Monday, August 17, 2009

VREB miscommunication

Over the weekend, the VREB published this in the local paper (H/T to Roger and GoneTooFar for links). Through crafty layout, they made their advertisement look like a factual education piece. But it was so full of fallacies that we can't just let it go un-responded to, can we?

I won't cut and paste the whole thing. But I'll rebut a few points below.
  • If you are 35 now and just buying your first home, you will likely be mortgage-free when you are 60 and sitting comfortably on a considerable asset.
Maybe. If you take out a 25 year mortgage. But the average first time buyer in Victoria these days doesn't. 35 year amortizations have become the new norm at today's prices. So while past experience suggests this claim may be accurate, it is completely unknown, and relatively unlikely, that future experience will prove this theory correct. You see, 25 years ago, a 25 year mortgage was normal. And it was normal for people to pay off their mortgages in 25 years or less.

Today, normal is entering the property ladder, using extended amortizations and moving through the market in multiple transactions, constantly refinancing and removing equity from homes to purchase new homes worth more. We don't know what future experience will be in terms of mortgage pay downs because we've never seen the kind of mortgage product innovation we have today during past real estate cycles. The VREB is applying the old rules to a new game and expecting the same outcomes. I say the ref should be calling a penalty on that play.
  • Buying a home is a very effective way of saving regularly over many years. Even if you never buy into another retirement or investment plan, you are effectively putting money away for the future.
What this point should have said was "Buying a home is a very EXPENSIVE way of saving regularly." Can you think of a financial product that is more expensive to purchase, costs you more to sell, costs you more to maintain, costs you more to service and gives you worse liquidity? I can't. Some rough back of the napkin math I did on the weekend on a $375K purchase worked out to be an approximate 35 year cost of $1.25M. In other words, just to break even, you'd have to sell that property for $1.25M once you'd completely paid it off, and then where would you live? That's highly possible as it's only a 3.4% annual ROI, but I can think of many more effective ways to save and invest less money for greater 35 year returns at far less cost and far greater liquidity.

Furthermore, any other industry that offers the consumer an investment product or investment advice has mandatory disclosure requirements on every piece of advertising it does. Why is the real estate industry allowed to market their products as investments with no mandatory disclosure statements, no requirements whatsoever about qualifying consumers etc and no industry financial regulatory oversight?
  • Owning a home of your own means you and your family can set down roots, get to know your community and involve yourselves in it.
This is true. Our communities hate renters. Renters are a scourge. An infestation. They destroy communities. So naturally, communities exclude renters and excluded people tend to be rootless and uninvolved. It's a vicious cycle. You owe it to your families to never let this happen to you. Be a Star-bellied Sneech, not one without.

If I'm a member of the VREB, I'm embarrassed by this advertorial. I also find it odd that in the middle of a great big first time buying boom, the VREB felt it wise use of dollars to try to further appeal to first time buyers. Could they know something we haven't seen yet? Like maybe the buying is slowing down again and that FTBers are either exhausted or parked on the sidelines expecting to pay less again in the near future?


Robert Reynolds - GBA said...

My blog is back and with new posts. It can be found at its new address

and still at the old

I broke it by accident right before going on vacation and didn't get a chance to fix it.

GoneTooFar said...

HHV - Here is a scan of the actual ad with my comments.

VREB AD - Saturday paper.

I find the ad to be very misleading and the tax advice is dead wrong.

I imagine the ethical real estate agents in Victoria are a bit embarrassed about their organization running an article like this.

Robert Reynolds - GBA said...

Rent Vs. Buy

Not as good as Rogers Calculator but fun nonetheless

From craigslist

Here is a house both for rent and for sale. 1bed 1 bath 600sqft.

for sale $399,999

for rent $1350/m

Really nice area,

Incredibly small lot
Incredibly smaller house
in need of major work

Which is the better deal? Rent or Buy?

A "Victoria Special" mortgage (0 down, 35 year, variable @ 2.5%) runs you $1427/month then add in taxes, maintenance etc. and you are probably talking more like $1700/month.

Using a "normal mortgage" (20% down, 25 years, 5 year fixed)
monthly payments are $2523/month (+ taxes, maint, yadda yadda)

So either renting rules, or the seller simply priced his rent at a "Victoria Special" equivalent

Roger said...


