Thursday, December 4, 2008

HHV to MSM: yer turn, I think they're hearing it

H/T to Anon for graphics (please don't make me H/T anon anymore people, I like to give credit where credit is due)

Real estate forecast grim. When I started this blog, I never, and I mean never, imagined I'd read an article with a title like that in the TC. One choice tidbit:
Greater Victoria will lead the country in real estate declines next year as both average price and the number of sales tumble
Re/Max, without using the words, have stated very clearly, that Victoria real estate is the most over valued in the country.

What I find most telling about this article is that Re/Max states that despite the fact that our economic drivers are more insulated from the overall market our home prices will fall further. I question the insulated lines, but here it really is irrelevant.

Forgive me for feeling a deep sense of vindication today. Victoria real estate bloggers and regular market watchers and commentators, you've been confirmed by Re/Max today.

108 comments:

greg said...

Bwahahaha.

Feelin' the love from Re/Max. Gotta love it.

Guess some local franchisees are not going to pay their fees to easily with no sales.

Big sales drops equal re-starting of the local market as prices reach levels supported by local incomes.

Re/Max can only hope this happens sooner rather than later.

B2B said...

I have altered this quote from the article to reflect reality better:

""Certainly, this report should serve as yet another example of how the underlying fundamentals of the Canadian economy remain well behind other countries due to its unsophisticated, commodity-geared nature, especially compared to much of the industrialized world as plunging real estate values from San Francisco to London to Barcelona and Auckland lead the world economy further into the abyss.""

It makes me guffaw also how our banks are touted as so strong. No mention of the reasons being that the Canadian banks are sheltered from competition by belonging to a government- and consumer-sponsored protectionist cartel. Next we'll be hearing that Canadian wireless companies are the best in the world....uhhhh...because they are protected from competition and can thus keep their rates higher than anywhere in the globalized, competitive world.

roger said...

More real estate forecasters jump on the downturn bandwagon:

Sharp drop in Vancouver home sales

Home prices have become overvalued in many parts of Canada, and prices nationally may have to correct by an average of 10 per cent to fall in line with economic fundamentals, Carl Gomez, vice-president of research at Bentall Capital LP, said in an interview.

In early 2008, home prices rose to a value of about 9.5 times income, well above the long-term average of seven times income, Mr. Gomez said in a report yesterday. In Canada, home prices rose by 80 per cent from 1997 to 2008.

Housing markets vary widely in different parts of the country, however, and using a national average can be misleading, Mr. Gomez said. In both Alberta and B.C., for example, home prices may need to drop by as much as 25 to 30 per cent to correct runups in value, he said.

roger said...

In the last thread someone asked if Carla Wilson was still covering real estate. Yesterday she reprinted the VIREB news release:

House sales north of Malahat echo 'wait and see' approach

VicREBear said...

You can bet that if the spinmeisters at ReMax are "predicting" a 10 percent decline in prices, the real figure will be 30 to 40 percent. 2009's gonna be a wild ride for Victown!

hhv said...

"well above the long-term average of seven times income"

That must be a misprint.

greg said...

roger -

the only problem with all these stories is they keep blaming external events. No doubt they are contributing, but it seems the biggest reason for the reversal is that affordability is completely out of whack, 40 year mortgages are gone, buyers are depleted and sellers are listing way too high.

When theaffordability improves, the situation will improve regardless of what is happening in the US.

greg said...

hhv -

they're praying 7 times is the floor in Vancouver. Long term average is more like 5 since the 1970s, as we all know.

In fact, its not uncommon as recently as the 80s to see the number closer to 3.

But since incomes have not kept up with inflation since the late 70s, it would take a colossal crash to get prices down to the 3 times income multiple.

Even I'm not expecting that in the medium term.

Prices in Victoria are hovering in the 8 times range, something like 5-6 would give an average of $375,000 locally. I don't think that's out of the question in the medium term - say by 2010.

Isn't it ironic that everyone was hyping the bonanzas of real estate reaching a frenzy with the olympics a short time ago. Now it looks like a bottom will barely be reached by that time.

B2B said...

3 (or perhaps a stretch to 3.5) times income was considered the norm and long-term average in the UK when I was living there - and that's even in the boom times (I lived there from 2003 to 2007). In fact, one of the signs of doom in the UK was when 6-times-income and 8-times-income mortgages were introduced. This was when most Brits started to balk at the prevailing insanity, and, well, the rest is history.

This certainly puts this talk of 9.5 times income mortgages, or the floor being 7, in perspective. I don't see offhand why 3.5 times earnings should be any less reasonable for BC as it is for England.

Anonymous said...

I expect outlying regions to fall back to the 3x median income average. Cities in general I figure will retreat to 5x median income.

$375k doesn't seem all that outrageous for a house price in Victoria. Mind you, we've shifted to a 'only the payment' matters philosophy in psyche of most people I know. I wonder what effect that will have on house prices.

-Village

Ryan said...

