tenants do what you can to keep them as their options and opportunities for cheaper or better accoms may be increasing.
But Marko assured me that investors have never made up a huge % of SFH purchasers…
Excellent article and information Leo. Isn’t it fascinating that most of these multiple home owners live in Ontario and B.C.. Even more fascinating that their principle residence is valued higher than those single family residences that don’t get involved in this investment.
So, let’s call it what it is. These people, by majority, utilized their equity to purchase investment homes to become richer than their wildest dreams. Home values in B.C. and Ontario were skyrocketing and Realtors gave everyone the same spiel.
https://www.castanet.net/news/Investment-Real-Estate/271527/A-retirement-rescue-plan
This is what you get when Realtors become financial advisors and everyone reaches for the golden ring.
Great article. Depressing and surreal to look at those numbers -all age groups have at least a 10% drop in employment, and the unemployment rate for 25-34 is about 40% . Hopefully it bounces back quickly,
I read the link usually 2 SFH. Very surprising. The second home does not have to be in Victoria
“Most multiple-property owners own two single-detached houses
In the three selected provinces, the majority of multiple-property owners owned two properties. Just over three-quarters of multiple-property owners in British Columbia (76.7%) and Ontario (76.0%) owned two properties, as did 70.2% of multiple-property owners in Nova Scotia”
Generally an apartment building would only have 1 owner though no?
The 21k is fishy. Wonder how apartment building are calculated in the 21k.
That’s crazy.
What is that as a % of people who own property in Victoria?
10%? More?
Also, it’s interesting that new listings have bounced higher, but sales have not in the past week or so.
Leo, wondering if you could do a graph overlay of auto sales vs home sales. I wonder if those two are correlated (given they are typically the 2 largest discretionary purchases people make). Wonder if one could be use to predict another.