I too find it disconcerting that VREB would publish an article "pumping" the market like this with half-truths and bad tax advice. Besides bear blogs there seems to be little counterbalance in Victoria to this type of self interest promotion by real estate organizations that represent commissioned sales agents. In Vancouver the media interviews Tsur Somerville at UBC and other analysts in order to get a different point of view. Unfortunately all we get in the Victoria media is a rehash of VREB, BCREA, CREA, Remax and LePage press releases. CHEK news is the only exception. They at least research the stats and have had a local analyst on from time to time.

Many first time buyers are getting into the market with zero or little down and signing up for mortgages they are only able to handle due to the record low interest rates. When it comes time to renew in a few years they will be in for a nasty shock as shown in this table.

The finance minister recently commented on the lack of financial literacy in Canada and has set up a task force to see what can be done. By the time they even issue a report it will be too late and our credit bubble will have popped. One only needs to read this article, that I posted earlier, to see the level of debt being taken on by Canadians. Consumers cannot keep spending more than they earn. Unfortunately, this is all going to end very badly.

Roger said...

Robert Reynolds said:

Here is a house both for rent and for sale. 1bed 1 bath 600sqft.

for sale $399,999
for rent $1350/m

Which is the better deal? Rent or Buy?

Here is a detailed analysis of the owner keeping the property and renting it out. I took a best case analysis for the owner and assumed that they owned the house outright.

Craigslist House - Rent or Sell?..

Note: Impact of taxes are not shown as they depend on landlords financial situation and tax planning strategy.

HouseHuntVictoria said...

If I'm reading that correctly Roger, it confirms that real estate investment for rental income using cash has really become a poorly performing option, eh?

No wonder why no one is building rentals in this town.

Roger said...


Absolutely. In the previous example the cash-on-cash return and capitalization rate are very low. Real estate investors like to see a "cap rate" around 6% and start to get keen on a rental property around 7%. Otherwise you might as well buy long term bonds and sit back clipping the coupons.

Speculators on the other hand just want to see somebody in the place while they wait for the big capital gain.

Robert Reynolds - GBA said...

Habitat for Humanity is building some rental low income housing, if things keep going they way they are all of us renters will be living in them, 12 to a room, triple decker bunk beds.

Or there could be a real estate correction... naw squalor is so much more appealing.

Animal Spirit said...

Has anyone seen any recent (i.e. last month) rental vacancy stats? On my wanders I've been seeing a lot more 1BR and 2BR vacancy signs than previously on the mid-sized and small apartment buildings.

s said...

Amazing that the VREB blurb claims that you can't get to know your community nor involve yourself in it without "owning" a house. What exactly is it about getting up in the morning and going to work from your house that's so different if renting from the bank instead of an agency?

omc said...

I don't know about the rest of you, but my PCS is showing things are going completely insane. So much for things cooling down by the end of summer.

Village said...

PCS listing I get (350-510 w/ suite) has virtually nothing available. It's been like that all year, with the better products moving and the crap slowly reducing price point.

Definitely no selection. I would guess the low rates (5yr/4.3%) and constant rumblings of rising interest rates are pushing a lot of purchases. Victoria hasn't suffered any economic shock yet. No government layoffs, construction still going rather heavily, midst of tourist season. Locally, there hasn't been a reason for much retreating in prices, nor enough pressure (affordability maxed) to push prices any higher.

I have noticed more occurrences of court order sale listings on MLS so things are probably shifting if slowly.

omc said...

In my range, $500- 1 mill (not that I am planning on 1 mill) things have really picked up from the spring. Houses are quite often going for well over assesment (and over asking), with bidding wars. It is no longer a bi-modul market, but a tight sellers market up to the 1 mill mark. It appears thet the total sales will be decreasing due to the lack of inventory only coming up. Prices are very much on the up swing, in a time when sales and prices ussually drop off.

This is a great source of concern to my family as we will have to move this winter due to a new addition. Yet another rental, and rents are extremely high now. Or do we buckle under pressure and buy with all of the risks of buying so high in the market.

jazzgate said...

So I am making a major life change. I live in NE BC in the heart of oil and gas development with a full time job in the industry. My husband is working full time also. I have been increasingly concerned about the debt bubble and the real estate bubble & the way the world economy is going, unsustainable levels of national debt, derivatives, secretive trading platforms of the likes of Goldman Sachs, manipulations in the stock markets etc., you know the story.I have lived in resource dependent places long enough (Calgary) previously to know what the boom-bust cycle looks like when it hits a town. This party (in my opinion) is being kept artificially alive with low interest rates. I have made the decision to sell my house while I can, do not want to get caught in a lay-off downdraft as has happened before, quit my job while it is still my choice and move. I will be going to the South Okanagan and paying minimal rent to my brother ($300 a month + my share of the utilities) on the family orchard and taking part in running that business. It's been around for 100 years, so I figure if it survived the Great Depression, it should survive this. Okay, now that I have told you my plan, how crazy does it sound & where should I park my savings and equity from my house & investments. I am in all cash at the moment after bailing out of the stock market last summer.