I'm surprised they think Victoria will crash harder than Vacouver. Their median price is way above ours, yet their median income is about the same or even lower.

mln said...

You can bet that if the spinmeisters at ReMax are "predicting" a 10 percent decline in prices, the real figure will be 30 to 40 percent. 2009's gonna be a wild ride for Victown!

I looked up a few articles from 2007 and early 2008 which quoted Re/Max guys like Elton Ash. They were actually pretty reasonable, citing problems with affordability as early as 2006. I couldn't find any ridiculous predictions from them, which surprised me.

hhv said...

Re/Max actually uses different measures altogether to determine avg house prices compared to VREB, so you have to put everything into perspective.

An avg decline using their numbers of 10% could be 20% when using VREBs.

roger said...

hhv said:

Re/Max actually uses different measures altogether to determine avg house prices compared to VREB, so you have to put everything into perspective.

- CREA and Remax calculate average prices by polling together together all residential sales (i.e. condos, townhouses, SFH etc.). They do not breakout each category.

- The numbers are annual averages using all sales in a given calendar year. So they are comparing the average of all of 2008 with an estimate of all sales in 2009.

So what will happen with SFH in 2009? A 10% drop in annual average could easily result in a bigger % drop in prices when comparing December 2009 with December 2008. 12 month averages tend to hide monthly declines.

roger said...

oops polling=pooling

patriotz said...

"well above the long-term average of seven times income"

That must be a misprint.


It's not a misprint. The "long term" for his report starts in 1981, i.e. it encompasses three bubbles - early 80's, late 80's/early 90's, and the current bubble. That's why the average is so high.

The long-term average before 1981 is three times income.

B2B said...

$375k doesn't seem all that outrageous for a house price in Victoria.

I respectfully disagree - I think that's still too high. At a sensible, long-term metric like 3 times income, that's $125k a year. For households that make that, I could see it - but I doubt the average household in Vic makes that much (e.g. could a double-income household, wherein one earner makes 75k and the other 50k, be the average/norm?).

greg said...

You're right about that Patriotz. Isn't it interesting that ever since incomes stopped keeping up with inflation, the ratio of income to prices went out of whack....

If you take house price valuations out of the calculation of net worth, we're a lot poorer per capita than we were in 1979.

Oh well.

phil said...

Hey, we haven't heard from Sitting Pretty or Happy Owner for a while...

I hope they're ok.

Anonymous said...

I respectfully disagree - I think that's still too high. At a sensible, long-term metric like 3 times income, that's $125k a year.

I don't think the 3x metric is the target for a City anymore. 5x income is what I expect us to fall to from whatever we are at now, 9x? Hopefully I'm wrong, I'd rather buy at 3x.

Of course, with all the desperation to prop the economy up. I'm wondering what the unexpected consequences will be. Trillions of dollars in bailouts is going to take it's hide out of something.

-Village

Anonymous said...

I found this part of the TC article interesting.

"Re/Max said Victoria is more insulated from an economic downturn than other centres because of a solid base of government, academic and advanced technology jobs."

Hmmmm, they don't mention construction.

Where the heck did construction go?

S2

Wenna said...

Can someone please tell me what "MSM" stands for?

Also, this talk about dropping percentages - what is it dropping from? The highest point? And of what, the average, the median?

Thanks!

greg said...

MSM = Main Stream Media.

Nick said...

Is there going to be another bear blogger pub night at some point? I'll buy the first pitcher, I figure you, Roger, and the other great posters here have saved me tens or hundreds of thousands of dollars by opening my eyes to the truth about the Victoria market.

hhv said...

we're not far from a 20% drop from the peak for SFH, let's do it then...

womp said...


Hmmmm, they don't mention construction.

Where the heck did construction go?


Bankrupt!

http://ca.news.finance.yahoo.com/s/04122008/2/biz-finance-canadian-bankruptcies-21-cent-year-earlier-october.html

Anonymous said...

Riding the market down:
2500 Cedar Hill Cross Road
MLS 252552
BC Assessment: $812,000

$1,095,000 listed July 3
$995,000 July 24
$895,000 Sept. 12 (relisted)
$839,000 October 28
$795,000 November 19
$725,000 Dec. 2 SOLD!

hp

Ryan said...

"I don't think the 3x metric is the target for a City anymore. 5x income is what I expect us to fall to from whatever we are at now, 9x?"

You could be right, but this just reads like "It's a new paradigm! The old rules don't apply anymore!" And that has been proven false in every bubble, most notably the .com bubble, the real estate bubble and the commodities bubble in my adult life.

It's possible that the multiple has shifted up but there has to be a better rationale than "it's a city". After all, if there are more and better jobs in a city then the median price would be higher even if the multiple is the same, because the median income would be higher.

Some explanations for a higher multiple would be scarcity of desirable (ie SFH) properties, longer-term mortgages, higher debt tolerance, and higher than normal non-income money (rich foreigners and retirees). I'm not sure whether any of these factors are real.