NanHousing said...


where did you find the July stats for places north of the Malahat? I can't see them anywhere yet...

HouseHuntVictoria said...


I bet if we had a way to run the numbers, dollars for doughnuts what you're seeing is a direct result of low-end market sales allowing a move-up market buying frenzy to happen. Most of these new buyers will have witnessed multiple/quick offers on their overpriced low end units so they'll be convinced the market is hot and rush out to act in the same manner on houses in the range you're looking in. Most of the activity is concentrated on units priced around the $650K-$750K mark right?

Travel Girl said...


If I were you, I'd just put it in a money market account, nothing fancy. Unless you plan to leave it in for longer than 5 years, then I'd put most of it in good growth stock mutual funds.

That's just my 2 cents; I tend to be quite conservative with money that I know I may be using in a few years.

Just Janice said...

How's this for an excuse to be stupid with your money:

"I can't rent, I have a child..."

That coming from somebody who is going through a transition and is again in the FTB housing section....

I ran the math and if houses come down 15% in the next 2 years (likely IMHO) and the downpayment is put in a 2 year GIC and the difference between rent and mortgage is banked, she'd owe $77,000 less on her mortgage and still own her home at the same time even if rates went up to her mortgage payments would be about the same as they would be by buying now and likely less than they would be when it came time to renew in 5 years...

Did I mention I have 2 step-children, and we rent - and yet I do not think my step-kids have a lower quality of life as a result and in all likelihood have a much higher quality of life than if we were to buy right now?

omc said...


The price range seems to go up to $900k. Some of the prices are probably at the peak levels by now. I couldn't say why this is happening, but the market is following emotion not fundamentals. Or I should say that the only fundamentals being followed are that of supply and dmeand, and supply is dropping off greatly. The shear # of homes I know of that have accepted offers but aren't showing as sold is nutty. The houses (structures) are getting far more than they are worth. Overall the market is like 2007 all over again.

I dunno, if the gov't inflated the bubble this time, what's to say they won't agsin in the future.

omc said...

about that putting money into money market accounts,

I don't understand why anyone whould want to do that as those accounts are not guaranteed and there is no return on investment. You would get a better return with a simple high interest rate savings account, and they have almost no retun either.

If you have any sizable amount of money to invest I would seek hired advice. One of the more economically fluent members of this site would be a better guide on where to go. I don't trust the standard rrsp commission sales industry as they have very high fees and what i considere to be a conflict of interest.

HouseHuntVictoria said...

As of yesterday, there were 377 sales in the CRD.

This time last month there were 528. I know it's only mid-month, but that represents a 28% drop in sales volume MOM thus far. In other words, a normal decline for this time of year.

We may be seeing 2007 levels again. Makes sense given the low interest rate environment and some of the perceived "deals" on houses in the upper price ranges.

Just Jack said...

Heres some numbers for you to look at. These are the mid month medians July 15- August 15 for condominiums and detached homes over the last decade for the peninsula, westshore and victoria areas.

Year #ofSales Median Days on Market
2009 253 $290,000 35days
2008 212 $289,500 46
2007 227 $270,000 28
2006 178 255,000 33
2005 206 209,000 21
2004 194 170,000 25
2003 207 148,000 23
2002 142 134,500 33
2001 137 124,900 61
2000 60 115,500 73
1999 81 132,000 77

Detached homes
2009 432 $534,500 30
2008 296 $528,450 35
2007 415 530,000 26
2006 314 448,500 39
2005 351 435,000 23
2004 357 343,000 29
2003 426 298,400 22
2002 372 245,000 25
2001 392 233,500 37
2000 292 230,000 55
1999 309 225,000 41

omc said...

I am seeing new listings a ways above assesment now, and they are selling right away. They may not show on the PCS as sold right away until conditions are lifted. Almost everything sells though, no matter how poor the structure is. I have noticed a few new flippers even.

If we do see a decrease in sales #s, we shall see higher prices at the same time as the decrease in sales is due to the decreasing inventory.

Brace yourselves for the lunacy.

Just Jack said...

This heightened level of sales activity must be having an affect on the rental market. Especially the more costly condominum and basement suites. Where else can we be getting the increase in the number of purchasers?