A competing theory is that of the generational bubble caused by the boomers, which will be ending soon and could cause deflation across real estate and stock markets. I'll be a little disappointed if the market settles at a 5x multiple but it's possible. I just don't think it's likely. The reasoning seems to much like "it's different here" or "it's different this time". It's never different.

greg said...

Ryan -

you might be right. Another theory would be that higher housing prices have increased familial net worth, allowing higher multiples to take hold as net worth increased - even while incomes were stagnant or fell.

With a drop in housing values, maybe things will punch back down to 3 times income - which would be a $250,000 average in Victoria. 50% off, and where the boom started 7 years ago in nominal terms.

Allowing for inflation, that's of course even lower...

hhv said...

at some point, someone new must always enter the market, which seems to me would cap the entry level price at the same as it has been for as long as the income is the same; adjusted for inflation of course.

Ryan said...

Greg,

Yup, that seems a lot more likely to me. For prices to stay higher than normal long term there has to be some new factor. For prices to revert to the mean merely requires time.

Anonymous said...

So... whens the next Bear Beer Fest? =)

-Village

Anonymous said...

The Remax report does imply better volume in sales for 2009 versus what the snail paced market at the moment.

Volume across BC in November was down between 60-80% from November 2007. VREB's volume was closer to 60% down.

VREB 2007 total volume, according to the report, was 8403 units. At the current slow pace of 60% of VREB sales that would translate into 3361 sales for 2009. Where the report predicts a more active 5800 unit sales volume (~or 30% down from 2007 levels).

ps. When considering the 3x income factor for 1981 sales one has to consider that high interest rate versus the low interest rates we have today as a major factor. The higher the interest the lower anyone can afford as a multiple of income.

Anonymous said...

I agree, bring back 18% interest rates for two or three years, and all real estate will revert to 3 times incomes.....

Anonymous said...

Another bear beer night. I'm in.

Maybe we could entice Just Jack to join us this time.

S2

roger said...

Beer night sounds good to me. It was great to meet everyone at the last one. Why not early in the New Year after all the Xmas festivities are over?

Hopefully Just Jack, VG, Boomer, Village, VicRebear, Nick, Patriotz, Phil, Womp, B2B, Art V, Mln and all the other regulars might be able to make it this time!! (sorry if I missed anyone)

hhv said...

The bengal may be quiet by then too... I may be able to convince the mrs...

womp said...

I would definitely try to make it. I'm out of town from the 20th through to the new year but would be back around the 4th.

olives said...

So if $250,000 is where the average should be based on today's incomes, we also need to keep in mind that incomes will likely be dropping in the future due to deflation , and as well, bubbles generally over-correct in relative fashion to their size. These factors may bring down the average much lower than $250,000.

Just Jack said...

How about a Bear Run. Theres an 8K coming up in January in Central Saanich. We can get T-shirts made up.

Dumb Canuck said...

I'm in for beer during the bear run... 8km pub crawl - that would be fun... (been there, done that - at least on skis)

patriotz said...

A competing theory is that of the generational bubble caused by the boomers, which will be ending soon and could cause deflation across real estate and stock markets.

Real estate but not stocks. Real estate has local markets. Stocks have global markets. Someone in Seoul can buy a TSX stock just as easily as someone in Toronto.

There is a rising middle class in Asia which can take the place of aging boomers in North America in the stock markets. Capital is mobile and will seek the best return.

Not to say you can't have stock market bubbles, of course you can, but not generational ones because economic demographics are not correlated globally.

Anonymous said...

Another major Vancouver condo project goes poof.

2008-12-04 16:24 ET - Street Wire

by Mike Caswell

Quest Capital Corp. has filed a lawsuit seeking to recover $30.4-million it lent to Jameson House Properties Ltd. and Jameson House Ventures Ltd., the developers of a stalled Hastings Street condominium tower. Quest claims the loan is in default, and that it has demanded repayment.

The suit comes two weeks after construction was halted at the project. On Nov. 14, the developer, Tony Pappajohn, said an unnamed bank had withdrawn a $180-million loan.

Of the proposed 144 suites in the building, 105 have already been sold at an average price of $3-million. Buyers paid deposits of 15 to 25 per cent.

Mr.4AM said...

I think 3 or 4x gross income for a house may be a reality in a couple of years or perhaps even less, at the rate the global economies are tanking.

We might not have 18% interest rates this time around, but we have the steeps bear market since the 30's that is looking more grim with each passing week. Add to this the recent political crisis, gas dropping below $50 (bad for Oilberta), and a possible 30 billion dollar bail out package (at tax payer's expense)... don't forget 30 billion for us is like 300 billion for the USA (10x population).

Then on top of all this there's still a slew of potential mass market events, any of which could turn the economic crisis into a catastrophe:

* US Treasury bubble blow up
* CDS blow up
* CDO blow up
* COMEX default
* China unpegs Yuan from USD
* US Fed interest rates hit 0% or go negative/liquidity trap occurs
* Israel/Iran war
* Russian market collapse
* India / Pakistan war
* Brazil Real crash (again)
* UK drops pound & joins deflating Euro
* Massive USD reversal and eventual collapse.
Ladies and gentlemen, place your bets, the roullette wheel is spinning.

Oh yeah and I forgot to mention the whole Canadian political fiasco. Just when our government is needed most, they shut down parliament for an entire month + so they can strategize their 2009 power grabs. I didn't vote for Harper, but the coalition play is seriously messed up. I don't have confidence in a single one of those leaders... where's our Obama???


Looking forward to the -20% SFH get together, I'll see what I can do to make it.

patriotz said...

Of the proposed 144 suites in the building, 105 have already been sold at an average price of $3-million. Buyers paid deposits of 15 to 25 per cent.

Looks like somebody got lucky. The buyers will get their deposits back with interest.

As opposed to the legions of pre-sales buyers who will be sued by the developer for failing to complete at the contracted price.

Art Vandelay said...

I believe the median household income in Victoria is actually lower than the median household income in Canada. But that hides huge disparities.

Something I haven't seen mentioned before is the effect declining values have on the quality of housing stock.

When prices are skyrocketing, homeowners can't pour enough money into their properties. Granite counters, sure we laugh. But also new roofs, granny suites, and landscaping makeovers.

With values plummeting, will we return to a city where far too many houses look like mold-infested crack shacks. Because as an Albertan refugee, I gotta tell you that for all the natural beauty in this city, huge swaths of houses in Victoria make Buffalo look like Manhattan.

Anonymous said...

A kept up 1913 crack shack with one bathroom and granite countertops in a postage-stamp kitchen is still a 1913 crack shack.

Finally the condition crash of those things will actually start reflecting their real inherent value... it's exactly the other way around, Art.

P.S. There are less granite countertops per capita in Victoria than in any other real estate market save the third world. Only in Vic can someone think they can get close to a million or more for a big house with original formica or ceramic tile countertops.

Now, thankfully changing. Not the countertops, no way; but the prices.

Anonymous said...

I want a 1913 crack shack. I just want to pay crack shack prices. Not the massively inflated prices we have now. Most construction just lacks the character of a crack shack. =)

-Village

dub said...

I wonder how many RE bulls are still walking around in bliss?

Must be getting a bit harder with news like this everywhere....

Canada loses most jobs in 26 years
http://tinyurl.com/5qbfo6

Personal bankruptcy filings soar in October
http://tinyurl.com/6mmrax

CIBC profit slides by 51%
http://tinyurl.com/6f9f64

roger said...

It was just a few weeks ago that the Royal Bank speaker at the UVic seminar said that foreclosures were not on the radar. Maybe in Victoria but not in the rest of BC.

Grab coffee and watch this Global TV video clip (after short commercial):

Foreclosures rise in BC

vg said...

Touching on the bankruptices, did you see the Global news last night with the bankruptcy lawyer ? He stated he believed there are thousands of BC'ers filing for bankruptcy based on his business all due to being maxed out on credit and too much house/lost job.

A credit expert claimed this is just the tip of the iceberg as most are still in denial right now that they can't handle their debt load. They showed a condo in The Wall where the owner just walked and left all the contents as well. Funny how they told us it can't happen here because we didn't lend out willy nilly like the US. Total bullshit.

Anonymous said...

Business section of the TC today:

Construction permits value down 21%

Telus cutting 100 jobs

AT&T cutting 12,000 jobs

B2B said...


With a drop in housing values, maybe things will punch back down to 3 times income - which would be a $250,000 average in Victoria. 50% off, and where the boom started 7 years ago in nominal terms.


This is exactly what I expect. People have been conditioned (even us) to think that a quarter of a million dollars is not very much money - when it's a house price. Otherwise, your average Victorian has a pretty small-time income. But $250,000 is a LOT of money to someone who makes an average Victoria income. Heck, it's a lot of money to anyone.

I also don't see why a multiple of 3 times income, considered normal in Southeast England where property is at a premium and incomes high, should not also be reasonable in a thinly populated outpost like Vancouver Island.

Near Redmond, WA, I noticed recently, a nice 3-bed house is about $375k US. Victoria should be FAR cheaper given that our incomes are far lower and that we are far more isolated (you can be in Seattle in 30 min from Redmond).

Ryan said...

"It was just a few weeks ago that the Royal Bank speaker at the UVic seminar said that foreclosures were not on the radar. Maybe in Victoria but not in the rest of BC."

I shook my head when I heard that. Either they're lying or incredibly incompetent at their job. I'm expecting foreclosures to spike and I don't even pay as close attention as some of you guys. When it's your job to track these things, you'd better not be surprised that high debt ratios and falling asset values will lead to defaults.

patriotz said...

Near Redmond, WA, I noticed recently, a nice 3-bed house is about $375k US.

For the benefit of anyone not familiar, Redmond is the home of, that's right, Microsoft.