Ryan said...


I think selling your house now (if you can) is the smart move, but I don't think quitting your job early is a good idea, assuming the orchard gig is not a limited-time offer. You'd be far better off working and saving for as long as you can.

Roger said...

Here is a graph of Greater Victoria weekly MLS Sales. The rolling 4 week average is slowly dropping. August sales will be lower than July but way above August 2008 sales so the usual VREB and TC hype should be expected. In fact they will be doing this every month in 2009 (4th quarter 2009 was dismal for sales).

MLS Weekly Sales..

Roger said...


You can get up Island stats by clicking here..

Animal Spirit said...

Excellent discussion here.

My read is:
1 - HHV at 7:28 is right on the move-up buyers coming from lower end house sales
2 - there are still some lower end sales occuring
3 - both of these are the result of the low interest rates (a work colleague of mine openly gulped, looked down and said 'too much) when I gently asked how much she paid for her house. She said that interest rates are low and that peer pressure played a lot into it)
4 - in effect this was a push forward of low end sales, with the push forward of mid-range sales occuring now
5 - this could result in a result of sales volume (both volume and low end decreasing) and an increase in prices (mix of sales changing from low to mid-end)
6 - when the mid-range move ups slow down, there will be very few lower end sales to trigger further mid-range sales
7 - this will then result in a substantial drop in volume and a very substantial drop in reported prices
8 - the Sept. 1 budget could change all of this

This whole analysis, like any projection, is likely wrong, so treat it with proper respect and throw it out.

Roger said...

Here is another graph of MLS sales. This one shows the total reported sales, on a weekly basis, for the previous 4 weeks.

Greater Victoria MLS Sales..

Readers will note that the numbers are lower than the ones reported by VREB for June and July. This is because those months are longer than 28 days.

omc said...

I really can't see any price correction now until they raise the rates, and that might not be any time soon.

We were planning on buying this winter, but I think that is pretty well not going to happen.

beagle said...

Lines of credit are going up. Banks must be desperate to be pissing off long time customers. I've had a unsecured credit line at the Royal for about 20 years. It was always prime + 1.75%. Got a letter today it's going up to prime + 2.89% in October. Had fun venting on the phone to the customer rep, it's nice to not need their credit. Most people would not want to rock the boat for fear of getting cut off from the debt trough.

Just Jack said...

Employment and migration are just as important as interest rates. In the early 80's many people lost their wealth because their rental properties went vacant. Just like in the 80's if Ontario pulls out of the recession before BC, you can expect the moving vans to load up in Victoria and head East.

jazzgate said...

Thanks Travel Girl, OMC & Ryan. I have the opportunity to work remotely as some of the things that I do, really don't matter where I do it from.
I will have a fair bit of equity after the sale and fairly sizable savings & no debt. No credit card, line of credit, auto or other, none. I am finished with mutual funds, very hard to justify the returns given they haven't beat the street in the majority of cases and the MERs are so high. Looked into index funds & iShares etc., but they are starting to get as pricey. Having said that there is no yield to be had in "safe" investments that inflation won't gobble up in short order.What's a GIC going for these days? Pretty awful. Savers are being punished and the big boys won't be happy until they have transferred every last red cent of our money to their coffers and made debt slaves of us all. The orchard gig is solid, been in the family for 100 years. If worse comes to worse, I know how to live frugally, am capable of preserving, bread baking, and get a lot of pleasure from it. My Mum is an organic farmer in Sask. so between the orchard & the farm, I won't starve. I had my heart set on buying a place in Victoria and have been coming to this blog for years watching the disaster unfold. The artificially low interest rates are keeping the prices at ridiculous levels and I have had a slight change of heart. I think for the next 10 years I am better off somewhere I can grow my own food, raise my own sheep and not have to think about the insanity that is all around me. I will be working seasonally at the orchard for what is probably going to be at least a %50 pay cut, but my expenses will be far less. No mortgage, ~$300.00 a month rent, one less car. It would just be nice to be able to gain some interest on investments. Oh well, back to the farm for me. Until real estate makes sense again, I will be a very happy renter. Oh, and I won't be freezing my buns off for 9 months out of the year. Hoorah! It's crazy enough, it just might work...

Roger said...

Here is another look at MLS stats for Victoria. I have added New Listings to the graph I posted earlier.

MLS Sales & New Listings..

The graph shows 4 week totals over the last two months. Sales and new listings are dropping every week as we experience the usual seasonal slowdown.

It will be interesting to see what happens over the next month as pre-approval letters for 3.7% mortgages expire and we see impact of the BC budget.

Leo S said...

3 billion dollar shortfall in BC. Hold on to your hats everyone, the ride is just starting here, and it is going to get crappy.

Anonymous said...

Sept & Oct are historically (on average) the worst months for the stock market. This time around according to the analysts I follow, we could be looking at another crash possibly initiated in Chinese stock indexes and then spreading West, as we've already started to see hints of. Specifically, we could be seeing a commodities crash, only to then recover in a V like shape in Q1/Q2 2010 mostly due to a supply-side shock + inflation primarily due to dollar devaluation and of course another dose of quantitative easing & government stimulus world-wide.

You guessed it...This ain't over by a long shot.

As for real estate, the (insane) prices may hover around this level so long as interest rates remain artificially low and government intervenes to prop things up... but it won't go on forever. We (Canada/USA) are in no condition to pull a Japanese-keep-the-interest-rates-low-for-nearly-2-decades. So any year now (2011?) we should see interest rates jump high enough to cause the housing meltdown we've all been waiting for, only it will be even worse because of all the artificial propping up.

So if you are renting and saving your pennies, I suggest you stay out of the stock market for this next quarter, then get ready to dive in just as things begin to artificially "recover" again.

Inflation down the road will force the stock indexes to all time highs, except even after all the money you make from that, you won't be that much further ahead in terms of buying power.

Oh and just like last time, when the markets crash again we'll see a repeat of a run to "safe" US dollars... yep CDN will get hit yet again. But don't worry, it'll be propped back up again once the second "recovery" begins again and comodities (oil+PM's+food)rise against fiat.

Good luck everybody!

c said...

Thanks Mr. 4 am--much agreed and awesome advice! do you think instead of real estate i should put money into gold?

patriotz said...

where should I park my savings and equity from my house & investments.

If your goal is to buy a house when prices become reasonable, put it into GIC's, CSB's or other government bonds, or high interest savings.

All other assets have downside and that downside tends to be correlated with RE.

And that goes for gold too - take a look at how the early 80's gold bust and RE bust coincided.

If your goal is to keep some of the money long term (i.e. some will be left over after you buy the RE), you might be looking into some of the safer income-producing assets like preferreds, income trusts, etc, but you need professional advice from someone not receiving a sales commission.

Anonymous said...

c, no, I don't expect gold to perform during the Q4 downturn, quite the opposite... unless of course things get panic-bad, which there is some probability of that. I'm reading stuff by some analysts (though they are not all in agreement) that the S&P could drop again this time between 500 to 600 (last low was 666). Gold goes up the most during fiat panics and secondly during high inflation. Just look at this morning's news. Bernanke saying things are better and gold shoots up, because everybody knows inflation is around the corner the second (in fact before) stabalization occurs - regardless of how fake it may be due to stimulous+QE and not real organic industry growth as a result of consumers spending from savings (instead of easy credit). I'm not selling my physical gold, I'm holding on for that longer term.

I would agree somewhat with patriotz, if you don't have the guts to play this crazy stock market (and I wouldn't blame you) then just tuck your money away for now in the safest of investments as he listed... though none of those will beat real inflation and if you stay in those investments when inflation really rears its head, you will lose big time in terms of buying power. Savers will get punished by high inflation. But for now, it (low interest safe investment savings) should in theory appreciate against declining house asset values.

It's a tough world out there right now for the average person. Higher unemployment, paying for the mistakes of the banks and too-big-to-fail companies, pensions taking a beating, getting suckered into over priced housing and about to be whacked with run away inflation in the next couple of years and having almost nowhere to hide.

Vic said...

mr 4 AM,

I think "c" is being facetious going by their previous posts.

As long as Bernake keeps pumping out the good vibes the markets will buy into it. Any signs of bottoming also fuels the fires. I'm not so sure we will get the big blow off as the stock market bears are anticipating.

As my blog mentioned,the herd betting the market to go
down is a tough gig when the trend is still showing upward with a ton of money on the sidelines still buying in. The first week or so of September will tell the tale.

If you believe Sinclair then the US dollar will be tanking in 80 days and gold/silver will rocket. Will it ? who knows, but if it does,the junior gold/silver stocks will go nuts and where part of my current focus is.

Robert Reynolds - GBA said...

If you go Money Market, just make sure you have a fund that has guaranteed no negative returns. With returns so low the management fees are actually pushing some funds negative. A lot of fund managers have done something about it by either reducing profits or cutting agent commissions, few have actually outright guaranteed not to post negative returns.