"Due to its large population of highly paid tech workers, especially those of Microsoft, Redmond is known for its affluence. Based on per capita income, one of the more reliable measures of affluence, Redmond ranks 20th of 522 areas in the state of Washington to be ranked."

Redmond

hhv said...

But Redmond lacks diversification, unlike Victoria. They don't have gov't, healthcare, universities, tourism and construction to support them... ;-)

hhv said...

this is a must read. Look at this quote:

"Still, at the end of the day, CMHC isn’t a private company, which means taxpayers may have to write a sizable cheque if the housing market worsens. It’s happened before. Back in the early 1980s Ottawa had to bail out CMHC when thousands of homeowners defaulted on their mortgages and insurance claims skyrocketed. Much has changed since then, but it’s becoming clear that CMHC’s policies encouraged many homebuyers to jump into the market before they were ready. And the consequences of that could be far-reaching. “[The easy credit] dragged buyers kicking and screaming from the future to today and they were lent money whether they could afford it or not,” says Ozzie Jurock, a Vancouver real estate promoter. “The only test was whether they could breathe.”

Oh, Ozzie, how your tune does change with the prevailing winds.

vg said...

"Oh, Ozzie, how your tune does change with the prevailing winds."


He's the biggest pumper in BC,and makes himself the most visible of all being on Global all the time as the voice of reason. Even as the US was crashing he could not say one bad word about BC real estate other than to keep buying cause the world loves us. Utter garbage.

VicREBear said...

I'm reading the latest Real Estate Victoria rag, and just have to report on the latest buffoonery by my favourite father and son Victoria RE team, who shall go nameless to protect their reputations (but their ad is at the top of page 52 of this week's issue, online at www.revweekly.com!). The ad has a picture of a coweb-covered skeleton sitting by a telephone; the copy reads:

"THIS IS BONES! HE'S WAITING FOR PRICES TO DROP IN VICTORIA! AND...IT COULD HAPPEN! PICK ONE!

1. Taxes are removed on building materials.
2. Prices on building materials are coming down.
3. Labour takes a cut in wages.
4. Farmers retire to Crooked Creek, Saskatchewan
5. GST is removed on new land.
6. God makes more land!

Bones should have packed a larger lunch- It ain't gonna happen!

Victoria is NOT based on the economy, It's based on supply and demand! In Victoria, the demand is growing and the supply is shrinking."

Ahem. I'll let you ladies and gentlemen make your comments if you see fit.

patriotz said...

7. Nobody is willing or able to pay ridiculous prices any more.

That's all it takes.

This is the Battle of the Bulge for the RE industry. Make no mistake - they are VERY, VERY scared. They know damn well what has happened south of the border and will pull out all the stops to suck in the last few fools.

greg said...

Brailsford eh? Never heard of 'em. Have to say, running such a fictional ad while prices are cratering all over Canada implies either a wilful deception (prices down 5 months plus now) or a complete lack of knowledge of the market. Or maybe they're just wishing...

Anonymous said...

VREB published this ad in today's TC...

Cautious Buyers Lead to Decline in Sales

What would you think if you were a buyer or seller after reading this??

P.S. - They might want to hire someone else to proofread their ad copy.

patriotz said...

"Six Month Average"? Who give a rat about that? Does anybody buy 1/6 of a house each month for 6 months?

Why not just publish the average price from 6 months ago... oh... that's why not.

Coming up: One Year Average, Two Year Average, yes the smoke and mirrors are really getting revved up.

Anonymous said...

Check out Garth's latest: "Toxic Cash". We are no better than the good old USA. In fact worse, at least down there they have some debate in congress regarding bank bailouts.

www.greaterfool.ca

roger said...

Some time ago I asked if anyone knew why the Parkside fractional ownership project in downtown Victoria seemed to be taking so long to complete. I think the answer is in this article:

Buying a piece of paradise

"Fractional properties help consumers spread their investments," says Sylvia Therrien, a real estate agent with Newport Realty. "It is especially attractive when someone is looking to buy in an expensive real estate market such as Victoria." She says buyers are attracted to fractional properties because they are secured by property deeds.

She sells units in the Parkside Victoria Resort and Spa, the first fractional offering in Victoria. It is a 126-unit building that offers one-quarter fractional ownerships in a 540 square-foot one bedroom suite from $140,900. It is 78-per-cent sold.


But what about financing?

But while it is possible to get a mortgage on a fractional property, it might cost more than a conventional mortgage as not all financial institutions offer it.

According to Ted Jones, a mortgage specialist with Centum LendingMax, only two of his 30 sources of capital offer mortgage financing for fractional properties.

"The financing rate is generally in the same realm as other recreational properties but there are more lenders for conventional properties," says Jones. "With just a limited number of lenders for fractional properties, rates may be higher."


Given current credit and real estate conditions it may be a tad difficult to sell the last 22% of that development. But the 78% that bought a pre-sale are probably anxious to take possession.

patriotz said...

"Fractional properties help consumers spread their investments," says Sylvia Therrien, a real estate agent with Newport Realty.