One fund with a guarantee is Standard Life's Money Market II fund.

patriotz said...

If you go Money Market, just make sure you have a fund that has guaranteed no negative returns. With returns so low the management fees are actually pushing some funds negative.

Money market funds are only for people who might need to get their money out right away at a fixed unit price. If you know you are putting the money away for a year (or whatever), just eliminate the middleman and buy the T-bills and govt. bonds directly.

Art Vandelay said...

Money market funds also invested in toxic paper assets at times. They sound boring, but they aren't necessarily failsafe.

Roger said...

Money market funds are not a good option for savers right now for several reasons:
- there is no CDIC insurance on your money should we run into another credit problem.
- rates are lower than so called "high interest" savings accounts. Even premium funds (over 100K) are paying less than .73%

If you want to stash some cash for the short-term and be insured consider the following.

Coast Capital Credit Union @ 1% with no limit on deposit insurance.

ING Direct @ 1.2%..

Canadian Western Bank @ 1.05%..

CIBC Renaissance Account @ .95%..

Just Jack said...

One of the ways to get our economy rolling is to invent new words like:


Now, let us try to use this new word in a sentence.




Over to you Mark.

Roger said...

Here is an update on what is happening on Bare Mountain...

Globe & Mail article..

Like many real estate developers, Barrie and his 17 investors – who include current and former NHL players such as Mike Vernon, Gary Roberts, Joe Nieuwendyk, Ray Whitney, Rob Blake, Ryan Smyth, Sean Burke, Rob Niedermayer, Scott Mellanby, Matt Pettinger and Trevor Kidd – were whipsawed by falling prices and the drying up of bank credit.

Some of those investors are angry and some are not, but they all have two things in common: They are not talking about it and all fervently hope Barrie can pull a rabbit out of his hat. He needs to work out a new financing deal on the 500-hectare development that includes two golf courses, a resort, hotel and as many as 5,000 condominiums, townhouses and residential lots.

The reason all of the Bear Mountain investors are keeping quiet, even the unhappy ones, is that none of them want any negative vibrations to kill the Siraj Capital deal. They see it as the only hope of getting their money back, let alone making a profit.

If successful, it may also go a long way to soothing Barrie's major lender, HSBC. Apparently the bank wants to be repaid a lot quicker than Barrie thinks is manageable (say two years versus five or more) and it wants higher fees than Barrie is willing to pay.

But not everything is gloomy. Once Bear Mountain dropped its prices by 20 per cent or so, the condos started selling again. Since the spring, 200 units were sold, although they have a long way to go. Construction prices have dipped too, which makes selling homes easier

Marko said...

"Bare Mountain"

I don't think "Bare Mountain" is so bare. If you take a look at residental housing starts last month in Victoria, a huge portion are on Bear Mountain.

I've also noticed that they have raised prices back up in St. Andrews by 10%.

However, Bear Mountain has really poor management. A lot of people bought lots on Player's Driver for around $200,000; however, it wasn't a legally binding contract because Bear Mountain did have titles to the lots at the time. Anyhow, now that prices are back up and they can get upwards of $230,000 for these lots they are refusing to honor deals they made with people 5-6 months ago.

Vic said...

Interesting story roger, noticed the previous paragraph from your clip and notice the word "gamble" was quite the way to sum up the whole development. I thought the local MSM made this deal a lock. Shhh, don't want to upset the Dubai guys.

Seems I made a post a long ways back about that HSBC loan of $100 million would come back to haunt him in a big way.

Big talk will only last so long with the big banks who won't waste time dickering around these days if they smell blood. What's the odds they wind up with a cut of BM when all is said done ?

Vic said...

One other thing,from what I have learnt is the Dubai guys by historical DD take their sweet time to close a deal. This could get interesting if they decide to drag things out.

PainInThe said...

Possible volatile day in the markets tomorrow... and Garth has something so say about it at the nth hour tonight. Until then, there's this:

Mother of All Bank Runs?

Roger said...


Thanks for heads up on BMO news. There have been rumours on US blog sites that something is going on. Garth Turner says he will be posting something tonight at 11 PM EST. Here is the link..

Too Safe to Fail?..

Mark said...

Under this arrangement, Siraj Capital gets control of the residential side of the Bear Mountain project for what amounts to a $350-million loan with stiff terms. Once Barrie has the homes sold (about 1,200 have been sold so far), Siraj Capital will get its money back plus the Islamic version of interest, plus a 25-per-cent equity stake in the development.

But even this depends on Siraj being able to raise the $350-million by selling units in a weak market. If the units cannot be sold by the first week of October, the deal will likely die.

Now does anyone here really believe they are going to be able to raise the money? Bare Mountain is a joke.....nothing more than some very effective and EXPENSIVE marketing.

3 months of irrational exuberance thanks to stupidly and unrealistic low interest rates does not a recovery make.....BC has not even gotten a taste of how bad the real estate melt down is going to be.

The Government is only going to be able to continue the game for so long. They WILL have to raise money and when that happens interest rates will rise accordingly.

I wonder how many of those delusional folks living on Bare Mtn are going to be able to afford their 600k + mortgages when they jump to 7 or 8%

Barry let his ego get in the way. Bare Mtn could have been a nice subdivision (although I would never live there) but he had to be the biggest and best......won't be too long before his shack is up for auction IMO.

More guts than brains and too much ego always end badly in Business! It's a great idea to make $ with other people's money BUT eventually those people want to be paid....when the shit hits the fan they want it quicker. And so the demise of Bare Mtn begins......

Robert Reynolds - GBA said...

Anyone know a way to browse mls or on an iPhone?

Marko said...

"I wonder how many of those delusional folks living on Bare Mtn are going to be able to afford their 600k + mortgages when they jump to 7 or 8"

My brother is a local traffic officer. He made $114,000 last year due to all the overtime (court appearances). There are a lot of high paying professions in Victoria. Two married professionals can afford $600,000.

Mark said...

My brother is a local traffic officer. He made $114,000 last year due to all the overtime (court appearances). There are a lot of high paying professions in Victoria. Two married professionals can afford $600,000.

Marco you are killing me with your posts dude!

I know a lot more people that live on top of Bare Mtn and other over priced neighborhoods in Victoria that are 2-3 % points from bankruptcy.

Affordability is not the only issue you little RE's quality of life.

How many people are already over extended and house poor? I know plenty of them. How many people can afford a 30 - 40% drop in the value of their home and the obvious problems that arise when they go to refinance 3-5 years from now?

You think the bank is going o give you a mortgage for 600k when your home is appraised at 400k?????? it's happening all over the world developer boy. The sheeple in Victoria are just too stupid to realize it its going to happen here too!

Now let me throw another interesting point at you Marko...what happens when one of these professional well paid couples becomes a single income family? The Provincial Budgt is coming and the layoffs are just beginning......guess what it's managment and middle management that's getting hit this time....Hmmmm I think that might factor into some of your friend's abilities to pay for that over priced shacks out in Langford.

FYI ....600k @ 3.75 looks a lot different @ 7% (and I'm being conservative as rates will go higher) especially with only 5 - 10 % down.

Your posts are drivel dude just give up the pumping and go find a basement suit to reno cuz that's all you builders will have left for work in the next few years.

*this clown sounds more like a realtor than a builder hahahaha!

Robert Reynolds - GBA said...

Mark I disagree, there are a lot of well off families in Victoria. People are buying houses worth $600K+ houses, they do have money.

Marko, I have enjoyed your posts please keep it up. While we bitch about the TC etc not being fair and balanced its amazing how quickly people attack when their own viewpoint isn't presented.

Roger said...


Many of us are bears but you provide polite, informative posts with a different perspective.

I hope you keep posting...

PainInThe said...

Marko said "Two married professionals can afford $600,000."

Yeah, but for how long on a house worth $300,000 less than the price they bought it at?

omc said...

This place is for an exchange of ideas, not flamings.

My wife and I are one of those professional couples that can afford over $600k for a house. That is at the present interest rates though.

Prices will have to rationalize with the rest of the world as many people have the option of where they choose to live. We didn't work hard to get where we are to live pay check to pay check. I am considering else where.

Mark said...

I am not "flaming" anyone....Marko is a builder right? He and the rest of the crooks that have a vested interest in this insanity contiuing, right?

Do you think he has an agenda? Personally I do and a such I am voicing it here.

I bet he is going to be one of those honest contractors that will be passing on his savings (HST rebate) to his customers right? LOL! Right from the finance minister's mouth!

His arguments and insights are drivel that's all I was saying and if you think he is here to exchange ideas you are on crack.


Muriel said...

Has anyone else noticed the absence of rental scare stories in the TC this August?

For the past several years, I think the TC has run a story in August about desperate students not being able to find any rental housing, or having to go to extreme lengths to secure somewhere to live.

This year, nothing - at least, so far,that I've seen. If I've missed this story, please someone let me know.