Translation: it increases the supply of fools.

It is a 126-unit building that offers one-quarter fractional ownerships in a 540 square-foot one bedroom suite from $140,900.

Total cost 564K. And right now you can buy a fricken house in Oak Bay for less than that, never mind in a year or two.

hhv said...

Not that I'm defending the price, but understand that parkside is developed by avia west. They have an excellent track record of creating individually owned hotel suites. 140K or so for a quarter share is not a bargain, but i bet if you asked the average owner of one of those shares, they'll tell you they'll never stay there. It's about ROI, and hotel room cap rates.

The parkside will be successful as a hotel/resort, not as a live in condo development. granted, it's a very different business model from most hotel chains and condo developments, but given the success of avia west's other projects, this one doesn't concern me in the least in terms of completing...

i suspect early buyers will be disappointed by the lower ROI compared to today's and tomorrow's buyers, but hey, that's the risk.

patriotz said...

They have an excellent track record of creating individually owned hotel suites.

Excellent for whom? If these things were such a good investment the developers would raise the capital themselves and keep the return.

It's just a scheme to raise capital cheaply and offload risk so they can rake off the profits from management fees.

The US is facing a severe cutback in discretionary income for a long time and this is going to affect all facets of tourism and recreation.

hhv said...

Patriotz,

excellent for avia west... otherwise they'd do exactly what you said... it's actually a fairly small family run business, and local, remarkable really all things considered

Anonymous said...

The ROI on such an investment has to be negative, not to mention those management fees. I would never buy into something like this where there is so little control.

I would also not do it with debt. Maybe if I had disposable cash and really wanted to spend a bit of time somewhere, but Victoria? LOL.

vg said...

I would never consider doing any business with Newport,they are a bunch of clowns. I have never been treated so crappy by any real estate business before. Lack of professionalism is an understatement.

Just Jack said...

As for fractional interests


A certain portion of the time is to be personal use (non rented), otherwise, you will not be assessed as residential but as a commercial hotel and taxed accordingly.

When buying a fractional interest it is the income after expenses and before debt servicing that should be your only concern.

Comparing the physical aspects of one fractional interest suite to the suite that your are thinking of buying is not an appropriate way of formulating your offer. You may find some agents will try to sell the suite this way, but they are just leading you down the garden path.

You will need income and expense statements for the last year or more. To buy a fractional interest without a financial history is not for the average person as you will under estimate the expenses and over estimate the revenue.


Also, make sure that the zoning allows for this hotel use.

If you do your homework, fractional interests should provide a suppliment to your income. Prepare for ups and downs in the Hotel industry when considering the rate of return that you require.

dub said...

I love this report from RBC:
Risk of U.S.-style housing meltdown remote in Canada

One sentence says:
households are generally not overstretched financially.

And a couple sentences later:
The RBC affordability index shows a standard condo to be the most affordable housing in Canada, requiring 31.4 per cent of pre-tax income. A standard townhouse is next at 36.9 per cent, followed by a detached bungalow at 45.7 per cent and a standard two-storey home at 52 per cent.

I guess if a typical family were to buy a bungalow or a two-storey home, they wouldn't be considered 'over-extended at 45% & 52%??

These guys are jackasses.

greg said...

dub -

look on the bright side, the % of income to purchase these standard properties is going down by tens of thousands per months in the most expensive markets right now.

Anonymous said...

Over and over again, we hear that our local market will not be affected like the USA. Simply because we did not have the level of sub prime lending that the USA did. Its not that we didn't have sub prime lending. Companies such as Clarica and Prime America and others whose primary business was not mortgages entered into the mortgage business. Citifinacial and ING who are not Canadian banks did mortgages in Victoria as well. Most brokers, like Mortgage Depot primarily due equity financing.

There are some 85,000 residence in Greater Victoria. Last month there were only 268 sales. How many of the 85,000 properties have been refinanced or bought that have over extended the home owner?

If only a small portion of these properties have to sell under duress circumstances, would this cause a collapse of Victoria's market.

If more than 10 percent of the sales in a given month are under duress, I think our market will really start to tank. Last month that would have been only 27 properties out of a potential pool of 85,000!

Anonymous said...

Very simple.

I’m holding cash and waiting to buy a house. But I would not buy at least in the next 6-12moth.

Realtor, mortgage broker, banker, some economist belong to a same gang: they make a living on RE. they are trying everything they can to make people sell and buy. 101 reasons to sell now, and 101 reasons to buy now, 101 reasons we are different. Too bad, I would believe you any more. I checked your record, the credibility is as bad as Harper, Bush, and the drug guy on the street.

Anonymous said...

Housing starts fall almost 19%

December 8, 2008

Housing starts in Canada fell almost 19 per cent in November from October, driven by a sharp decline in condominium construction, waning demand and tighter credit conditions.

Canada Mortgage and Housing Corp. reported Monday that the seasonally adjusted annual rate of housing starts was 172,000 units in November, down from 211,000 units in October.