Might this be a result of all the rental condos available, as well as UVIC's efforts to build on-campus housing? I don't think that most students can afford to rent a new condo, but those condos are still more supply, that could be having the effect of loosening up the market in general...

Roger said...


TC got scooped by Black Press..

Back to school adds up to housing crunch for UVic student..

HouseHuntVictoria said...

^ Muriel, they run those stories early September if I recall correctly. Now that you've tipped them off, expect two in short order ;-).

Mark, couldn't disagree with you more. Marco is hardly a delusional pumper. I'd say he's a fairly honest builder with a respectable outlook on the market. More so than the 50% fire sale language that some commentators throw around here regularly.

I'm a bear, but there are no signs of those kinds of drops in the local market nor are there signals of 10% interest rates on the horizon. Those kinds of extreme predictions do nothing for credibility.

Mark said...

I'm a bear, but there are no signs of those kinds of drops in the local market nor are there signals of 10% interest rates on the horizon. Those kinds of extreme predictions do nothing for credibility.

Did I say 10%? I think I said 6 - 7 % Regardless that is a big jump in monthly payments.

You have your opinion, I have mine....leave it at that. Assuming this blog is here a year or 2 from now, we will see who is right. I am betting I will be right.

HouseHuntVictoria said...

Month-to-date Victoria real estate stats: Sales - 561; new listings - 822; total active listings - 3554.

Roger said...


I always try to stress that the trend is what tells the real story.

Here are two graphs showing weekly MLS sales and listing activity. One can clearly see that the running 4 week sales total is trending down every week.

Sales & New Listings - Weekly..

Sales & New Listings - 4 Week Totals..

This graph shows that active Listings are falling as well.

Greater Victoria Active Listings..

Marko said...

"He and the rest of the crooks that have a vested interest in this insanity contiuing, right?"

I need a margin, not insanity. If prices drop 20% and my costs drop 20% I am still going to be okay. However, this is unlikely to happen due to fixed and rising costs. Lack of available lots, increased costs due to changes in building code, warranties, insurances, material. Labour is the only area where I can save a bit; however, current prices are back up. No one is going to come frame my house for $20/hour when a carpenter makes $32.80/hour at Campbell Construction with benefits. My warranty company is not going to drop a $3000 warranty on home to $1000 just if the economy slows down.

Most builders are not crooks. If I a sell a house for $600,000 it is because I have to. If I could make a profit selling for $550,000 I would build 20 houses, undercut everyone, and sell in 2 days.

Vic said...

"No one is going to come frame my house for $20/hour when a carpenter makes $32.80/hour at Campbell Construction with benefits. "

They will be when they are all laid off and the EI runs out. The unions are only as good as the latest contract. There isn't much leeway for a carpenter without an income. Most trades guys have a hard time switching careers midstream when there is an economic crunch in all careers. Swapping a hammer for a suit is not an easy thing to pull off when banging boards is in your blood.

Building homes is not crooked,it's a dog eat dog way to make a buck and marko is brave for hanging in there when many before him have come and gone...gone bankrupt that is.

greg said...


Sorry for the lack of recent comments.

Anyway, having become quite cynical about the current market phase, I think at this point the only thing that will move prices downwards again is the same thing that did last fall -- a lack of buyers.

Since at this point the low interest rates don't look as likely to go back up soon as I thought, the only other tipping point is exhaustion of the first time buyer pool.

How much future demand has been used up by the recent surge of "low end" sales? A few months? Half a year?

It's possible we are going to reach that point, but when? I tend to think it is still coming, but I no longer want to hazard a guess on when that will unfold.

Being down in the US on vacation and seeing prices in places like San Francisco lower than in Victoria, it's a bit disheartening.

In the long run, with the memory of a price collapse and much lower current prices, the US is probably going to come out of the current mess in a much better position than Canada relative to household debt loads (if not national ones).

Propping up the Canadian market instead of letting it correct is going to prevent a whole generation from entering the market on reasonable terms. In the long run, that can't be good.

Meanwhile, my deposit is getting hosed in GICs.

I'm sick of Victoria real estate and the bleating crowing real estate pumpers. Even if I end up buying, how can anyone be happy to pay sickening prices, in the long run, even if prices stop rising instead of dropping, the pain is just going to get spread over many years.

Also, "low end" (~$500,000 sfh} inventory is miserable, the selection is baaadd.

For all property owners in the market for years who don't care, just remember, at least 50% of your kids are going to end up leaving solely based on the price of local real estate.

That sucks.

Back to the previously scheduled vacation...