The statistics reflect the “new reality” in the home-building market, CMHC's chief economist Bob Dugan said in releasing the report.

Anonymous said...

Real number worth 1000 words of any analysis.

Developers are more real and accurate than 1000 economists. They can make and lost $$$$ every day. They just build it if they think they will make money and stop it when they think they will lost money. Simple? Simple. That’s the big picture. That’s where the real world.

womp said...

Still, she added, while the pace of the decline in November might seem quite steep, “it should not be confused with any of the dynamics in the U.S. housing market.

I'll say. We're crashing way faster, no one should ever confuse them.

Anonymous said...

"In Florida, 7.3% of home loans were in foreclosure at the end of September. The figure was 3.9% in California and just under 3% for the nation."


Just in case you were wondering how many properties it takes to affect market prices. Last month 268 properties sold in Victoria so for our market to be similar to California and Miami between 11 and 20 of those 268 properties would only have to be under duress circumstances.

Anonymous said...

The voters can bring down Harper, the opposition can too.

Foreclosure will affect the market, the affordability (mortgage, economy…) will too. The results are the same, price and sale jump – up and down. Now it's down time.

dub said...

Does anyone know what's going on with Tuscany Parking Lot? It still says "Condos Now Selling" outside.

If I were a hooligan, it sure would be tempting to cross out that 'w' and replace it with a 't'... :)

Anyone know how many are left to sell there?

Libre Esprit said...

greg said...

" Brailsford eh? Never heard of 'em. Have to say, running such a fictional ad while prices are cratering all over Canada implies either a wilful deception (prices down 5 months plus now) or a complete lack of knowledge of the market."

Sorry for the late reply - GASP - I am not reading every day!

The realtor in question has been in business as long as I've been in the city (1981) and was/is famous for his chauffeur driven limo (he explained it in those pre-web, pre-cell, pre-Blackberry days as being more efficient - truth!).

Had a reputation as a bit of a high flyer - really liked to impress his clients.

As for the "willful deception" - you be the judge.

Anonymous said...

Did a quick google of this "high-flying" agent. His has to be one of the least impressive web sites I've ever seen. This guy should cut back on the transportation expenses and get a web designer. I mean come on its 2008 here.

vg said...

"Last month 268 properties sold in Victoria so for our market to be similar to California and Miami between 11 and 20 of those 268 properties would only have to be under duress circumstances."


And we have clear evidence from last week's Global segment with a Vanciuver bankruptcy lawyer and the rep for a/the BC Credit agency stating this is the tip of iceberg for BC'ers who are under duress and just now starting to call and are beginning facing the music.

All these reports on RBC etc seem to be based on numbers not in the past 30 days,correct me if I am wrong. This sudden shift/wake up call is only now moving to a new level.

For Muir to say things will pick up in the spring or flatline at worse is just wishful thinking. He hasn't a clue what the future holds more than any of us do but it's safe to say the facts lean heavily to the bears side that real estate will be much much cheaper then they could ever imagine.

phil said...

Does anyone know what has happened to the vancouver condo info board? Something about the REBGV - Lawsuit? Bribe? That was a great one to follow because it was so active. What a shame!

womp said...

Gah...you're right, it really is down. That's a shame, it was one of my favorites.

Mr.4AM said...

And in today's headlines...


1. Financial Post: Bank of Canada cuts rates to 50 year low . Last time a .75 cut was made, was after 9/11 in 2001. Too bad Consumers won't get full cut

2. Globe & Mail: Canadian job cuts looming. Nearly one-tenth of employers planning to cut staff in Q1 2009, survey shows.


3. Vancouver Sun: Cooling new home market, gets significantly worse. With 'only' 172,000 units built last month, that wwas the lowest level of housing starts since Nov 2001 (9/11).


Meanwhile, over at the Times Colonist, editors with rose colored glasses print...


4. Times Colonist: Housing Slump leading to more affordable homes. '... the threat of a US-style plunge in Canada is not likely'. That's right people, Victoria has nothing but sunshine and lolipops, which is why everyone wants to move here, including all those foreclosed Florida & California residents... They had the sunshine, but not the lolipops! Well, for sure they didn't have the Times Colonist there to provide them with their daily dose of SPIN and false hope, right?

Anonymous said...

Wow, a .75 cut. Looks like Canada is getting serious about trying to keep the bubble inflated. Should hit our dollar nicely!

Anonymous said...

Study finds real estate market downturn helping home affordability in B.C.

B.C.'s real estate market correction is improving home affordability in the province, according to a new RBC Economics study.

The proportion of pre-tax household income needed to service the costs of owning a home has fallen for all housing types in the third quarter. According to the study, owning a standard two-storey home requires 77.7% of a household's income. That's down from 80.9% in the second quarter.

Anonymous said...

Interpretation:

There are good news for home owners, before you have to use $900 of your $1000 after tax income to pay for the gang (Bankers, realtors…), only left $100 for your kids, for your life. Now you have $100.00001 left. If you save this $0.00001 per month for the next 1000 years, you will be able to buy a new pencil for your grandson.

Economist = @#$%^&

boomer said...

RE:"Wow, a .75 cut. Looks like Canada is getting serious"


Problem: Auto Companies cant get financing except from government. (taxpayers)

Solution: Increase liquidity (and provide taxpayer funded guarantees) to the banking system so the banks will lend----to each other.

ludicrous

Vancouveritis said...

I'm also disappointed and sad to see vancouvercondo.info closed down for good.

If anyone is interested in why vancouvercondo.info was shut down, The Pope explains it on condohype's blog in comments:

The Pope explains

And the offending blog post and graph mentioned by The Pope can be accessed from Google's cache:

Google's cache of the blog post

Anonymous said...

I didn't mind Dodge at the BoC. But this new Goldman Sachs(I think he's ex-Goldman anyway) shill there it's gotten progressively worse.

-Village

vg said...

Sad to see Vancouver Condo go down but when the realtors are desperate they will go to desperate measures. I am sure the same thing happened to VHB but he may have been greased in some form to shut his down, he went down too easy.


What will HHV do if free speech is challenged here ? My gut tells me he wouldn't go down without a fight.

Anonymous said...

Layoffs hit NFL headquarters

Goodell announces that league staff will be reduced by about 150 employees

hhv said...

VG,

Lots of consequences to consider. I can understand why pope decided what he decided.

vg said...

Some tough times in the NHL too with Nashville struggling and some talk of other teams having a hard time with raising cash.


Looks like Tampa Bay Lightning have been going down in value lately as the worst team in the league. The fired coach had some nasty comments on how the management interfered with his coaching.



"When pressed about who he was referring to with his comments, Melrose said he had a lot of respect for co-owner Oren Koules, but didn't want to talk about other co-owner Len Barrie when asked directly about him."



http://www.tsn.ca/nhl/story/?id=259045

vg said...

hhv,

I can understand him tiring of monitoring the posters on his board with his high traffic load and many more loose cannons.


It would be interesting just what consituted a law suit threat to his blog. Does the previous Victoria RE MSM's ridiculous denials of the world financial system not fall into negligently misleading prospective buyers as the market falls $40,000 a month ? How can an industry threaten law suits as they led many FTB's down the garden path of financial ruin while promising never ever land ?

The hypocrites can't handle reality and shut down a site for posting public information and allowing open discussion, sounds like Russia.

vg said...

hhv,

You can remove my last post.

Here is the clarification on Chipmans site. The legal problem was with a chart posted that was not the GVREB's not on the commentary.




"Further to the changes as outlined below which we expect to be implemented immediately, we also request that the phrase “The Real Estate Board of Greater Vancouver has released their November 2008 stats package and the Benchmark prices are still plummeting. Here’s the stats package (pdf) and here’s the graph for the benchmark house price so far this year:” as posted above the graph be removed, as it is misleading that the graph is produced and distributed via our statistical package.

In lieu of any contact information being forwarded as requested this email will serve as notification with respect to our requests and will be kept on file and further forwarded to our legal department."

Anonymous said...

Thankfully Fairfield is completely safe from all this turmoil. The reasons are simple really :
1) Fairfield is close to downtown Victoria which is one of the economic hubs of the pacific region
2) The proximity to the ocean. Everyone likes the ocean.
3) Cook street village. Enough said.

dub said...

Thankfully Fairfield is completely safe from all this turmoil. The reasons are simple really :
1) Fairfield is close to downtown Victoria which is one of the economic hubs of the pacific region
2) The proximity to the ocean. Everyone likes the ocean.
3) Cook street village. Enough said.


4) Fairfield is a world-class destination. Everyone wants to live there.

hhv said...

troll, meet food... ;-)

vg said...

CHEK TV says there is no better time to buy with the rate drop today even though only one bank is lowering their rates. Very hypocritical of them to portray it like that. Sorry boys,who wants to catch the falling knife right before Xmas.


Even had some no name mortgage broker on their blaming the media for the negativity and some FTB who just has to have it now. Let's not talk about all the overpumping all the way up and how you have to buy now or never get in. Reality bites.

Anonymous said...

Which one bank were you referring to? TD, RBC, BMO?

Maybe stop watching Check TV.

Anonymous said...

"TD dropped its prime rate by a half-point to 3.5 per cent. The other top banks followed suit." CBC

Anonymous said...

Housing crisis, credit crunch, stock meltdown, global recession, and now (drum roll please...)

The Chicken Crisis

Just when you thought things couldn't get any worse, HN5 (SARS) is back, as 80,000 chickens go to heaven. Good thing at my company we just finished a "Pandemic Planning Project". Got Air tight windows & HEPA filters? Got generator & VPN access? How about canned tuna? Then you should be good till at least 2012 X-)

B2B said...

H5N1 is a strain of the influenza A virus (flu), not SARS. SARS is a completely different virus - a coronavirus.